There have been four serious financial crises and countless more corporate scandals with global implications in just the last decade. All of them driven by greed and corruption, all of them led by dynamic, charismatic business leaders who initially showed fantastic promise, innovation and financial leadership. And it seems with the most recent of these crises, many of the key players in the 2008 global recession have not only not been punished, but are still in the same positions of power and able to continue their transgressions. Here are some interesting highlights of the last decade: Enron scandal (2001): Andrew Fastow the CFO of Enron along with Kenneth Lay the Chairman and Jeffrey Skilling the CEO develop an off­balance­sheet mark to market fraud that loses $11 billion and bankrupts Enron. It is the largest bankruptcy reorganization in US history at the time. They are charged with conspiracy, wire fraud, securities fraud, false statements, insider trading and money laundering. Fastow serves 6 years in prison, Lay passes away before sentencing and Skilling is sentenced to 24 years in prison. WorldCom scandal (2005): Bernard Ebbers the CEO of WorldCom loses $100 billion of shareholder value in the largest accounting scandal in US history (until Madoff). Ebbers is charged with securities fraud and conspiracy and is serving 25 years in prison. Bernard Madoff (2008): Bernard L. Madoff Investment Securities LLC heads a $50 billion ponzi scheme, the largest in history, and is charged with securities fraud, investment advisor fraud, mail fraud, wire fraud, money laundering, false statements, perjury, making false filings with the SEC and theft from an employee benefit plan. Madoff is sentenced to 150 years in prison and $17 billion in penalties. Subprime mortgage Crisis of 2007­2008: The greatest crisis yet which goes on to create the 2007­2012 global recession with combined worldwide losses greater than $500 billion. It involved Fannie Mae/Freddie Mac (bailout cost 224­260 billion), the collapse of Bear Stearns and Lehman Brothers, two of the five biggest investment banks, and forced the remaining three to significantly change with Merrill Lynch being sold to BoA, and both Goldman Sachs and Morgan Stanley forced to become bank holding companies. In addition insurer AIG was almost brought to collapse as well. Sadly, indicative of the decline in governance, not one person is brought to justice, not even the rating agencies that were clearly complicit in the fraud. While some of these crises would create legislation and governance in the U.S. to curb the ethical lapses that led to these losses with both the Sarbanes­Oxley act of 2002 and the Dodd­Frank act of 2010, it’s clear that with 23 major accounting scandals in just 2002 alone, the ethical flaws are systemic. And given that players like Henry Paulson, the former CEO of Goldman Sachs is given the US Treasury Secretary’s position but forced to liquidate, conveniently exploiting a tax­free public service loophole, $700 million of his holdings in Goldman Sachs for “compliance”, even the feeble attempts at governance have clear conflicts of interest. It is interesting to compare this to the 2006 sale of Shin Corp to Temasek Holdings which netted the Shinawatra and Damapong families $1.88 billion in a capital gains tax­free sale and led to the

ousting of former Thai Prime Minister Thaksin Shinawatra. In just 10 years, the four scandals listed above combine to create over $700 billion USD in losses, that’s the national GDP of Thailand or Singapore for more than 2 years. More than 230 million people globally or the equivalent of 76% of the population of the United States would lose their jobs by 2009 alone or 80,000 workers per day at one point. How? Why? In reading Ron Jonson’s “The Psychopath Test: A Journey Through the Madness Industry”, journalist Ron Jonson reflects on the recently developed Hare Psychopathy Checklist and decides to use it as a litmus test for political and business leaders that have inflicted grievous damage in ethical or corrupt scandals. Ron decides to investigate former CEO Albert J Dunlap, a famous “turnaround specialist” notorious for his ruthless corporate streamlining methods, and appropriately nicknamed “Chainsaw Al”, who had run Sunbeam­Oster into the ground with $60m in fraudulent accounting out of their $180m in revenue. Dunbar would demand and receive from the board a very large severance in addition to the $100M he had already received in compensation for only 20 months of employment. With the new Hare Psychopathy Checklist in tow, Chainsaw Al, failed the test miserably. What’s interesting to note here is that as Dunbar was being interviewed and examined through the psychopathy checklist, he consistently explained how each of the common telling psychopathic traits were not bad qualities, but clearly leadership positives. “Manipulative” became inspirational. “Superficial Charm” was seen as a necessary quality in business. “Grandiose sense of self­worth?” Dunbar responded “If you don’t believe in yourself, nobody else will. You’ve got to believe in you.” “Impulsive” became quick to analyze. And the most telling, Jonson shows: Shallow Affect (an inability to feel a deep range of emotions) stops you from feeling “some nonsense emotions.” “A lack of remorse frees you up to move forward and achieve more great things. What’s the point in drowning yourself in sorrow?” (Dunbar’s response) Robert Hare, the researcher in criminal psychology who invented the now standardized test to detect psychopaths asserts that psychopaths lack the ability to feel remorse. The signal paths in their brain that feel empathy for others, that can have a sense of guilt are just not there, as if simply biologically disconnected. A typical example would be of a psychopath passing a traffic accident then going home and recreating in the mirror the various expressions of horror he saw on the crowd gathered around the accident. The psychopath, without the tools to understand this kind of shock, mimics the facial expressions in an effort to understand why the crowd is contorting their faces as such. They simply can not fathom the sorrow others are feeling and lack the burden of conscience. The psychopath will often recreate these facial contortions in the wrong setting to try and find the appropriate context. In an August 2002 conference, gathered in front of police officers and law enforcement officials,

