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At the end of a

RealMoney.com

column last week, Jim Cramer offered the following:

"I was struck by a reporter's statement about how nothing really has gotten better and that Wall Street is just going to get back to its old tricks as soon as it can. I don't agree with that. You know why? Because when you are pictured in the paper as a crook, it breaks your heart and your spirit, especially if you have kids. Most people pictured in The New York Times as someone who did something wrong feel totally and utterly vilified. And if they go to jail? For the most part, their lives are over. Things have changed because humiliation, despair, embarrassment and loss of work always are going to be powerful motivators to do the right thing."

I would argue that it depends on the character structure of the potential wrongdoer. I think we'd agree that once someone is portrayed as a criminal, he is less likely to repeat the behavior that has caused the humiliation. At least that's what we'd expect from those whose lives are so altered by the experience that they will do whatever is necessary to avoid having it happen again.

But for this kind of reaction to occur, an important psychological ingredient is required:

a conscience

. We can't simply assume that those who have already committed these kinds of acts are going to be deterred by the threat of shame and humiliation. After all, if they had a conscience,

why wasn't it firing on all cylinders to keep them out of trouble to begin with?

Only those who have a fully developed conscience, who are capable of feeling guilt when they break the law or violate their own moral prohibitions, are less likely to repeat their behavior or engage in it to begin with. Without a conscience, the humiliation, despair and embarrassment simply won't be experienced.

The Anatomy of a Sociopath

Sociopaths are capable of performing all sorts of vile acts toward others without feeling the least bit of guilt over what they're doing. To be a sociopath, you need the inability to feel guilt. You also need impulsiveness and the failure to plan ahead as to the consequences of your actions. A few other hallmarks are deceitfulness (such as repeated lying), irresponsibility (the inability to honor your corporate financial obligations), reckless disregard for the safety of others (like your shareholders or employees) and a lack of remorse (being indifferent to those you've hurt or defrauded).

These criteria are actually part of what typify the "antisocial" personality, which is the kinder, gentler term for a sociopath. Don't let the term antisocial fool you. You can be charming and charismatic and still be a sociopath.

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Because a conscience is nonexistent or vastly underdeveloped, sociopaths are unable to use the fear of humiliation and punishment to keep their actions in check. There is a marked inability to use one's morals to guide decision-making. The enticement of riches, along with a twisted sense of entitlement, become far stronger than any fear of future shame.

The weaker the moral structure, the easier it will be to have that structure collapse under the weight of the possibility of a lucrative, quick and easy payoff. Money and power do indeed tend to corrupt morals -- and in the hands of a sociopath they corrupt absolutely.

The One-Two Punch: Sociopathy Dipped in Narcissism

Now here's where it gets interesting. If we look at those corporate officers who get in trouble because their moral structures are unable to fend off the enticements of greed and abuse of power, we see another character trait in operation. And that is narcissism.

In an earlier column, I hinted at the role of narcissism when corporate heads lie about their academic credentials. But that's only the tip of the iceberg. If we add to the primary characteristics of the sociopath some of the characteristics of the narcissist, we have a one-two punch that's difficult to stomach.

Narcissists have a great need for admiration from others, and they possess a grandiose sense of self-importance. They become preoccupied with fantasies of unlimited success, power and wealth. In addition, they have a strong sense of entitlement. They exploit others to achieve their own ends and feel no empathy when they see the consequences of their exploitation. And they are arrogant in attitude and behavior.

If you have a moral structure in place, you have the ability to consider the consequences of your actions before you take them. You choose to refrain from breaking the law because the potential for narcissistic rewards is simply not worth the risk of losing everything.

So, will things really change on Wall Street? Not if it is populated by hybrid sociopathic narcissists. And I wouldn't be too confident that those who didn't have Jiminy Cricket sitting on their shoulder

before

they chose to risk everything are going to find him perched up there giving moral guidance later.

Steven J. Hendlin, Ph.D. is a clinical psychologist in Irvine, Calif. He has been in private practice for the last 26 years, investing for the last 20 years, and actively trading online as a position trader and long-term investor since 1996. He is the author of

The Disciplined Online Investor and maintains a site at www.hendlin.net. He is pleased to receive your comments and questions for publication in his public forum columns at

steven.hendlin@thestreet.com, but please remember that he is unable to provide personal counseling or psychotherapy through the mail.

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