Time and again, the famous quote from the Pogo comic strip of years ago has been trotted out when appropriate. “We have met the enemy and he is us.” In this economic downturn my thoughts keep turning to the concept of moral hazard. I am sure most of us have had occasion to contemplate the benefits of our actions versus the consequences of something known to be at least close to the edge of propriety. In my own business career it began not long after getting my first job in the commodity trading business.
Selling various alloys to steel mills and foundries I recall one day quoting on a business inquiry and finding the material in our inventory was not precisely to the customer’s specification. “They can’t test for that,” was the answer I got when I asked what to do. And so it began. Over the years I saw such responses time and again from some of the most successful people in the business. When I moved to the investment world the comment became, “we wear a lot of hats,” and “sell the sizzle, not the steak.”
One can make a lot of money being clever. Make no mistake about it, the best on Wall Street are clever and now the entire nation is in the cross hairs of their moral hazard. If one’s behavior is dictated only by the chance of detection and then accountability, it is little wonder that the consequences are socialized. The cost of cleverness when divided by three hundred million is not so unpalatable and it is almost invisible on a personal level, of others.
I have little sympathy for the doyens of Wall Street or Congress or even Main Street who have forgotten that with great reward comes great responsibility. One hopes it transcends the quarterly balance sheet or the bi-annual election but that hope seems to have been misplaced lately.
I write this wistful screed today because my son is turning twenty-two, about to graduate from university and begin a career with a major bank as a credit analyst. It is much to consider for a young man who still looks out of place in a pinstripe suit. I have no doubt he will quickly learn about flexible decision making. But even at the lower rungs of a ladder which I am confident he will climb with great success, I hope he will remember to consider both the distant and invisible consequences of his actions and decisions and his own internal consequences.
Business ethics are a constant challenge and the measurements ever changing. He will have to find his own lines in the sand and inviolate rules to guide his behavior. No company statement of ethics will ever supplant personal integrity. I hope he will find his own personal words to place on his desk or mount on the wall but most importantly in his heart. Those will follow him from cubicle to corner office to executive suite. Have no regrets. Happy Birthday Son.
John Barnyak
President
www.stonehouseasset.com
