Chapter 4. Executive Behavior

In some cases, company leaders have let us down by committing acts of fraud and deception. For example, Tyco CEO Dennis Kozlowski is accused of using company locations to drop ship personal purchases in order to avoid paying $1 million in state sales tax. Former ImClone Systems CEO Samuel Waksal was indicted by federal prosecutors for using inside information about the firm to tip off relatives about upcoming problems in time for them to sell their stock. Family members sold $10 million in stock just before it became public that the Food and Drug Administration (FDA) had rejected the firm's primary product. Martha Stewart has also been caught up in the ImClone scandal because she sold ImClone stock just before the announcement (Stewart and Waksal shared the same stockbroker). In other cases, executive behavior has just been suspicious and even disappointing, but not necessarily illegal.

Corporate executives are greedy ”but then, so are most people. Most people in a capitalistic economy are partially motivated by greed. It is not greed itself that is a problem; the problem is how greed motivates some people. Greed may motivate a person to work hard and create long- term economic value in a firm by expanding into new products or new locations. These activities create wealth, jobs, taxes, and help our society. On the other hand, greed may push a person to take advantage of shareholders, the capital markets, and the government. Consider modern television shows. A person can become rich on either Who Wants to Be a Millionaire? or Survivor. The participants in both games are greedy. However, a person can become rich on one show by using his or her knowledge and talents, and a person can become rich on the other by scheming, lying, and being cut-throat. Which kind of greed is exhibited by many corporate leaders? Which kind does society want them to exhibit?