Thursday, November 6, 2014

Executive psychopaths

Our fourth type of systemic problem was pictured as:
In a Chinese palace garden a school of fish jumps out of the water in gracious arcs, their scales glistening in the sun. The fountains behind them produce a rainbow. In a gilded boat, rowed by servants, the prince looks about in great satisfaction. Even the fish jump for him. A big carper lies gasping and dying on the bottom of the boat before his feet. He studiously avoids to look at it.

This is a simple condition. Simple in the sense of straightforward and recognizable. It is capitalism in the eyes of socialists: egotistical and parasitical behavior of the capitalists. In practice it is not that common. The parasites are usually the owners at a distance, the absentee landlords, the continuously shifting stockholders. If the owner is also the director, there is usually more of a sense of continuity and in the course of many years, personnel may even become a bit of family. The more extreme form in the image, is more likely when the ownership of the organization has been inherited by the spoilt children or grandchildren of the founders and there is no restraining influence from the rest of the family.
A similar form may manifest itself when a company is taken over by a corporate raider who just wants to maximize profit in the short run. The common trick is to lend money to the company at exorbitant rates and book the proceeds as tax-deductible interest instead of dividend.
In the public sector we find in it countries who have a dictator or a powerful megalomanic president. Huge palaces are built (Khadaffi, Saddam Hoessein, Erdogan) or others extreme forms of conspicuous consumption (Imelda Marcos).
The solution is simple, but difficult: kill the parasite. The next step is not simple: prevent the next parasite in taking over.
Anyway, megalomaniacs and psychopaths do die. You can hasten that by mass attack or conspiracy. But if the winner takes all, the same play is acted out. The throne and the palace make the despot.
If the big solution isn’t possible, only  the small solution remains: leave. If you are not allowed to leave: flee.

Directors who are in the game of maximizing shareholder value and whose payment is tied to share value in any form, are a hardly less pernicious variant of the royal parasite, even if they have a MBA and also otherwise an impressive resume. The easiest signals to recognize them are:
  • They have no knowledge of and experience in the primary process: producing real services and products for real clients. They have rather a general background in economics, finance or law.
  • They stay at most a couple of years in the same function. They leave before the long-term effects of their short-term interventions become apparent.
  • The external directors excuse their being overpaid and pampered by the mantram that the market requires this to attract and maintain top people.
  • As cost-cutting is so difficult and painful, they have to be recompensed for such unhappy working conditions by extra bonus payments.
  • They thrive in times of high unemployment.
  • They have glib personal assistants.
Leave, flee, leave. If you can’t, pray for earthquakes, tornados, tsunamis, bolts from the blue. Pray anyway.
Many wealthy people have been competent, hard-working and lucky - at least not unlucky. Some of them have been only lucky. We may be envious, but we shouldn’t be carried away by our envy. But wealthy psychopaths are a scourge.

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