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The Seven Signs of Ethical Collapse: How to Spot Moral Meltdowns in Companies...before It's Too Late
Do you want to make sure you· Don't invest your money in the next Enron?· Don't go to work for the next WorldCom right before the crash?· Identify and solve problems in your organization before they send it crashing to the ground? Marianne Jennings has spent a lifetime studying business ethics---and ethical failures. In demand nationwide as a speaker and analyst on business ethics, she takes her decades of findings and shows us in The Seven Signs of Ethical Collapse the reasons that companies and nonprofits undergo ethical collapse, · Pressure to maintain numbers· Fear and silence· Young 'uns and a larger-than-life CEO· A weak board· Conflicts· Innovation like no other· Belief that goodness in some areas atones for wrongdoing in others Don't watch the next accounting disaster take your hard-earned savings, or accept the perfect job only to find out your boss is cooking the books. If you'
352 pages, Hardcover
First published January 1, 2006
78 people are currently reading
399 people want to read
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Displaying 1 - 10 of 10 reviews
August 20, 2018
Successful investing in stocks is just as much about dodging the loser stocks as it is discovering and keeping the winning ones. The process of knowing what to avoid could focus on qualitative factors such as companies with high leverage, poor return on capital, weakening profit momentum, high valuation multiples or accounting ratios that indicate dodgy accounting. It could also focus on qualitative signs regarding the corporate culture. Marianne Jennings, at the time professor of business ethics at Arizona State University, has with the experience of corporate collapses during three stock market cycles written the latter type of manual. It’s not just a handbook in detecting companies approaching the abyss but the author also gives a number of suggestions for improving the culture, to be used by companies.
The structure of the book is simple. There is an introductory chapter and preface, there are two concluding chapters and in-between there is one chapter for each of the 7 signs that in the author’s view point to the risk of an ethical collapse in the company. Each of the 7 chapters starts with a discussion of the issue, a number of examples mostly centered on the corporate scandals of Enron, WorldCom etc. in the early 2000’s and then a comes number of suggested antidotes that are summed up in a list at the very end. Mild forms of one or two of these signs might not indicate an imminent disaster but extreme cultures and multiple warning signs should be taken notice of.
Which warning signs should we as investors or corporate executives be on the lookout for in Jenning’s opinion? The signs are: 1) “Pressure to Maintain Those Numbers” – an unhealthy and unreasonable obsession in meeting earnings numbers that in the end makes the temptation to make the numbers up too great, 2) “Fear and Silence” – a culture that offers no venues to air concerns or punishes those employees who try, 3) “Young ‘Uns and a Bigger-than-Life CEO” – iconic, idolized and charismatic CEOs surrounded by young and sycophantic executive managers, 4) “Weak Board” – a board comprising of inexperienced, incompetent or too-busy directors or directors with too many business or friendship ties with the management, 5) “Conflicts” – companies full of nepotism, mutual back-scratching and the extraction of benefits on the expense of shareholders, 6) “Innovation Like No Other” – differentiated, innovative and successful companies that over time come to embrace a view that they in their uniqueness stand above petty wordly obstacles like rules and 7) “Goodness in Some Areas Atones for Evil in Others” – CEOs that use shareholder’s money for public and self-glorifying philanthropy or engage in what’s called corporate social responsibility and by these good deeds permit themselves to lie and cheat in others.
Unfortunately, the structuring of the chapters could have been more stringent. Often the texts on suggested antidotes too much continue to describe and exemplify the proposed problem. The author’s writing is somewhat stilted and declamatory at the same time as the opinions and antidotes are in my view sound and fair. I also quite like that she spares no punches – for example, with regards to Jack Welch, the former CEO of GM: “Mr. Welch was often touted as the greatest manager of all times. Mr. Welch would perhaps be more accurately described as the greatest earnings manager of all time”.
I would further love to see the propagation of the virtues discussed by Jennings in business life – and even more pressing in the political life. The question is how to go from wishing to execution of that hope – the author gives no real hints. As a side note, the book is published 2006, today a decade later when corporate social responsibility has developed into an all-embracing religion, the author’s text regarding the seventh sign would be almost impossible for an academic to write.
Often it is reading the subjective, quantitative signs that separates the great investor from the ordinary one. Jennings offers one potential framework to interpret the signals of an approaching fall.
The structure of the book is simple. There is an introductory chapter and preface, there are two concluding chapters and in-between there is one chapter for each of the 7 signs that in the author’s view point to the risk of an ethical collapse in the company. Each of the 7 chapters starts with a discussion of the issue, a number of examples mostly centered on the corporate scandals of Enron, WorldCom etc. in the early 2000’s and then a comes number of suggested antidotes that are summed up in a list at the very end. Mild forms of one or two of these signs might not indicate an imminent disaster but extreme cultures and multiple warning signs should be taken notice of.
Which warning signs should we as investors or corporate executives be on the lookout for in Jenning’s opinion? The signs are: 1) “Pressure to Maintain Those Numbers” – an unhealthy and unreasonable obsession in meeting earnings numbers that in the end makes the temptation to make the numbers up too great, 2) “Fear and Silence” – a culture that offers no venues to air concerns or punishes those employees who try, 3) “Young ‘Uns and a Bigger-than-Life CEO” – iconic, idolized and charismatic CEOs surrounded by young and sycophantic executive managers, 4) “Weak Board” – a board comprising of inexperienced, incompetent or too-busy directors or directors with too many business or friendship ties with the management, 5) “Conflicts” – companies full of nepotism, mutual back-scratching and the extraction of benefits on the expense of shareholders, 6) “Innovation Like No Other” – differentiated, innovative and successful companies that over time come to embrace a view that they in their uniqueness stand above petty wordly obstacles like rules and 7) “Goodness in Some Areas Atones for Evil in Others” – CEOs that use shareholder’s money for public and self-glorifying philanthropy or engage in what’s called corporate social responsibility and by these good deeds permit themselves to lie and cheat in others.
