The Ten Commandments for Business Failure - Don Keough [23]
One of the reasons corruption became more widespread, was because our whole social environment became less civil and more tolerant of bad behavior. The late senator Daniel Patrick Moynihan once described it as defining deviancy downward.
In 1969 a famous experiment was conducted by Philip Zimbardo, a Stanford psychologist. Two cars with no license plates and the hoods up were abandoned—one in the Bronx, New York, the other in Palo Alto, California. In the Bronx the car was stripped and trashed in a matter of minutes.
In Palo Alto something quite different happened. Nothing. For more than a week the car sat there unmolested. But one day the psychologist himself took a sledgehammer and began smashing the car. Soon, passersby were taking turns with the hammer and within a few hours the car was demolished. This experiment led to the “broken windows” theory of crime—the idea that if a broken window is left unrepaired in a building, soon vandals will break the rest of the windows. According to the theory the broken window says, “No one cares. Break a window and nothing happens to you. Break more. It’s okay.”
To a degree the business environment of a few years ago was suffering a similar fate. Little cracks in the body of ethics were being ignored.
Another reason why corruption became more widespread is that we began to spend an inordinate amount of time catering to our valued friends who help to make “the market”—the Wall Street analysts.
For most of its 120 years in business, The Coca-Cola Company had little to do with Wall Street. The glorious annual reports that the company issued consisted of eight black-and-white pages on almost tissue-thin paper, no pictures. The company’s attitude was: “What you need to know, there it is. Read it.”
The leadership of the company rarely talked to the street. Public relations people were paid to keep company executives’ names out of the papers. The product was the star, not the CEO or the CFO.
Gradually, though, for The Coca-Cola Company and virtually all companies, the annual report took on a whole new meaning. It became a public relations vehicle. No longer did it just report on what the companies were doing. Now annual reports of most companies are page after page of full color, featuring people of all races, creeds, and cultures plus a double-page spread of a pristine forest in Maine that was not cut down to produce the report. Somewhere in all this green beauty you’ll find the numbers.
In 1982 the longest bull market in history began. And with the exception of a temporary dip in 1987, it raged for eighteen years. During that time, many companies began to let the analysts into the front yard, then the hall, the kitchen, then into the living room. And finally many woke up one day and found them in the bedroom.
They were no longer there to see how companies were doing. They were there with sweet pillow talk, suggesting what the company’s leadership might do.
Up until that great bull market, chief financial officers were not judged on the basis of how creative they were. They were smart, tough, and often downright mean. Their basic responsibility was to test every dollar that came in and went out to see if it was real. If they had been dealing in gold coins, they would have bitten them. Bringing good news was not their function. CFOs were the truth tellers. They didn’t gild anything. You could always count on the CFO to tell the CEO the unvarnished truth, good, bad, or indifferent.
But as the stock market began to soar—and as businesses let the street into their bedrooms—slowly but surely the office of the CFO became a profit center, an important profit center. “I need another five cents this quarter. Find it!” some harassed CEOs would say.
Over time, instead of being the guardians of the transparency and the fiscal integrity of the corporation, many