The corporate psychopaths theory of the global financial crisis by clive r boddy

Journal of Business Ethics (2011) 102:255–259 Ó Springer 2011DOI 10.1007/s10551-011-0810-4The Corporate Psychopaths Theoryof the Global Financial Crisis Clive R. BoddyABSTRACT. This short theoretical paper elucidates a helped to answer the question of how organizationsplausible theory about the Global Financial Crisis and the end up with impostors as leaders and how thoserole of senior financial corporate directors in that crisis. organizations are then destroyed from withinThe paper presents a theory of the Global Financial Crisis (Boddy, 2005, 2010a, Boddy et al., 2010a, b).which argues that psychopaths working in corporations The event of the Global Financial Crisis hasand in financial corporations, in particular, have had a hastened an already changing climate in businessmajor part in causing the crisis. This paper is thus a veryshort theoretical paper but is one that may be very research. Commentators are no longer willing toimportant to the future of capitalism because it discusses assume that all managers are working selflessly andsignificant ways in which Corporate Psychopaths may entirely for the benefit of the organization thathave acted recently, to the detriment of many. Further employees them, and the study of dark, dysfunc-research into this theory is called for. tional, or bad leadership has emerged as a theme in management research (Allio, 2007; Batra, 2007;KEY WORDS: Corporate Psychopaths, The Global Fi- Boddy, 2006; Clements and Washbrush, 1999). Thenancial Crisis, leadership, corporate management onset of the Global Financial Crisis has thus led management researchers to be increasingly interested in researching various aspects of dark leadership in anIntroduction attempt to explain the current financial and organizational turmoil around the world. Numerous papersThe Global Financial Crisis has raised many ethical on dark leadership have, for example, been recentlyissues concerning who pays for the damage inflicted reviewed by this author for this journal and it isand who is responsible for causing the crisis. Com- evident that there are commentators with a deepmentators on business ethics have noted that cor- knowledge of individual types of dark and dys-porate financial scandals have assumed epidemic functional leadership and with views on how theseproportions and that once great companies of people have contributed to the current crisis. Cor-longstanding history and with previously unblem- porate Psychopaths are one such type of dark man-ished and even dignified reputations have been ager, and this paper investigates their possiblebrought down by the misdeeds of a few of their influence on the companies involved in the Globalleaders. These commentators raise the fascinating Financial Crisis. This is important because whenquestion of how these resourceful and historic large financial corporations are destroyed by theorganizations end up with impostors as leaders in the actions of their senior directors, employees loosefirst place (Singh, 2008). One writer on leadership their jobs and sometimes their livelihoods, share-even goes as far as to say that modern society is holders lose their investments and sometimes theirsuffering from a epidemic of poor leadership in both life savings and societies lose key parts of their eco-the private and the public sectors of the economy nomic infrastructure. Capitalism also loses some of(Allio, 2007). its credibility. An understanding of Corporate Psychopaths as These corporate collapses have gathered pace inexpressed in a recent series of papers in this journal recent years, especially in the western world, andand in others, and based on empirical research, has have culminated in the Global Financial Crisis that

