kothari - executive greed; examining business failures that contributed to the economic crisis (2010)

[...]... surfaced in the past few years It is highlighted in the highly publicized business failures, government bailouts, and other economic events Prior to the twenty-first-century “subprime” crisis and its aftermath worldwide, there were the Saving and Loan (S&L) scandal and the dot-com bust of the 1980s and 1990s Of the last three major economic crises in the past 25 years, the subprime has been the worst There... cases, business decision-makers at the top have contributed directly to their firms’ business problems However, instead of accepting responsibility for their flawed strategies and practices, these business managers continue to reward one another at the top with high salaries, bonuses, and severance packages In large firms, many corporate executives act as if they are accountable to no one; they behave... entice the CEOs and other senior members to overlook their long-term fiduciary duties and obligations The culprit in business failures is greed Business problems are a by-product of executive actions dictated by the individual self-serving financial motivations For personal gains, business leaders are ready to do anything—even cross ethical, moral, and legal boundaries At the moment, the number of executives... empowers corporate managers to pursue their own interests at the expense of the corporate stockholders Too often board members become their management’s collaborators In many ways, the corporate board system has evolved to serve the top executives much more than it does the primary stakeholders Everything that the corporate executives do with their board’s approval mostly for their own personal gains is official,... managers often preach about team efforts and the importance of team-playing, and they use all the buzzwords that they have learned from the business schools and management gurus However, when it comes to sharing financial rewards, there is not much available for the team players below the executive level While the CEOs and other senior executives and staff continue to earn high year after year, everyone... of the past three major economic crises is related to unbridled personal greed at the highest level in the corporate world While corporate executives enrich themselves using their management positions, everyone else pays the heavy price The self-serving corporate leadership behavior aimed at get-rich schemes is unhealthy and detrimental to the society’s economic well-being What we have observed is the. .. by the corporate managers These collaborators rather protect their own financial and nonfinancial interests, and join the “management club.” Instead of fulfilling their moral and fiduciary obligations, these team players prefer to do what the corporate managers want them to do As “club” members, the collaborators ignore their responsibilities for closer oversight and supervision They create a probusiness... effort across the organization with the right incentives and adequate resource support, people would rise up; they would release their energy and use their power positively for success On the other hand, without the appropriate work environment and incentives, people would not perform to the best of their abilities The reality is that corporate leaders pursue self-interests and fail to ignite the human... protectors of corporate stockholders and their interests Even though corporate boards are there to supervise and guide corporate managers, they fail to provide required checks and balances There is 8 ● Executive Greed plenty of evidence to suggest that the corporate boards tend to go along with management policies, plans, and actions without very close scrutiny Why? There are several factors that prevent... fast, the corporate managers lay the ground for future business problems and disaster For corporate managers, there is not much to lose Their short-term focus improves the operational picture temporarily and, as a result, enables them to 6 ● Executive Greed earn and enjoy extraordinary financial compensation (salaries, bonuses, frills, and perks) immediately during their tenures When they fail to gain the . intentionally left blank Executive Greed This page intentionally left blank Executive Greed Examining Business Failures that Contributed to the Economic Crisis Vinay B. Kothari executive greed Copyright. employees, distributors, suppliers, stockholders, and the society at large. In most cases, business decision-makers at the top have contributed directly to their firms’ business problems. However,. and other countries. ISBN: 97 8-0 -2 3 0-1 040 1-3 Library of Congress Cataloging-in-Publication Data is available from the Library of Congress. A catalogue record of the book is available from the