This story by Jeffrey Sonnenfeld, associate dean of Yale University's School of Management, is part of a special series by TheStreet.com investigating shareholders' reaction to corporate corruption on Wall Street. Click here to see a full listing of stories.
The demography of the corporate scandals of 2002 differ so from the financial corruption 70 years earlier that one might wonder how the American Dream became a nightmare.
While the reviled rogue financiers of the 1930s were largely the misguided scions of prominent wealthy families, the more recent abuses have been committed by upwardly mobile strivers aspiring for identification with an aristocratic heritage they personally lacked. Rather than abuses of class influence, the recent rogue CEOs desperately sought class confusion.
Bernard Ebbers was a bar bouncer and high-school basketball coach -- not a telecommunications engineer or financier -- just before launching
Ken Lay was the son of a part-time Baptist preacher and tractor salesman.
John Rigas was the son a Greek immigrant hot-dog salesman.
"deal-a-day" Dennis Kozlowski was the son of a New Jersey policeman.
Fallen financial wizards such as Enron's Jeff Skilling; WorldCom's Scott Sullivan, Tyco's Mark Swartz and
Jack Grubman had similar humble origins. For that matter,
Jack Welch was the son of train conductor ("Nearly every day was the same -- a ticket-punching journey through the same 10 depots over and over again.") and queen of class Martha Stewart the daughter of an autocratic alcoholic who failed in his career as a salesman.
Our fluid society is marked by a persistent fascination with wealth, rather than overt hostility between the haves and the have-nots. A century ago, the political economist Thorsten Veblen spotlighted the accumulation of wealth by those in "the working class" eager to become part of the "leisure class" as "pecuniary emulation."
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How then do we make sense of the theft of shareholder funds to purchase: outrageously flamboyant seaside palaces; luxurious Manhattan pleasure pads; personal golf courses; executive jets to spirit their children's furniture around to vacation venues; exotic overseas shindigs with an ice sculpture of Michelangelo's David with champagne coursing through the carved body; household items like shower curtains and umbrella stands for thousands of dollars each, let alone endless fresh flower bouquets or endless free premier tickets to cultural and sports events?
The vulgar "conspicuous consumption" symbols of class were likened prophetically to a pirate's booty -- the trophies of a successful raid. This was akin to the Puritan's symbols of success in the here and now to prove that they are among "the elected" for the afterlife.
In fact, the rapacious pursuit of gilded goodies is far more than simple greed as condemned by social critics, legislators and journalists. This behavior is motivated by a vanity that mere simple vaults of cash could not satisfy. The super-sized egos of the rogue CEOs also led to large philanthropic gifts to universities, museums, and hospitals -- all named for the CEO but funded by the unwitting shareholders.
In fact, the cultural event passes and flowers could have been purchased quietly through the swelling pools of diverted cash. But no, these CEOs wanted to be liberated from the logistics of life to live as they thought the aristocrats of "the leisure class" lived and not be seen concerned about how to buy their own toilet paper rolls, light bulbs, and flowers.
All of our former U.S. presidents fly commercially, yet what are the business pressures and security issues that lead these CEOs to demand 24-hour private plane access in their own retired years?
In short, many CEOs share a need for heroic stature. No one ever called Alexander of Macedonia "Alexander the Great" until he invented this appellation himself, and while he was at it, invented a false lineage to Odysseus and Achilles.
Leo Braudy's book "The Frenzy of Renown" reminds us that society always generates a subset of people eager to live their lives in the public eye. The trappings of office may help reinvent regular fellow corporate strivers into larger-the-life personae, which yield an aura of power.
The importance placed on the perquisites of office, such as chauffer-driven limousines, platoons of administrative assistants, personal jet planes and exquisite office locations with well-appointed furnishings have a logic to the status-seeking CEOs that have been with us for ages.
What is truly new is the apparent acquiescence of boards, often chock-full of fellow marquee-name directors, who come to accept the nobility -- if not the royalty -- of the CEOs. This made it hard for some CEOs to distinguish what was what was not theirs, believing in some divine right of entitlement to seize the assets of their peasant shareholders.
As more upwardly mobile executives grab for the symbols of accomplishment, boards of fellow grasping directors have lacked the fortitude and moral anchor to just say no. What the CEOs assumed were badges of success actually were cloaks of shame. Upwardly mobile, early-career maverick, dragon-slaying CEOs begun to resemble dragons themselves in their later careers.
Jeffrey Sonnenfeld is the Associate Dean for Executive Programs at Yale University's School of Management as well as the Founder, President & Chief Executive Officer of The Chief Executive Leadership Institute. He has also authored five books, including
The Hero's Farewell: What Happens When CEOs Retire. He welcomes your comments at