Every Decreasing Circles

The great convergence goes on. I picked up this link from a cross-hit; Lectures at the Rafael Escola chair of Ethics. The inaugural 2004 presentation by Jeffrey Pfeffer is straight into the morals of CEO remuneration and immediately picking up on the perverse drive of purely objective, logical measures of company performance (See “why reward success” posted 3 days ago, and my general thesis)

Robert Jaedicke is a former accounting professor and the former associate dean and dean of the Stanford business school. He was also the chairman of the audit committee of Enron and served on the Enron board since the mid- 1980s. The question posed by those who know Jaedicke well is how could this ethical, honest, and decent man have been caught up in such a massive financial fraud? There are many possible and plausible answers, including a) the complexity of the transactions that ultimately brought the demise of Enron, b) Jaedicke’s long association with the company and its CEO, Ken Lay, that may have made him complacent and reluctant to challenge a long-time colleague, and c) the fact that responsibility can become diffused when many people are present and observing an action (e.g., Latane and Darley, 1968), in that no single individual may feel particularly responsible or comfortable with disagreeing with the others. But there is another possibility as well. Suppose Enron, with its high stock price, needed to show growing earnings or earnings of a certain amount as expected by analysts in order to maintain and even increase that share price. A transaction is presented with the following possible outcomes: approve the possibly questionable deal and permit the company to continue to report favorable financial results and maintain the stock price, or refuse to approve it and potentially face a calamitous decline in shareholder value. If maintaining shareholder value is the only thing that matters”if it is only the short-term results that count”it is clear that there will be enormous pressures to approve the deal and, in fact, doing so is probably the logical thing to do.

Hypocrisy rules, as I’ve said many a time. Anyway, so nothing new under the sun continues as a theme, but the real reason I was drawn to this link is that hero Charles Handy gave the 2005 lecture, and in expounding his ten moral dilemmas to address in modern business life, he uses “Eudaimonia” as his archetype for the duty to “flourish”. Good read actually, Handy’s usual folksy style advice, including a good reminder that for Adam Smith these personal duties came before capitalism. [Previous eudaimonia references.]

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