Corporate Governance and Corporate Governance and Narcissistic BehaviourNarcissistic Behaviour

The Role of VirtueThe Role of Virtue

Presented at 3Presented at 3rdrd Biennial International Conference Biennial International Conference in Business, Banking and Finance in Business, Banking and Finance

May 27 – 29, 2009May 27 – 29, 2009U.W.I, St. AugustineU.W.I, St. Augustine

Surendra ArjoonSurendra ArjoonDepartment of Management StudiesDepartment of Management Studies

U.W.I St. AugustineU.W.I St. Augustine

The Evolution of GollumThe Evolution of Gollum

StagesStages AttitudesAttitudesThe VirtuousThe Virtuous

Acts of OmissionActs of OmissionThe OUBThe OUB

Acts of Administrative Acts of Administrative CommissionCommission The EgoistThe Egoist

Acts Acts of Criminal Commissionof Criminal Commission

The Continuum of CompromiseThe Continuum of Compromise

Corporate GovernanceCorporate GovernanceWeaknessesWeaknesses

Safeguards against excessive risk-Safeguards against excessive risk-takingtaking

Standards insufficientStandards insufficient CompensationCompensation

Corporate GovernanceCorporate GovernanceCauses of Failure Causes of Failure

Rotten CoreRotten Core

“ “ The very capitalism that built America into The very capitalism that built America into the super-power that is being questioned the super-power that is being questioned and politicians are finding it hard to and politicians are finding it hard to swallow that the solution may lie in a swallow that the solution may lie in a socialistic framework”socialistic framework”

Ram Ramesh Ram Ramesh

Trinidad Express Trinidad Express

March 15March 15thth 2009 2009

Rotten CoreRotten Core

““I’m not sure if it’s good to have freedom I’m not sure if it’s good to have freedom or not. I’m gradually beginning to feel that or not. I’m gradually beginning to feel that we Chinese need to be controlled. If we’re we Chinese need to be controlled. If we’re not being controlled, we’ll do what we not being controlled, we’ll do what we want to….freedoms in Hong Kong and want to….freedoms in Hong Kong and Taiwan made these societies Taiwan made these societies chaoticchaotic””

Jackie ChanJackie Chan

Associated PressAssociated Press

April 20, 2009April 20, 2009

Rotten ApplesRotten Apples

““While institutions are larger than men it is While institutions are larger than men it is still men who inhabit them. And if our still men who inhabit them. And if our institutions are now degenerating through institutions are now degenerating through lack of integrity and trustworthiness, it is lack of integrity and trustworthiness, it is ultimately the men and women entrusted ultimately the men and women entrusted with the task of maintaining and building with the task of maintaining and building such institutions have themselves operated such institutions have themselves operated without integrity and trustworthiness”without integrity and trustworthiness”

Michael HarrisMichael HarrisTrinidad ExpressTrinidad Express

March 6thMarch 6th

Rotten ApplesRotten Apples

““The US financial crisis was not caused by The US financial crisis was not caused by the complex instruments, but by the failure the complex instruments, but by the failure of leaders on Wall Street. The heads of firms of leaders on Wall Street. The heads of firms like Bear Sterns, Lehman Brothers, AIG, like Bear Sterns, Lehman Brothers, AIG, Countrywide, Financial, and Washington Countrywide, Financial, and Washington Mutual all too often sacrificed their firms’ Mutual all too often sacrificed their firms’ futures in order to maximize personal gains”futures in order to maximize personal gains”

Bill GeorgeBill George

Business WeekBusiness Week

Narcissistic Behaviour Narcissistic Behaviour CharacteristicsCharacteristics

Extravagant sense of self-importanceExtravagant sense of self-importance EgotisticalEgotistical Exaggerate talents and abilityExaggerate talents and ability Desire for power, attention, and admirationDesire for power, attention, and admiration Likely to emerge as leadersLikely to emerge as leaders Boastful and pretentious behaviourBoastful and pretentious behaviour Grandiose fantasies of unlimited successGrandiose fantasies of unlimited success Unreasonable sense of entitlement and Unreasonable sense of entitlement and

superioritysuperiority

Narcissistic BehaviourNarcissistic BehaviourManifestationsManifestations

Denials and rationalizations to justify Denials and rationalizations to justify behaviourbehaviour

Willingness to exploit othersWillingness to exploit others Vulnerable and fluctuating self-Vulnerable and fluctuating self-

esteemesteem Lack of empathyLack of empathy Charming and extravertedCharming and extraverted Believes that others envy him or herBelieves that others envy him or her Envious of othersEnvious of others

Narcissistic BehaviourNarcissistic BehaviourManifestationsManifestations

Likely to emerge as leadersLikely to emerge as leaders Vulnerable and fluctuating self-Vulnerable and fluctuating self-

esteemesteem Strong reactions to perceived Strong reactions to perceived

challenges or threatschallenges or threats Fluctuating or impaired emphatic Fluctuating or impaired emphatic

abilityability Perfectionist ideals and standards Perfectionist ideals and standards

Economic Fallacy Economic Fallacy

Natural Resources + Labour = Natural Resources + Labour = ProductivityProductivity

The Role of VirtueThe Role of Virtue

“…“….to support that any form of .to support that any form of government will secure liberty or government will secure liberty or happiness without any virtue in the happiness without any virtue in the people is a chimerical idea”people is a chimerical idea”

James MadisonJames Madison

The Role of VirtueThe Role of Virtue

““The common good of the State The common good of the State cannot flourish unless the citizens be cannot flourish unless the citizens be virtuous, at least those whose virtuous, at least those whose business it is to govern”business it is to govern”

Thomas AquinasThomas Aquinas

Types of Business PeopleTypes of Business People

““The difference between the The difference between the temporarily successful business temporarily successful business persons and those who became and persons and those who became and remain successful is the latter remain successful is the latter possess virtuous characters”possess virtuous characters”

JudgmentJudgment• Think before acting and consider the Think before acting and consider the

consequences of actionsconsequences of actions FairnessFairness

• Honesty:Honesty: saying what is truesaying what is true open and transparent communicationopen and transparent communication

• Respect:Respect: treating people with dignity and valuing their treating people with dignity and valuing their

contributionscontributions maintaining fairness in all relationshipsmaintaining fairness in all relationships

Mental toughnessMental toughness speaking up for what is right and reporting speaking up for what is right and reporting

wrongdoingswrongdoings

Key Components of Virtuous Key Components of Virtuous BehaviorBehavior

Self-masterySelf-mastery• Trust:Trust:

keeping commitmentskeeping commitments

• Integrity:Integrity: doing the right things without compromisedoing the right things without compromise avoiding the appearance of improprietyavoiding the appearance of impropriety

• Responsibility:Responsibility: accepting the consequences of actionsaccepting the consequences of actions admitting mistakes and correcting them quicklyadmitting mistakes and correcting them quickly not retaliating against those who report violations of not retaliating against those who report violations of

law or policylaw or policy

Key Components Virtuous Key Components Virtuous BehaviorBehavior