Corporations Find Integrity A Candidate for Analysis

“As everybody in the business press knows, we have been through an incredible year.” So declared Carol Hymowitz, a senior editor and columnist for the Wall Street Journal at a meeting in New York City in January.

She was talking about those American companies that have turned out to be “bad apples” in recent months, about those executives who were more interested in shelling out $15,000 for a designer umbrella than in ensuring the financial well-being of their companies.

The American Psychoanalytic Association had asked her, along with several experts on the psychology of corporative executives and on the psychological dynamics of corporations, to talk at its January meeting about corporate integrity. It wanted to give its members a better understanding of the subject, especially as some of them are interested in consulting to companies. The session was organized by the association’s Committee on Corporate Consulting and was kicked off by Kerry Sulkowicz, M.D., a New York City analyst who does consulting with companies.

Certainly unethical corporate behavior is nothing new, Hymowitz reminded those at the session, and those executives who have misbehaved of late did not operate in a vacuum. Their malfeasance occurred during an era of incredible prosperity—the 1980s and 1990s—where the general public was not inclined to take any action against their exorbitant salaries as long as it was prospering as well. What’s more, they realized that their outlandish compensation depended on how well the companies did over the short term for stockholders, and they started to fudge profits.

“I would argue that we got the CEOs we deserved,” Kenneth Eisold, Ph.D., president of the International Society for the Psychoanalytic Study of Organizations, declared. “We all wanted those stock values! We too were blinded by our pension funds.” Which raises this question: What can company board members, executives, and staff do to remain on a straight and narrow road?

Board size, the age of board members, meeting attendance by board members, and financial expertise by board members are not all that important, Jeffrey Sonnenfeld, Ph.D., associate dean of the Yale University School of Management, stressed. For instance, Enron’s board of directors was diligent about attending meetings and possessed financial expertise. But “fostering a culture of open debate” on boards is crucial. Board members should be able to dissent without being ridiculed.

Internal accountability in companies is crucial for remaining on the moral high road, Sonnenfeld added. He said that Home Depot board members are good in this respect; they visit various Home Depot stores regularly to get feedback from them.

Company executives, as well as employees down the ladder, should be aware that “group think” is common in companies, Eisold reported. “Group think” is tacitly accepted rules of behavior within a group, sort of a group norm of behavior that is hard for individuals within the group to buck because they want to fit into the group. “Group think” is not necessarily bad, but executives and staff should be aware that it exists, that it is probably influencing their thinking, and that it may tempt them sometimes to make improper decisions.

Company board members should also be aware that they are susceptible to “group think,” Eisold pointed out. In fact, some 80 percent of today’s CEOs are members of boards, and “in this environment group think is encouraged to flourish.” And if “group think” prevails on a board, its members will probably feel less comfortable about dissenting on issues—which, as Sonnenfeld made clear, is detrimental to a board’s integrity.

Finally, executive training programs can help keep company executives on the moral high road, Eisold said. And so can analysts, Sonnenfeld added. This session was a “clarion call” for analysts to get involved as company consultants, he declared. “Corporate governance is very much a human behavior issue.” ▪