A Pyramid of Greed

Many of us have read a book or an article containing material that presents something new and memorable, which has proved to be a revelation or which has influenced our thinking. Long ago The Feminine Mystique by Betty Friedan (1961) was such a book for me. Lately, it has been Barbara Ehrenreich’s Nickel and Dimed: On Not Getting by in America, listed by the New York Times as a top paperback bestseller for many months. If you have not read the latter book, it dealt with a healthy, educated middle-class woman who temporarily left her family with a suitcase of clothes and $200 to see how a single person could manage as a hotel maid or as a worker in another minimum-wage job.

Another revelation was the interview “Ne tirez pas sur les patrons” (don’t shoot the bosses) which appeared September 2002, in L’acualité, a Montréal-published biweekly to which I subscribe. It was the high point in the Enron, World Com., Tyco and other scandals. A reporter for the magazine, Irène Inchauspé, interviewed Michel David-Weill, the managing director of Banque Lazard, a rich and venerable French bank with significant interests in the USA. M. David -Weill used the interview to make clear for readers of L’atcualité what had been going on in American executive suites for a considerable period of time. He said that the swindles in regard to profits reported by the CEO’s, and the crooked ways of the accountants (e.g., Arthur Anderson) involved, were in part the results of the most extreme pressures exerted on corporate officers by the managers of pension funds and in particular by managers of mutual funds. These managers require a high level of profits that has to grow during good times and bad. No excuses are accepted. When David-Weill was challenged about the astonishing greed of the top officers, he defended them to some extent by saying that it was difficult for any of them to survive for a normal period of time, and that they had to get what they could in the short term. On the subject of greater regulation, he was very pessimistic. As far as large enterprises are concerned, the United States has the most stringent financial regulations anywhere, and yet the scandals broke out there nevertheless. He also stated that honesty is the basis for all commercial activities.

What is to be done?
David-Weill believes that as long as Americans feel they are entitled to combined returns (dividends and appreciation) of 15% per annum on their investments, not much is going to change. However, he is confident that a capitalist society, which is also a democracy, has the capacity to correct its excesses.

All this to say, that the myth of greedy CEO’s on top of a pyramid of reasonable people is absurd. The men on the top (they are almost all men – sorry about that), supported by spineless directors, are the greediest, but it all works up from the bottom. Levelheaded investors will support a corporate culture that produces reasonable and responsible CEO’s. Conversely, Get- Rich- Quick types, far more numerous than the former group, and their mutual funds, will demand CEO’s who have an uncanny resemblance to sharks.

March 2004