How - Dov Seidman [70]
This got me thinking about some other celebrated cases of the past few years. In the securities fraud and obstruction of justice trial of media maven Martha Stewart, Judge Miriam Goldman Cedarbaum considered whether Stewart showed remorse in deciding how to best mete out justice after her conviction for lying to investigators, but her postconviction social gallivanting to awards shows and parties in the Hamptons did little for her cause.9 Hotelier Leona Helmsley displayed negative attitudes toward the court. Her famous quote “Only little people pay taxes” displayed an egregious disrespect that proved a factor in her punishment as well.10
Character is a difficult thing to judge, and yet we judge the character of individuals day in and day out, both casually when deciding in our own interests and in the extreme cases when deciding someone’s fate. It is a deeply held, long-standing tradition that informs who we are in profound ways. The importance of the outcome, from the trivial to the most dire, does not change the criteria we use. Whether it be meting out the ultimate punishment or giving a dollar to a homeless person on the street, character, that soft quality of a person’s worth, plays a huge role in our dealings with others.
Then in 2006, when public mortgage corporation Fannie Mae was fined $400 million for financial irregularities, what I heard on the news made clear to me how the world had changed.11 Reuters reported that the enormity of the fine had a lot to do with the fact that “Fannie Mae’s ‘arrogant and unethical’ corporate culture led employees to massage earnings,” and that “Fannie Mae’s faults were not limited to violating accounting and corporate governance standards, but included excessive risk taking and poor risk management as well.”12 James B. Lockhart III, director of the Office of Federal Housing Enterprise Oversight, made it very clear when he appeared on PBS’s News-Hour . “This whole company’s culture needs to be changed,” he said. “We’re really demanding sort of a top-to-bottom look at this company.” 13 It struck me that if he had been speaking three years before, Lockhart would have said something like “They lacked proper internal controls or compliance mechanisms.” Now he was saying that they had looked deep into the soul of Fannie Mae and decided that something was rotten at the core, that the transgressions arose from an “arrogant and unethical corporate culture.” We habitually judge people’s characters, but when it came to companies, this was not the case until very recently. We did not judge an organization’s “character,” because we couldn’t impute a character to it.
In the days before information transparency made almost everything easily knowable, all we could really know about a company’s “character” were the programs and procedures that stood as proxies for it. When companies could be fortresses, they had much greater control over what outsiders could see. The walls were high, and it was highly effective to post proxies on the parapets like flags that could be seen from a distance. A jury assessing a company’s complicity when one of its employees broke the law had to assume that if it invested heavily in, say, a compliance hotline, then it must be honest and diligent. The hotline served as proxy for self-policing. Since people couldn’t see deeply into the corporation’s true, everyday behaviors, they had to pick a surrogate, a proxy, something that would indicate whether it was good. Often these took the form of programs or departments charged with duties such as compliance or safety. When a company like Fannie Mae became embroiled in a scandal or was accused of wrongdoing, we would judge its culpability on the programs it had in place. The thinking went: Like every city has some criminals, every organization has some bad apples; you judge a city by its laws and efforts to root out crime, and you judge a company by the programs and policies it has in place