The crisis – ethics or competence?

See Background follows … I have been watching a long debate on the Academy of Management’s discussion list re Management Development about the role of ethics and values [or lack of] in bringing about the current crisis. That debate and many similar comments in the media seem to make a big assumption – that unethical behaviour was the main reason for the crisis, so with more ethical standards the crisis would have been avoided or substantially reduced. But apart from a few egregious examples, it is not clear that most senior execs were deliberately doing things for their own gain that they knew to be against the interests of investors, employees or customers.

An alternative view is that executives were mostly doing things they thought – but incorrectly – to be in the best interests of their organizations and their customers [as well as themselves of course].  This hypothesis is supported by the endless positive assessments of corporate prospects by analysts and other well-informed commentators, right up to the moment things went wrong. Surely all those hundreds and thousands of executives could not have hidden dishonest or deceitful behaviour from the outside world for so long?

If they were not being dishonest or unethical, then, were they in fact being insufficiently competent in the strategic management of their organizations. Government grilling of banking executives, for example, has shown that CEOs were doing things that were widely regarded as skilful, even super-clever, that neither they nor most others realised were dumb until after the event. And the banks were not alone in managing themselves into crisis, or at least into serious trouble – we now have car makers, airlines, ship-building, commercial real-estate, retailers and hundreds of other sectors in difficulties they could and should have foreseen and guarded against.

The screen-cast you will find at came about because I had reason to reflect on this question for presentations at business schools in Argentina and Brazil over the last 2 weeks.

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