Unfortunately, the structuring of the chapters could have been more stringent. Often the texts on suggested antidotes too much continue to describe and exemplify the proposed problem. The author’s writing is somewhat stilted and declamatory at the same time as the opinions and antidotes are in my view sound and fair. I also quite like that she spares no punches – for example, with regards to Jack Welch, the former CEO of GM: “Mr. Welch was often touted as the greatest manager of all times. Mr. Welch would perhaps be more accurately described as the greatest earnings manager of all time”.
I would further love to see the propagation of the virtues discussed by Jennings in business life – and even more pressing in the political life. The question is how to go from wishing to execution of that hope – the author gives no real hints. As a side note, the book is published 2006, today a decade later when corporate social responsibility has developed into an all-embracing religion, the author’s text regarding the seventh sign would be almost impossible for an academic to write.
Often it is reading the subjective, quantitative signs that separates the great investor from the ordinary one. Jennings offers one potential framework to interpret the signals of an approaching fall.
May 22, 2018
This book is a tough read. This is not because of the way it is written but the stories it relates to the reader.
It is a shame to read stories such as these because it is a few bad apples that ruin all of the apples is not believed to carry over to organizations. Leaders who believe they are above the rules and operate without checks and balances is hard to fathom in this day and age but Ms. Jennings present many cases in depth that provide examples of ethical failures across many different organization types. A must read for young leaders.
It is a shame to read stories such as these because it is a few bad apples that ruin all of the apples is not believed to carry over to organizations. Leaders who believe they are above the rules and operate without checks and balances is hard to fathom in this day and age but Ms. Jennings present many cases in depth that provide examples of ethical failures across many different organization types. A must read for young leaders.
July 9, 2021
A good read that itself was more useful than the ethics requirement of the MBA. Plenty to mull over and her prescriptions seem directionally right. Dinging a star because of factual errors about which MLB team’s ballpark had a naming rights deal with Enron and the analyst whom Jeff Skilling called an asshole on an earnings call. The second error was material as the author was critical of that analyst’s ethics at two other points in the book. If these facts are wrong, one is left to wonder what else in the book strays from the truth.
December 7, 2015
The concepts in this book were amazing- that ethical analysis of businesses can predict their financial collapse. Enron, Worldcom, etc. The author and her students do an amazing job of identifying key ethical indicators, but the editors of the book did a horrible job putting it together in a compelling manner. The concepts are so outstanding that the book should be slogged through. It really makes you look at the place you work with a whole new set of glasses.
May 22, 2021
When reading what would be the seven signs, as much as I want to feel they might be something complicated and unique, they are mostly pretty common behavior in many organizations. Though it does come a little complicated scenario as which company do not chase the numbers game.
What is a positive sign of temporary relief is that, author mentioned even if companies display some signs, it does not mean they will collapse. Though it is a warning sign and guideline for us to pay greater attention to it; especially if we are stakeholders. And if we are not, these are guidelines (especially on the antidotes) on how to build a strong, sustainable team and company.
Regardless, when reading this book today, 15 years since it was first published, these 7 signs are ever-present, and more so in government offices as well. Should I be concern? Yes, especially when the obvious cracks are already there. Ethics may not be default operating modus as I would hope it to be in many places, including mine. So be alert and make changes! Else, it back to the wild wild west! Yeehaw!
What is a positive sign of temporary relief is that, author mentioned even if companies display some signs, it does not mean they will collapse. Though it is a warning sign and guideline for us to pay greater attention to it; especially if we are stakeholders. And if we are not, these are guidelines (especially on the antidotes) on how to build a strong, sustainable team and company.
Regardless, when reading this book today, 15 years since it was first published, these 7 signs are ever-present, and more so in government offices as well. Should I be concern? Yes, especially when the obvious cracks are already there. Ethics may not be default operating modus as I would hope it to be in many places, including mine. So be alert and make changes! Else, it back to the wild wild west! Yeehaw!
October 31, 2021
The book is twice as long as it needs to be with lots of repetition between chapters. At times the tone is unnecessarily condescending, judgmental, and dismissive. The constant use of young uns in leadership as an ethical issue reflects a bias. The book seems to intermix correlation with causation. There are some lessons to be drawn, primarily within the antidote section. For example, finding a way to restore virtue standards, using value-based decision-making, and changing our views on financial reporting are valid recommendations. Other antidotes are not practical or desirable. For example, shifting attitudes on social responsibility in business to one where businesses stay in their lanes because philanthropy and business does not mix goes against corporate citizenship. Likewise, being skeptical of any company that is highly philanthropic or heavily engaged in social responsibility as they are more prone to justify evil actions in other parts of the business is preventing good because evil might follow, instead of addressing moral disengagement.
August 5, 2019
This book pre-dates the 2008 meltdown and the rise of social media. It would be interesting to see an update. The style and organization are a bit difficult (dry) but overall it is an interesting read.
Want to read
January 10, 2020Note to self: read chapter 1 (Chanos recommendation)
Want to read
April 5, 2024Seattle U Theranos talk
March 7, 2023
This book should be required reading for all analysts/investors.
The signs of dotcom are back 20 years on. I guess you'll never get rid of corporate fraud - they'll always find new ways to mislead the public.
Nonetheless- a very useful book.
The signs of dotcom are back 20 years on. I guess you'll never get rid of corporate fraud - they'll always find new ways to mislead the public.
Nonetheless- a very useful book.
Displaying 1 - 10 of 10 reviews