256 Clive R. Boddywe are now in. In watching these events unfold it menace to the companies they work for and tooften appears that the senior directors involved walk society (Brinkley et al., 2004; Viding, 2004).away with a clean conscience and huge amounts ofmoney. Further, they seem to be unaffected by thecorporate collapses they have created. They present Corporate Psychopathsthemselves as glibly unbothered by the chaos aroundthem, unconcerned about those who have lost their The concept of the Corporate Psychopaths marriesjobs, savings, and investments, and as lacking any the terms ‘psychopath’ from the psychological lit-regrets about what they have done. They cheerfully erature with the term ‘corporate’ from the area oflie about their involvement in events are very per- business to denote a psychopath who works andsuasive in blaming others for what has happened and operates in the organisational area (Boddy, 2005).have no doubts about their own continued worth These people have also been called Executive Psy-and value. They are happy to walk away from the chopaths, Industrial Psychopaths, Organisationaleconomic disaster that they have managed to bring Psychopaths, and Organisational Sociopaths by otherabout, with huge payoffs and with new roles advis- researchers in this emerging area of research (Peching governments how to prevent such economic and Slade, 2007). They ruthlessly manipulate others,disasters. without conscience, to further their own aims and Many of these people display several of the objectives (Babiak and Hare, 2006).characteristics of psychopaths and some of them are Although they may look smooth, charming,undoubtedly true psychopaths. Psychopaths are the sophisticated, and successful, Corporate Psychopaths1% of people who have no conscience or empathy should theoretically be almost wholly destructive toand who do not care for anyone other than them- the organizations that they work for. The probableselves. Some psychopaths are violent and end up in mal-effects of the presence of psychopaths in thejail, others forge careers in corporations. The latter workplace have been hypothesized about in recentgroup who forge successful corporate careers is times by a number of leading experts and com-called Corporate Psychopaths. Who psychopaths are mentators on psychopathy (Babiak, 1995; Babiakand who Corporate Psychopaths are, is discussed and Hare, 2006; Boddy, 2005, 2006; Clarke, 2005;further below. Hare, 1994, 1999). Researchers report that such malevolent leaders are callously disregarding of the needs and wishes ofPsychopaths others, prepared to lie, bully and cheat and to dis- regard or cause harm to the welfare of others (Perkel,Psychopaths are people who, perhaps due to physical 2005). Corporate Psychopaths are also poorly orga-factors to do with abnormal brain connectivity and nized managers who adversely affect productivitychemistry, especially in the areas of the amygdala and and have a negative impact on many different areasorbital/ventrolateral frontal cortex (Blair et al., 2005, of organizational effectiveness (Boddy, 2010b).2006; Kiehl et al., 2001, 2004, 2006) lack a con-science, have few emotions and display an inabilityto have any feelings, sympathy or empathy for other The theorypeople. The area of the brain known as the amygdalahas been described as the seat of emotion and fear Professor Robert Hare, the world’s leading expertand is reported to be important in processing socially on psychopathy, has said that if he didn’t look forrelevant information and it is therefore theorized psychopaths to study in prisons he would look forthat disruption of its functions could lead to cold them in stock exchanges. Recent newspaper head-and socially inappropriate behaviour (Wernke and lines such as ‘Wall Street Shows No Remorse’ doHuss, 2008). This abnormal brain connectivity and nothing to suggest that his viewpoint is incorrect.chemistry of psychopaths makes them extraordi- Hare has repeatedly drawn attention to the possiblenarily cold, much more calculating and ruthless damage that Corporate Psychopaths could cause intowards others than most people are and therefore a major ﬁnancial and other organizations. Some of this

The Corporate Psychopaths Theory of the Global Financial Crisis 257damage has been illuminated by the research pre- organisation and yield considerable power, havesented in a number of recent papers while other largely caused the crisis. In these senior corporatedamage is merely hypothesised about. positions, the Corporate Psychopath’s single-minded Psychologists have argued that Corporate Psy- pursuit of their own self-enrichment and self-chopaths within organizations may be singled out for aggrandizement to the exclusion of all other con-rapid promotion because of their polish, charm, and siderations has led to an abandonment of the oldcool decisiveness. Expert commentators on the rise fashioned concept of noblesse oblige, equality, fair-of Corporate Psychopaths within modern corpora- ness, or of any real notion of corporate socialtions have also hypothesized that they are more responsibility.likely to be found at the top of current organisations The Corporate Psychopaths Theory of the Globalthan at the bottom. Further, that if this is the case, Financial Crisis is that changes in the way people arethen this phenomenon will have dire consequences employed have facilitated the rise of Corporatefor the organisations concerned and for the societies Psychopaths to senior positions and their personalin which those organisations are based. Since this greed in those positions has created the crisis. Priorprediction of dire consequences was made the to the last third of the twentieth century large cor-Global Financial Crisis has come about. Research by porations were relatively stable, slow to change andBabiak and Hare in the USA, Board and Fritzon in the idea of a job for life was evident, with employeesthe UK and in Australia has shown that psychopaths gradually rising through the corporate ranks until aare indeed to be found at greater levels of incidence position was reached beyond which they were notat senior levels of organisations than they are at qualified by education, intellect or ability to go.junior levels (Boddy et al., 2010a). There is also In such a stable, slowly changing environmentsome evidence that they may tend to join some types employees would get to know each other very wellof organisations rather than others and that, for and Corporate Psychopaths would be noticeable andexample, large financial organisations may be identifiable as undesirable managers because of theirattractive to them because of the potential rewards selfish egotistical personalities and other ethicalon offer in these organizations (Boddy, 2010a). defects. These Corporate Psychopaths are charming indi- Changing companies’ mid-career was seen asviduals who have been able to enter modern cor- being questionable and inadvisable and their riseporations and other organisations and rise quickly would therefore be blocked both within their ori-and relatively unnoticed within them because of the ginal employer and among external employers whorelatively chaotic nature of the modern corporation. would question their reasons for wanting to changeThis corporate nature is characterized by rapid jobs.change, constant renewal and quite a rapid turnover However, once corporate takeovers and mergersof key personnel. These changing conditions make started to become commonplace and the resultantCorporate Psychopaths hard to spot because constant corporate changes started to accelerate, exacerbatedmovement makes their behaviour invisible and by both globalisation and a rapidly changing tech-combined with their extroverted personal charisma nological environment, then corporate stability be-and charm, this makes them appear normal and even gan to disintegrate. Jobs for life disappeared andto be ideal leaders. not surprisingly employees’ commitment to their The knowledge that Corporate Psychopaths are employers also lessened accordingly. Job switchingto be found at the top of organisations and seem to first became acceptable and then even becamefavour working with other people’s money in large common and employees increasingly found them-financial organisations has in turn, led to the devel- selves working for unfamiliar organisations and withopment of the Corporate Psychopaths Theory of the other people that they did not really know very well.Global Financial Crisis. The Corporate Psychopaths Rapid movements in key personnel between cor-Theory of the Global Financial Crisis is that Cor- porations compared to the relatively slower move-porate Psychopaths, rising to key senior positions ments in organisational productivity and successwithin modern financial corporations, where they made it increasingly difficult to identify corporateare able to influence the moral climate of the whole success with any particular manager. Failures were

