Corporations in the United States are at times known as much for their money making skills as they are for their scandals. I mean just take a quick look at the Wikipedia page devoted to corporate scandals. (WOW!) And this list only consists of the ones who got caught. I am sure the clever CEOs of Fortune 500 Companies have gotten away with many more scandals than this list suggests.
The CEO’s of these companies when they fall are
found to intentionally or unintentionally follow the beliefs of Machiavellianism.
For a quick summary, Machiavellianism is the concept of performing an action
for the greater good that may not be ethical. It is the idea that the end result justifies the means.
Let’s examine how the concept of
Machiavellianism applies to CEO’s of corporations, and specifically, to the
late Enron energy corporation. Below is a brief history of the company’s climb
and fall.
Imagine
the stereotypical high school kids who manipulated their way to popularity. They
found a way to hurt anyone who rebelled against them and made sure their
popularity was always growing.
Well,
Enron was the most popular guy on Wall Street in the 1990s to early 2000s. Stock
prices drove the company, so they lied, stole, and cheated their way for higher
prices. When the rare stock analyst gave Enron a bad rating (which would cause
stock prices to fall), he would be fired from his job at his respective
investment firm. They also practiced an accounting scheme called mark to market
accounting, which is sarcastically presented below in a skit by
Enron.
Mark to market accounting essentially lets accountants enter the profits they
HOPE to make, instead of the profits they MADE. This made it easy for Enron
executives to lie about their profits, and thus, improve their stock
rating. The only problem was soon enough, they would not have enough
potential profits to write down on that expense sheet. Dun dun dun…
Soon enough, the company went bankrupt,
and the main executives of the company where the ones who were going to pay the
price. The executive I want to focus on, CEO Jeffery Skilling, was the man
whose Machiavellianism views ultimately brought him and the entire company
down. In fact, Skilling's Wikipedia picture is a mug shot of himself. That's rough.
If you want to understand Machiavellianism and
why it is detrimental to society, Skilling is the man to observe. He was indicted on 35 accounts of fraud, insider trading, and other criminal charges. Why did he do this? Because he was obsessed with money and making money for Enron. In fact, he was so obsessed that the stock price was posted in the elevator so everyone knew the importance of taking actions (no matter the moral consequence) to improve the price. He justified the
means with the end result. One of his quotes from his court case exemplifies
how he believed his actions were justified by the end result of making money.
He quotes:
[Mr. Skilling said that his conduct…]“Even if wrongful in some way (means: which are morally wrong), was not the crime of honest-services fraud,
because the government conceded that his acts
were not intended to advance his own interests instead of Enron's (end: advance his Enron’s interest)."
http://www.nytimes.com/2009/10/14/business/14enron.html
Skilling’s ‘end’ was profit for the company, but
what put him in trial, and eventually jail, were the ways that he went about
acquiring profit. He took massive risks that put everyone, including all 20,000
employees and countless more investors, in a vulnerable place. He lied on
expense sheets and cheated on deals. He was the Prince that Machiavelli
describes.
In class we examined if Machiavelli’s theories are
good or bad. This case of Enron clearly details how detrimental this tunnel
vision view on an end result can be. Skilling was so focused on the stock price
and making money, that he couldn’t avert his eyes away from the
morally hazardous actions he was taking. While the Machiavelli view was working
for a few years, it ultimately left Skilling’s and Enron’s reign of power in
tragedy.
Do you think Skilling took the right actions for
the company? Do all CEO’s of huge corporations act in a Machiavelli-esque way? Are CEOs just as bad as Politicians?
To understand more about how we psychologically
make choices when faced with a moral dilemma, check out this recent NPR clip:
Sources:
http://www.nytimes.com/2009/10/14/business/14enron.html
http://en.wikipedia.org/wiki/Jeffrey_Skilling
http://www.youtube.com/watch?v=OnvkFG1wBCo
Hayley, good post. As for your first question, no I do not believe Skilling took the right actions for Enron. For one, he is in prison. Secondly, Enron crashed. He was a bad Machiavellian and put his own and his cronies’ profits ahead of the company. The company itself didn’t benefit; only the stockholders’ profits. However, I would say all good CEOs act in Machiavellian-esque manner. Business is business and tough decisions must be made. Top companies aren’t top companies because they are nice. Look at Apple - they won a billion dollar lawsuit about rounded edges against Samsung. I would say CEOs are equivalent to politicians. They’re trying to do their best for their respective company/country.
ReplyDeleteI definitely don't think Skilling took the right actions for the company. It is possible to have the stock price of your company go up through moral means. Just look at Apple, if your parents bought Apple stocks 15 years ago, you'll be set for life. Granted, a company also needs to have a sustainable balance sheet where liabilities aren't that big compared to the equity that the company has, something that got GM in trouble was the liability for all the pensions of former employees. That's why companies don't offer pensions anymore, too much of a long-term liability. But anyway, I do believe the CEO's of huge corporations act in a Machiavelliesque way, which I don't blame them for. It's like they're the fathers of the family, they have to do whatever it takes to bring home bread at the end of the night.
