The Financial Crisis Inquiry Commission heard the testimony of two former Citigroup executives, Charles Prince (CEO) and Robert Rubin (Chairman of the Board of Directors) on Thursday, April 8 2010. In a New York Times article, Charles Prince was quoted:
“I’m sorry the financial crisis has had such a devastating impact for our country,” Mr. Prince told the commission. “I’m sorry about the millions of people, average Americans, who lost their homes. And I’m sorry that our management team, starting with me, like so many others could not see the unprecedented market collapse that lay before us.”
This combination of apology and excuse reminds me of a story told in The Book of Leadership and Strategy: Lessons of the Chinese Masters. As the story was told, a man was caught stealing gold in broad daylight in an open market with people all around. When asked by the police why he took the gold with everyone around the thief responded, “I only saw the gold, I did not see the people.”
It is nice to see that Mr. Prince is sorry for what had happened—sadly he is among only a very few showing remorse. That said, the fact that the consequences of decisions made by so many Wall Street executives were completely imperceptible to each and everyone is a real head scratcher. How people having such a shortsighted perspective and such a meager understanding of the dynamics of business and society could be paid so much is astounding.
It seems that the criteria, perhaps even the only criteria, used to select individuals to be executive officers on Wall Street is the ability to make lots of money—enough to fill the tall buildings they occupy—in a short period of time. The ability to count and a flair for plundering for profit are all that is needed, at least so it seems.
At what business schools do such executives learn their craft? Perhaps it is all on-the-job training in their climb up the hierarchy. How we educate and train, the ends we advance and celebrate, and the very way of life we perpetuate are all in support of a misguided economic system.
This is a systemic problem that should not be laid at the feet of a few individuals. If we really want to ensure that this doesn’t happen again, then our questions should be directed toward understanding the system itself and not the failings of people who are products of the system.
If we as a society are to have any hope for a future that presents the prospects for progress, then fundamental changes in the conduct of business, of every business, must take place sooner than later. Regulations alone won’t do it. Greed can’t be regulated. Given the system we have, there are far too many plunderers and far too few (truly) independent overseers to police them. Besides it is a very costly way of organizing and doing business. It is far better to have a system wherein it is less likely that such behavior will emerge—a system that doesn’t promote it—than it is to rely on inspection. If your system produces defects, do you invest in more inspectors or do you invest in a different system? Isn’t it about time we take the long-view?