Robert Hare suggested that many of the recent corporate scandals could have been prevented if the leadership of the company had been tested for psychopathic traits. “Why wouldn't we want

to screen them?" he asked. "We screen police officers, teachers. Why not people who are going to handle billions of dollars?" He has further suggested in the 2003 documentary “The Corporation” that corporations are inherently sociopathic as they typically pursue only the self interest of shareholder value. As such it is natural to extrapolate that the type of leader that typically rises to the top of these organizations can successfully ascend the corporate ladder by being predisposed to psychopathy. In my own non­scientific testing, I decided to try and apply the Hare Psychopathy Checklist to my own father, a very successful businessman and the former vice president of Warner Lambert, a multinational corporation acquired by Pfizer in 2000. In addition, I decided to enlist the support of a close friend, who similarly grew up under a successful and highly driven businessman­father and who, convenient to this study, was one of Michael Milkens business partners during the Wall Street Junk Bond scandal of 1988. Our analysis, while not scientific, suggests that our own fathers score uncomfortably high on this checklist as well. While not necessarily in psychopathic territory, the data suggests enough to indicate a correlation between some psychopathic traits and success in business. And as a serial entrepreneur, returning to an executive program in a top business school in my early 40s, I too have scored myself on this test with interesting results. I believe there to be sufficient data to correlate a high score on the Hare Psychopathy Checklist to the perpetrators of the moral, ethical and financial crises that have affected the world in the last 20 years. As such, like Robert Hare himself, I believe screening for this should be the very first step in any corporate social responsibility plan. I believe an evaluation should be performed of all finance ministers, treasury secretaries, senior bankers, stock brokers, loan officers, insurance agents, business academics and educators as well as anyone in a position to handle large sums of other peoples money. Further to that, I think additional study should take place to the specifics of psychology in the corporate world. While the Hare Checklist was derived primarily from a broadly general concern for criminal psychological behaviour, the specifics of how this could apply to CSR must be researched. It is not a single person nor a single company without conscience nor scruples that created the Great Recession of 2007­2012. Perhaps a fitting solution lies in hiring a psychopath to catch a psychopath. Like the famed TV series Dexter, in which the hero is a secret serial killer, working for law enforcement, who only preys on murderers, we should enlist a team of morally bankrupt corporate raiders who conveniently only prey on wall street vultures. But perhaps the government has already tried this and couldn’t contain the madness, after all Eliot Spitzer the former Attorney General and then Governor of the state of New York was forced to resign after a

prostitution scandal with the Empire Club VIP escort girls, who interestingly also service a multitude of Wall Street clientele. Then there was Dominique Strauss­Kahn, the former IMF Managing Director who was indicted for sexual assault by a hotel maid with serious credibility issues. Both Spitzer and DSK had developed a reputation of being good guys and even one of going after the bad guys. Though DSK’s case was dropped, his career, like Spitzers was significantly derailed.

Sources: Ronson, Jon (2011­05­12). The Psychopath Test: A Journey Through the Madness Industry (p. 158). Penguin Group US. Kindle Edition. http://www.aljazeera.com/focus/outofwork/2009/02/200929131058678415.html http://www.theguardian.com/business/2009/jan/26/job­losses­uk­europe­usa http://en.wikipedia.org/wiki/Accounting_scandals#List_of_major_accounting_scandals http://www.forbes.com/2006/06/01/paulson­tax­loophole­cx_jh_0602paultax.html http://www.psychologytoday.com/blog/handy­psychology­answers/201103/what­do­we­know­ab out­psychopathy http://www.fastcompany.com/53247/your­boss­psychopath http://legalschnauzer.blogspot.com/2011/06/are­psychopaths­running­rampant­in.html Additional information from Wikipedia pages for: Bernard Ebbers, Kenneth Lay, Jeffrey Skilling, Bernard Madoff, Andrew Fastow, Henry Paulson, Eliot Spitzer, Dominique Strauss­Kahn, Goldman Sachs, Merrill Lynch, Bear Stearns, Lehman Brothers, Enron, WorldCom, Robert Hare, Ron Jonson, and The Great Recession