ReplyDeleteOne person that comes to mind that I’m sure everyone in this class knows about is good old’ Bernie Madoff, since what happened with Enron occurred while we were in elementary school and that was the last thing on our mind. He was behind the largest Ponzi scheme in history; he had traded money with thousands of clients that totaled around $50 billion dollars. Do I believe that Madoff and Skilling are sorry for what they did? No. They’re sorry that they got caught.
CEO’s are just like politicians, they do whatever it takes to keep their family happy and whatever keeps them in that seat of power. As Gordon Gekko said, “The point is ladies and gentlemen that greed, for lack of a better word, is good.”
This is a very interesting post! I disagree, however, that Skilling held Machiavellian views at heart. If he were a true Machiavellian, he would have carefully thought out the possible repercussions for his company before making any decisions. And though he was very clearly "obsessed" with Enron's stock price, I think this was for personal reasons: the higher the stock price soared, the higher Skilling's pay check, the more money he could make off of stock options, etc. To me, it seems that Skilling was acting only out of greed, not with the interests of the company at heart, although these goals did overlap in some ways. It is also very clear that he did not make the right choices for the company, as Enron failed. It cannot be debated whether Skilling was acting morally, for he surely wasn't, but that in itself does not make his actions Machiavellian.
ReplyDeleteI do, however, think that many CEOs act in a Machivellian way, as it is ideal for a CEO to have the interests of his/her company at heart, and only those. However, as Machiavellie mentioned, it is impossible to avoid one's self interest entirely. Some CEOs who seemingly held Machiavellian views dear are the robber barons, such as John D. Rockefeller, Cornelius Vanderbilt, and Andrew Carnegie. These men held the aspirations of their respective companies dear, although one could surmise that this was only because their personal wealth relied on these companies.
Great post! It is very interesting to apply Machiavellian ideas to a field other than politics. I think it's very clear that, ultimately, Skilling's actions did not benefit Enron. However, I think the test of whether his actions were in line with Machiavellian thought would be whether or not his intentions were good. This is a difficult thing to discern because his self-interest and interest in Enron are not easy to separate. There's no debating that the end results were far from good, but one could argue that his intentions were good at least in the sense that he was hoping to increase profits for his stockholders and perhaps employees.
ReplyDeleteI think that CEO's probably do act in a Machiavellian way on a pretty regular basis. Their "nation" is basically their stockholders and employees. An example of this is the environmental irresponsibility of a lot of major corporations. This is something that's bad, but good for the bottom line and the company.
This is definitely an interesting take on Machiavellian ideas, as you were able to take a primarily political idea and apply it to the major issue of corporate scandals. In the long run, it is pretty obvious that Skilling's actions were not right for his company, as Enron went bankrupt and collapsed completely. The question as to whether or not Skilling was acting in a Machiavelli-esque way is also a great question, but it is basically impossible to answer without a greater understanding of Skilling himself. While Skilling's actions led to a growth of his corporation, it is very possible that he did what he did just to make money for himself. Skilling most likely didn't care about his stock-holders at all, as he was essentially setting them up for long-run failure through deception. I believe Skilling was not acting in a Machiavellian way. I don't think Skilling actually cared about Enron at all, but rather was only concerned with making himself money in any way possible.
ReplyDeleteThis is an interesting application of Machiavellian ideas to an economic moral issue, but are Machiavelli's ideas applicable? The concept of undertaking moral wrong or morally ambiguous actions in order to do what is necessary to maintains one's rule as well as doing what is best for those he rules or has power over. Like others have already said, his morally incongruous actions were not undertaken for the good of those he had power over: Enron and its employees.
ReplyDeleteInterested in maintaining the facade of his success and his own self worth, he chose to be dishonest to those he had power over, and did so in a manner that is consistent with Machiavellian characteristics: maintain the image of normality. However, it boils down to his intent; his actions were not done with the intent to benefit his corporation and its employees. His dishonesty may have helped Enron in the short run, there is a sense of inevitability that Enron would not benefit from his actions. In fact, his actions may have only been done to sustain the status quo that he established for himself; to reveal the dishonesty would undermine his own status and credibility. By being deceitful and dishonest for his own self purpose, his actions are not representative of Machiavelli's ideas. It could be argued that his actions had the unintended side effect of being beneficial for his company past the initial point of dishonesty, but in most white collar crimes, the dishonest is continued for self preservation purposes. The self centered reasons I think invalidate the concept of "dirty hands" in his situation.