American 21st century CEOs lack honor

I missed writing last Sunday’s column because I was in the hospital. In the not too distant past, my pancreatitis attack might have been life threatening. Thanks to the competence and care of the doctors and nurses at Christiana Care, I spent a few very uncomfortable days, had a gall bladder removed, and got a lecture about taking it easy for a few weeks.

That’s how I found myself sitting at home the morning after leaving the hospital, watching a DVD of Verdi’s opera, “Ernani.” The storyline involves a number of pledges made by the leading characters, who find that in some cases keeping those pledges will lead to terrible personal results. The music is wonderful, the ending tragic, and the message clear. In Verdi’s Italy, your word was your bond and death was preferable to dishonor.

After the DVD ended, I caught up on newspapers I had missed in the hospital and read that a federal court had found Ragat Gupta guilty of insider trading. Gupta had been the chief executive of McKinsey and Company, perhaps the world’s leading management consultant firm, for 10 years. The very basis of that business is a pledge to clients to never divulge confidential information. Yet as a Goldman Sachs board member, he did just that and profited by blatantly trading on that information.

I got to thinking about what honor means in 21st-century America. Here was a man, unquestionably brilliant, who had led a company known for its integrity. How could he do something so fundamentally dishonorable? I’m sure there were other reasons, but I can’t help but believe that what Gupta did has something to do with the disturbing disconnect between some of our rich and powerful and the rest of the population. He just didn’t think the rules applied to him.

I remember thinking, back in 2008, how differently Wall Street insiders reacted to that financial meltdown as opposed to what happened in 1929. Brokers then were throwing themselves out of windows because they couldn’t live with the dishonor of losing their clients’ money. I don’t want to see anyone commit suicide, but can anyone picture crooks like Alan Stanford or Bernie Madoff worrying about their honor?

I am still haunted by the memory of questioning Lloyd Blankfein, CEO of Goldman Sachs, when I was on the Senate’s Permanent Subcommittee on Investigations in 2010. It was clear that Goldman had been selling their clients securities at the same time they were betting the same securities would fail. Time and again Blankfein insisted that what Goldman did was legal. Yes, it was legal, I thought, in large part because people like you had lobbied to write the laws that way. But can anyone defend engaging in such a gigantic conflict of interest as honorable? I use Goldman Sachs only as an example. The same culture of deceiving customers – going back on promises made to them – existed and still exists throughout parts of Wall Street and in other parts of corporate America as well.

That disconnect I referred to earlier has to be magnified by the huge disparity in this country between what the average CEO is paid and what the average American worker makes. The concept of honor is still alive in Japan, for instance, where a number of CEOs, whose companies were involved in some kind of scandal, have in recent years publicly announced their shame and resigned. I don’t see this happening in our country, and it is probably not a coincidence that the ratio of CEO to average worker pay is 10 to 1 in Japan and 300 to 1 here.

Maybe I shouldn’t mix post-operative Verdi and today’s headlines. I don’t really long for the days of duels of honor or broker suicides. But we seem too accepting these days of politicians who promise one thing today and the opposite tomorrow. We too often excuse dishonest business conduct as “that’s just the way it is.”

“That’s the way it is” only if we don’t speak out and fight for a society that values personal integrity and a commitment to keep one’s word. If we are to make democracy and a market economy work, we need that most of all at the top of our political, economic and educational institutions.

Originally published 26 June 2012 on