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The Fine Line Between Wealth-Seekers and Criminals

Where is the tipping point of corporate criminality?

That is, what is the proximal cause of a manager crossing the Rubicon from highly-compensated C-Suite resident to fraudulent, power-abusing malefactor?

In a commentary for MarketWatch, James Kaplan and Phyllis Elliott remind us executive compensation scandals are not yesterday’s news. Indeed, they argue the conditions that incubated the financial market collapse of 2008-09 are as present as ever:

Boards of directors must truly be “on stranger tides.” They continue to approve executive-compensation packages weighted to short-term incentives despite the clear statistical — and, obviously, intuitive — connection between high incentive compensation and corporate malfeasance.

In March, in a post about the quality of this year’s Academy Awards acceptance speeches, I lauded Charles Ferguson, director and co-producer of winning Documentary Feature, “The Inside Job,” for pointing out that, to that date, not a single architect of the financial meltdown had been sent to jail. As Kaplan and Elliott point out, that remains painfully true.

But where do corporate criminals come from? What is the genesis of this crisis? To attribute it simply to high compensation seems to unfairly simplify the problem. After all, many great leaders driven by core values are handsomely compensated – and deservedly so.

Is there a dangerous tipping point – a line of demarcation beyond which the promise of further reward is compelling enough to convince an executive to hand over his or her ethical compass? Does the allure of even more money – and the Faustian bargain accompanying it – push an otherwise good person to betray civil values?

Or does gaudy compensation merely filter out the most ethically void among us, attracting only those with egos big enough to justify their “profit at any cost” ethos? Perhaps astronomical incentives find corrupt men rather than corrupting fine men.

“You can’t legislate morality,” says the old political standby. But what if you could compensate for it? What if we fundamentally realigned our pay structures to value civil progress as sincerely as short term corporate earnings growth? Is it possible to reward effective leaders attuned to core values, and if so, could such a model survive on a landscape dominated by power- and ego-driven executives? If we reward core values, do we diminish the tremendous power they hold intrinsically?

Don’t boards of directors – criticized today for being co-conspirators in greed corruption – have a responsibility to balance and check the absurdity of shameful C-Suite compensation packages? And what is the responsibility of the shareholder in passively enabling the business model that clearly includes out-of-whack executive comp?

We’ve seen how surprisingly awesome change has removed corrupt leaders in the Middle East when citizens took up digital arms by tweeting, texting and emailing. When shareholders, governing boards, and governments fail to act to punish abuse of corporate power, do consumers have a means of influencing excessive executive compensation? Are consumers who choose to use the power of the internet the righting-arm for executive compensation corruption?

Hopefully, these questions may engage an exasperated world in the next few years. And, just as we seek to understand how to nurture core values-centric leaders, so too must we strive to understand what catalysts drive a person from wealth-seeker to criminal, and avoid further empowerment of these people, however charming or persuasive they may be.