December 13, 2005
Excerpts: The Battle For The Soul of Capitalism - Part XII
The Vicious Circle
The market boom and bust were based not only on the delusions of the day but on a mutation from virtuous to vicious circle—a failure of character, a triumph of hubris and greed over honesty and integrity in corporate America. It’s facile to ascribe the wrongdoing of the era to just a few bad apples, and it’s true that only a tiny minority of our business and financial leaders has been implicated in criminal behavior. But I believe that the barrel itself—the very structure that holds all those apples—is bad. While that may seem a harsh indictment, I believe it is a fair one.
Consider Reuters journalist Martin Howell’s list of 175 “red flags,” each of which describes a particular shortcoming in our recent business, financial, and investment practices. I’ve personally observed many of these warning flags, twenty-four of which are listed in Box 1.1. They amply illustrate that those in privileged positions, corporate managers, and money managers alike who ought to have known better, rather than accepting uncritically the financial machinations and hyperbole of the so-called New Era, should have been issuing instead stern warnings to investors.
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