Corporate psychopaths are still occupying positions of power, says Brian Basham. Not only that, but at least one investment bank was actively recruiting them, he claims.
Should we be surprised? Not really. After all, as Joel Bakan said, if corporations really were people, they would be regarded as psychopaths. The legal duties on directors to pursue profit and shareholder value mean that corporations often behave in a way that is so selfish it would be regarded as pathological in a real person.
In some situations, the attributes of psychopaths can be quite useful. If I were involved in a turf war with a neighbouring clan, fighting my way through Normandy in 1944 or even needing to sack a lot of people quickly with a minimum of fuss, having someone on my team whose heart-rate and sweat level barely changed when faced with terrifying threats would be a distinct advantage. Psychopaths walk towards the sort of situations which have most of us running in the opposite direction.
So, when there are millions to be made and lost with the click of a mouse, who better to employ than someone with ice-cold calm and very little empathy. If your strategy is to make as much money as you can in as short a time, you need people who will push mortgages at customers who can’t afford them, buy up and asset-strip companies, package up high-risk debt with triple-A assets and sell it on or pile into asset bubbles and make a killing. It makes sense to recruit people with nerves of steel and no remorse, then reward them to do more of what comes naturally to them anyway.
This may not have been a good strategy for the long-term future of the banks or for the wider economy but no-one was thinking too much about that in the mid 2000s. Given the business strategies at the time, the recruitment and reward strategies which fell out of them did exactly what they were supposed to do.
What should we do about psychopaths running banks and other corporations? Same as we do for psychopaths in any other context. Contain them and limit the damage they can do.
Banks (and others) hell-bent on making huge amounts of money in as short a time as possible will inevitably employ people who, even if they are not clinically diagnosed as psychopaths, share some of the same characteristics. Just as we have laws and law enforcers to protect us from psychopathic gangsters, so we must have laws to protect us from the worst excesses of the corporate world. And institutions with the power and political backing to enforce those laws. That’s what we have regulation for. The mistake was assuming that these hugely powerful organisations could be left to police themselves.
As Mr Basham concludes:
In attempting to understand the complexities of what went wrong in the years leading to 2008, I’ve developed a rule: “In an unregulated world, the least-principled people rise to the top.” And there are none who are less principled than corporate psychopaths.
All the more reason, then, not to have an unregulated world.
Update: More on this theme: William D. Cohan’s Bloomberg piece, “Did Psychopaths Take Over Wall Street Asylum?” and Clive Boddy’s article in the Journal of Business Ethics,
“The Corporate Psychopaths Theory of the Global Financial Crisis.”