Madoff, MLK, Buddha And Elusive Nature of Self-InterestBy Francine • Jan 16th, 2012 • Category: Madoff, Pure Content, Your Career
A repost of one of my favorite – and one of my most read – posts in honor of Martin Luther King Day. It was originally published December 24, 2008.
Back home after dropping off my friend at the airport. As those of you who have been following me on Twitter know, I’ve spent the last few days visiting with an old friend from my JP Morgan Latin America days. Kenny recently came out of almost five years of semi-reclusive Buddhist retreat. We hadn’t seen each other during that time, but had been in touch each time he was home in Brooklyn for the holidays or between sessions at the retreat in Northern California.
We worked together in Latin America, primarily Brazil, during the Year 2000 project period. I was JPM’s PMO Director for the project in Latin America. He was implementing a new order entry and trade management/compliance system for their equity options and derivatives business. As calm and serene as he has learned to be when faced with crowds, traffic, schedule changes and chatty friends like me, he is also still human. And he is still my old friend with enormous knowledge of how and why controls and regulations are intended to safeguard investors in financial services industry.
It didn’t take much to get him to talk about the Madoff scandal, the financial crisis, the Big 4 firms, the SEC, and the major players on Wall Street. As much as things should have changed in the seven years since he was actively working in the industry, unfortunately according to him, most things have not. He was up to speed, even more than me in some areas, since he has been catching up the last few weeks by subjecting himself to a heavy daily dose of MSNBC, CNBC and BloombergTV.
I sought his advice on some topics and ideas for posts, but he continuously pulled me back to the human element, the psychology of the issues we discussed.
Heady stuff. Fortunately he has not given up drinking or laughing so the heaviness was lightened with caipiroskas, pinot noir, Negra Modelos, and cuba libres.
One of the topics we kept coming back to is the responsibility of “professionals,” those who are licensed and mandated by their states to uphold a code of ethics and professional responsibility that demands action beyond that which does or doesn’t profit one personally. Your first obligation as a professional is to your client, not your firm, your partners, or even your family. If your client is doing something illegal then it is to law enforcement. That may seem harsh, but it’s the code that’s supposed to insure that lawyers and accountants, for example don’t cut corners out of their own self-interest and to the detriment of their client’s interests.
“By accepting membership, a certified public accountant assumes an obligation of self-discipline above and beyond the requirements of laws and regulations.
The Principles call for an unswerving commitment to honorable behavior, even at the sacrifice of personal advantage.
A distinguishing mark of a profession is acceptance of its responsibility to the public. The accounting profession’s public consists of clients, credit grantors, governments, employers, investors, the business and financial community, and others who rely on the objectivity and integrity of certified public accountants to maintain the orderly functioning of commerce. This reliance imposes a public interest responsibility on certified public accountants…In return for the faith that the public reposes in them, members should seek continually to demonstrate their dedication to professional excellence.
Due care requires a member to discharge professional responsibilities with competence and diligence. It imposes the obligation to perform professional services to the best of a member’s ability with concern for the best interest of those for whom the services are performed and consistent with the profession’s responsibility to the public.”
Too much regulation? Too little regulation? The problem is enforcement? Inadequate budgets? Lazy Boards of Directors? Overzealous plaintiff’s bar? Conflicts of interest? Bush? Democrats in US Congress? Greed? Satan?
Martin Luther King Jr.: “Morality cannot be legislated, but behavior can be regulated. Judicial decrees may not change the heart, but they can restrain the heartless.”
Regulate the immoral. Restrain the heartless.
Man naturally desires, not only to be loved, but to be lovely; or to be that thing which is the natural and proper object of love. He naturally dreads, not only to be hated, but to be hateful; or to be that thing which is the natural and proper object of hatred. He desires, not only praise, but praiseworthiness; or to be that thing which, though it should be praised by nobody, is, however, the natural and proper object of praise. He dreads, not only blame, but blame-worthiness; or to be that thing which, though it should be blamed by nobody, is, however, the natural and proper object of blame.
“He’s a man of integrity. He lives this company. He is a pillar of the community. He donates to charity. He is an elder statesman of the industry. He has unquestionable, unassailable ethics and cares about this company.”And maybe they are also told, “How dare you suggest that he would ever do anything to harm his employees, shareholders, business partners…”
“…But I was not going to wait until March or April or May to get it all nice and tidy and then bring charges and then say, “By the way, all this bad stuff happened because no one was aware of it back in December.” I think that would be irresponsible. (Cross talk.)
So sometimes, when there’s ongoing criminal conduct — and this is a very different case than what we often see — we will expose the criminal conduct and bring charges to let people know we’re on to it, and to hopefully — to put a stop to it…“
From The Guardian:
“So how did these exceptionally smart people forget their habits of due diligence? One answer lies in the curious respect Americans have for their leaders, which is something rarely appreciated in Europe. Anyone who reaches the top of the pile in the United States, whether in the law, broadcasting, investment management, business, the church or sport is given unwavering respect.
Their employees and supporters faithfully cluster round and offer up what seems to the European eye to be blind fealty. Pastor or president, you become the Man, at which point followers begin to suspend all judgment. Madoff was the Man and potential clients had to be damn well connected for him even to consider trousering the $1m minimum investment.
This tradition may have something to do with the small groups of pioneers that struck out West and relied on their leaders for their survival, but I prefer HL Mencken’s insight that while Americans see themselves as rugged individualists, they are rather conformist, as well as respectful. “There are no institutions in America, only fashions,” he once wrote.
It is true that Americans are often furiously trying to join something, enroll others or keep them out. The more exclusive a country club, society or nightclub the more desperate they are to gain entry…”
Or avoid being kicked out.