Wednesday, May 23, 2007

Sayles and Smith's Rise of the Rogue Executive

The Rise of the Rogue Executive.
Leonard R. Sayles and Cynthia J. Smith.
Pearson Education 2006. 258 pages.

Leonard R. Sayles and Cynthia J. Smith's Rise of the Rogue Executive is a very good book. I am writing a follow up paper to my earlier one in Academic Questions about university presidents' pay, and I noticed the Sayles and Smith book as I've been doing some additional background reading on executive pay. The book is a useful and insightful examination of how the corporate scandals earlier in this decade followed from various institutional breakdowns and have influenced the market system. I especially liked the fact that Sayles and Smith discuss the gullibility and/or culpability of business schools and the involvement of management consultants (which I have previously written about with Candace de Russy in Inside Higher Education. Sayles and Smith perceptibly discuss the threat to the market system that the breakdown in corporate ethics poses. Theirs are valuable insights.

I think the authors could have gone further in attributing the breakdown in ethics to failures in undergraduate and lower education. They quote Milton Friedman to the effect that "respect for the rules and norms of society is a necessary bulwark of a free market system." Friedman, in the tradition of Adam Smith, was right.

The debate between those for whom goods of excellence have value even if attained without concern for what is right and those for whom the goods of excellence have value only if they have been attained in an excellent way goes back to the days of Pericles in ancient Athens. Thucydides discusses such a debate in Pelopensian War , which Alisdair McIntyre discusses in one or two of his books. In order to have a sense of arete, the Greek word for excellence and virtue, according to Aristotle, one must have had habits inculcated from an early age, habits that are developed through mastering the arts of right reason, deliberation and prudence. Sayles and Smith rightly fault the business schools for failing to inclucate such habits of thought, but I do not believe that the business schools are alone, or even primarily, to blame for the lack of good habits, right reason and prudence in American culture. Rather, our elementary schools, high schools and colleges have increasingly become ideologically driven and are more likely to inculcate contempt for American society, nihilism and skepticism, often cloaked in the pretentious language of deconstructionism. Such skepticism has behavioral implications. The amoral anti-Americanism that has increasingly characterized left-wing critics of American policy is the flip side of the amoral self interest of executives who pay themselves large sums at the expense of shareholders and indulge trivial fantasies such as owning jets, multiple large homes and the like despite poor corporate performance. Such executives have little to be proud of, yet they feel no moral qualms because of poor upbringings, poor education and a decline in social values. The transformation that will be needed to correct the problems that Sayles and Smith intelligently outline goes far deeper than they suggest.

I first met Professor Sayles in 1987 when I was a doctoral student at Columbia Business School and he was a guest speaker in a doctoral labor relations course. He had written a book, "The Local Union" in 1953, only 54 years ago, with George Strauss of Berkeley. It was a delightful surprise to see that he coauthored a new book last year.

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