Corporate Governance and Narcissistic Behaviour The Role of Virtue Presented at 3 rd Biennial International Conference in Business, Banking and Finance May 27 – 29, 2009 U.W.I, St. Augustine Surendra Arjoon Department of Management Studies U.W.I St. Augustine

The Evolution of Gollum

StagesAttitudes The Virtuous Acts of Omission The OUB Acts of Administrative CommissionThe Egoist Acts of Criminal Commission The Continuum of Compromise

Corporate Governance Weaknesses Safeguards against excessive risk- taking Safeguards against excessive risk- taking Standards insufficient Standards insufficient Compensation Compensation

Corporate Governance Causes of Failure

Rotten Core “ The very capitalism that built America into the super-power that is being questioned and politicians are finding it hard to swallow that the solution may lie in a socialistic framework” Ram Ramesh Trinidad Express March 15 th 2009

Rotten Core “I’m not sure if it’s good to have freedom or not. I’m gradually beginning to feel that we Chinese need to be controlled. If we’re not being controlled, we’ll do what we want to….freedoms in Hong Kong and Taiwan made these societies chaotic” Jackie Chan Associated Press April 20, 2009

Rotten Apples “While institutions are larger than men it is still men who inhabit them. And if our institutions are now degenerating through lack of integrity and trustworthiness, it is ultimately the men and women entrusted with the task of maintaining and building such institutions have themselves operated without integrity and trustworthiness” Michael Harris Trinidad Express March 6th

Rotten Apples “The US financial crisis was not caused by the complex instruments, but by the failure of leaders on Wall Street. The heads of firms like Bear Sterns, Lehman Brothers, AIG, Countrywide, Financial, and Washington Mutual all too often sacrificed their firms’ futures in order to maximize personal gains” Bill George Business Week

Narcissistic Behaviour Characteristics Extravagant sense of self-importance Extravagant sense of self-importance Egotistical Egotistical Exaggerate talents and ability Exaggerate talents and ability Desire for power, attention, and admiration Desire for power, attention, and admiration Likely to emerge as leaders Likely to emerge as leaders Boastful and pretentious behaviour Boastful and pretentious behaviour Grandiose fantasies of unlimited success Grandiose fantasies of unlimited success Unreasonable sense of entitlement and superiority Unreasonable sense of entitlement and superiority

Narcissistic Behaviour Manifestations Denials and rationalizations to justify behaviour Denials and rationalizations to justify behaviour Willingness to exploit others Willingness to exploit others Vulnerable and fluctuating self- esteem Vulnerable and fluctuating self- esteem Lack of empathy Lack of empathy Charming and extraverted Charming and extraverted Believes that others envy him or her Believes that others envy him or her Envious of others Envious of others

Narcissistic Behaviour Manifestations Likely to emerge as leaders Likely to emerge as leaders Vulnerable and fluctuating self- esteem Vulnerable and fluctuating self- esteem Strong reactions to perceived challenges or threats Strong reactions to perceived challenges or threats Fluctuating or impaired emphatic ability Fluctuating or impaired emphatic ability Perfectionist ideals and standards Perfectionist ideals and standards

Economic Fallacy Natural Resources + Labour = Productivity

The Role of Virtue “….to support that any form of government will secure liberty or happiness without any virtue in the people is a chimerical idea” James Madison

The Role of Virtue “The common good of the State cannot flourish unless the citizens be virtuous, at least those whose business it is to govern” Thomas Aquinas

Types of Business People “The difference between the temporarily successful business persons and those who became and remain successful is the latter possess virtuous characters”

Judgment Judgment Think before acting and consider the consequences of actionsThink before acting and consider the consequences of actions Fairness Fairness Honesty:Honesty: saying what is true saying what is true open and transparent communication open and transparent communication Respect:Respect: treating people with dignity and valuing their contributions treating people with dignity and valuing their contributions maintaining fairness in all relationships maintaining fairness in all relationships Mental toughness Mental toughness speaking up for what is right and reporting wrongdoings speaking up for what is right and reporting wrongdoings Key Components of Virtuous Behavior

Self-mastery Self-mastery Trust:Trust: keeping commitments keeping commitments Integrity:Integrity: doing the right things without compromise doing the right things without compromise avoiding the appearance of impropriety avoiding the appearance of impropriety Responsibility:Responsibility: accepting the consequences of actions accepting the consequences of actions admitting mistakes and correcting them quickly admitting mistakes and correcting them quickly not retaliating against those who report violations of law or policy not retaliating against those who report violations of law or policy Key Components Virtuous Behavior