258 Clive R. Boddynot noticed until too late and the offending man- Conclusionsagers had already moved on to better positionselsewhere. Successes could equally be claimed by When presented to management academics in dis-those who had nothing to do with them. Success cussion, the Corporate Psychopaths Theory of thecould thus be claimed by those with the loudest Global Financial Crisis is accepted as being plausiblevoice, the most influence and the best political skills. and highly relevant. It provides a theory whichCorporate Psychopaths have these skills in abun- unifies many of the individual interpretations of thedance and use them with ruthless and calculated reasons for the Global Financial Crisis and as such isefficiency. worthy of further development. The message that In this way, the whole corporate and employment psychopaths are to be found in corporations andenvironment changed from one that would hold the other organisations may be important for the futureCorporate Psychopath in check to one where they longevity of capitalism and for corporate and socialcould flourish and advance relatively unopposed. justice and even for world financial stability and As evidence of this, senior level remuneration and longevity. Stemming from this belief that the mes-reward started to increase more and more rapidly sage concerning psychopaths in corporations isand beyond all proportion to shop floor incomes and important, an aim of this paper has been to get thea culture of greed unfettered by conscience devel- work that psychologists have been doing on psy-oped. Corporate Psychopaths are ideally situated to chopathy, and on ‘successful psychopaths’ andprey on such an environment and corporate fraud, Corporate Psychopaths in particular more widelyfinancial misrepresentation, greed and misbehaviour known to management researchers and to managerswent through the roof, bringing down huge com- themselves. In particular the paper presents a theorypanies and culminating in the Global Financial Crisis concerning the Global Financial Crisis which maythat we are now in. throw considerable light on its origins. Writing in 2005, this author commentating onCorporate Psychopaths predicted that the rise ofCorporate Psychopaths was a recipe for corporate Implications for further researchand societal disaster. This disaster has now happenedand is still happening. Across the western world the The Corporate Psychopaths Theory of the Globalsymptoms of the financial crisis are now being Financial Crisis is a theory that would benefit fromtreated. However, if the Corporate Psychopaths further development and research. This researchTheory of the Global Financial Crisis is correct, then could be into the personalities and moral reasoningthis treatment of the symptoms will have little effect aptitudes of the leaders of the financial institutionsbecause the root cause is not being addressed. The that are most associated with the Global Financialvery same Corporate Psychopaths, who probably Crisis. Simultaneous research into the brain chem-caused the crisis by their self-seeking greed and istry and connectivity of these people may prove toavarice, are now advising governments on how to be highly enlightening in helping to establish theget out of the crisis. That this involves paying nature and extent of their psychopathy.themselves vast bonuses in the midst of financialhardship for many millions of others, is symptomaticof the problem. Further, if the Corporate Psycho- Referencespaths Theory of the Global Financial Crisis is correctthen we are now far from the end of the crisis. In- Allio, R. J.: 2007, ‘Bad Leaders; How They Get Thatdeed, it is only the end of the beginning. Perhaps Way and What to Do About Them’, Strategy andmore than ever before, the world needs corporate Leadership 35(3), 12–17.leaders with a conscience. It does not need Corpo- Babiak, P.: 1995, ‘When Psychopaths Go to Work: Arate Psychopaths. Measures exist to identify Cor- Case Study of an Industrial Psychopath’, Applied Psy-porate Psychopaths. Perhaps it is time to use them. chology 44(2), 171–188.

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The corporate psychopaths theory of the global financial crisis by clive r boddy

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