Time for capitalism to get ethical…
Michael Lewis wrote a great piece in the August issue of the Vanity Fair. Entitled “The Man Who Crashed the World,” it’s about Joseph Cassano, former head of AIG’s Financial Products unit. I always admired Mr. Lewis’ writings for his no-nonsense approach to business, based on his first-hand experience on Wall Street, and his remarkable prescience about the financial industry train wreck to come described in his book Liar’s Poker published in 1989.
What grabbed my attention in the article about Mr. Cassano were his personal traits. He was described as “a guy with a crude feel for financial risk but a real talent for bullying people who doubted him. …Joe would bully people around. He’d humiliate them and then try to make it up to them by giving them huge amounts of money.” When Bernie Madoff was sentenced, “Judge Chin pointed out that no friends, family or other supporters had submitted any letters on Mr. Madoff’s behalf that attested to the strength of his character or good deeds he had done.”
Bullying, lack of character and good deeds seem to be the common denominators that fallen financial wizards have demonstrated in spades. What ever happened to the old values that characterized capitalism until the 1980s, when personal greed and profit became the norm rather than an exception?
Peter F. Drucker, one of the greatest business thinker whose “writings are landmark of the managerial profession,” according to Harvard Business Review, was no socialist. This is what he had to say about social responsibilities of every business: “The third task of management is managing the social impacts and the social responsibilities of every enterprise. None of our institutions exists by itself and is an end in itself. Every one is an organ of society. Business is no exception. Free enterprise cannot be justified as being good for business; it can be justified only as being good for society.” (The Essential Drucker, published by Collins Business Essential. Italics are mine.)
Drucker continues: “Asked what a business is, the typical businessman is likely to answer, ‘An organization to make a profit.’ The typical economist is likely to give the same answer. This answer is not only false, it is irrelevant.” Mr. Drucker’s thinking may come as a revelation to many fallen captains in the financial industry who think that ethics is a precocious Greek wine.
A real example of an ethical, socially responsible business is a story in Sunday’s New York Times about Trumpf, a family business employing some 8,000 people and based in Ditzingen, Germany. While the current economic crisis may force the owners to lay off employees by the end of the year, this business is run like nothing we’re used to in North America.
“About 15 years ago, Leibinger père put together his family’s principles in a written 20-page codex outlining rights and, above all, the responsibilities of Trumpf’s stewards. The imperative is to run the business in an ethical manner, to take care of employees and to earn a decent profit, which is largely reinvested in the company.” You can find the Company Principles section here.
Just compare that article to one in last week’s Financial Times, The town that Wal-Mart built. To the Wal-Mart town’s citizens, it’s all about size: the biggest this and the biggest that, topped by this quote from the journalist’s guide: “‘Look at the girls walking their little dogs,’ he says proudly as we cruise past leggy women in shorts. ‘You could be in New York.’” He’s right. You couldn’t be in Ditzingen.
Power, influence and leadership
I just read a great article by Elizabeth Haas Edersheim — “A tribute to Peter F. Drucker” — on the website of Peter Drucker Society of Austria. What caught my attention in the Edersheim piece was a quote from Jim Collins, author of Good to Great: “Influence and power are two dimensions by which to consider leadership,” he says. “Zero power and large influence are a fundamental measure of a great leader, whereas power alone only creates management authority, not leadership.”
What differentiates communications in a power-based authority from one based on influence? Influencers listen first and talk later to understand and analyze problems. They have a compelling way of defining the causes of problems and grievances by making them easily understood and digestible. This allows them to start a genuine dialogue rather than advocate their own, self-centered ideas. Influencers’ ideas are defined by opportunities rather than failures, but they don’t ignore or underestimate challenges. Influencers connect in a positive way that “leaders” who rely on power of their position in an enterprise or society can never replicate. Of course, to be true leaders, influencers must also have other attributes that enable them to put their ideas into action, including deep knowledge, self-discipline, perseverance and organizational skills.
Influencers tend to be wise rather than smart. They have a high degree of functional literacy. Have you noticed that functionally illiterate people in the workplace always produce dysfunctional ideas and results? How many times have you seen “change agents” self-destruct because their ideas of change were based on ignorance of real problems? The corporate landscape is littered with people who chose to rely on power rather than influence. Power comes and goes, but influence endures and makes great leaders.
