Anyone watching the rollercoaster ride that has been the U.S. stock market over the last two weeks can't help but be reminded of the traumatic series of events set off by the stock market crash in 2008. As many have commentators have noted, a lot of the behaviors that got us into that predicament persist today. These include disproportionate CEO salaries, six-figure bonuses and a preoccupation with short-term wealth concentrated to benefit those in management and investors rather than being shared with average employees and citizens for the well-being of society.
With that in mind, it is worth considering the dangers we are currently courting once again. We are possibly in for the same economic meltdown that ricocheted around the world, driven by the same moral meltdown that preceded and precipitated it. I describe this as a meltdown of values as capitalism's "seven debtly sins." Let me address each one:
Greed: This is without doubt capitalism's most common transgression. While the free market encourages us to cultivate wealth, it produces a particularly dangerous streak in people whose desire for money completely overshadows any empathy, concern or sense of fairness to others and to society at large. Greed has increasingly become a virtue among Wall Street bankers and corporate CEOs in the U.S. Nowhere else in the world do CEOs insist on receiving compensation as high compared to what their employees earn. Despite the global recession, the average CEO of a company listed on Standard & Poor's 500 Index received a total compensation of $11.4 million in 2010 -- a 23-percent increase over 2009. Tempering such greed must become a key priority for today's business leaders. But as the ongoing resistance to the Dodd-Frank banking law shows, this may not be possible even if it leads to an even more devastating economic meltdown.
Gluttony: A close cousin to greed, gluttony is the insatiable desire for more, regardless how much one already has. Gluttony might be innocuous were it not for the fact that gluttons tend to disregard whether their self-serving behaviors harm anyone else. We don't need to look far and wide to find examples of gluttonous behavior, as they are numerous throughout the history of capitalism. Recently, we witnessed the unraveling of what is arguably gluttony's greatest proponent in the form of Bernie Madoff's global Ponzi scheme. Yet each year brings us a fresh crop of Ponzi schemes, frauds and dishonest business practitioners who will seek to take advantage of the free-market capitalism without regard for how much they have or whom they hurt.
Sloth: A kind of stupor and laziness in one's habits, sloth is another debtly sin that robs capitalism of its sustainability. Often motivated by a desire to maintain the existing status quo, sloth almost cost the U.S. its auto industry, as it refused for decades to build fuel-efficient cars to compete with Japanese, Korean and European imports. We see a similar mindset inhabiting the oil and coal industries today that continue to argue against reasonable regulations to protect the environment and against laws that would advance the development of clean energy technologies. Their self-protectionism is already having a negative effect on U.S. opportunities to develop competitive solar and wind industries.
Wrath: The most underhanded debtly sin, wrath seeks to eliminate anything that gets in your way. Wrath played a leading role in the financial meltdown of 2008, as it does today, as financial institutions offload toxic securities to their competitors in order to cripple them while surviving themselves. It also persists in the form of highly paid lobbyists hired by nearly every major industry to fight against any government attempt to regulate their companies in order to ensure fair competition as well as protect the public from harm. The oil industry rails against any form of environment regulation, the banking industry refuses to embrace the need for consumer protection against predatory lending practices, and the coal industry insists that coal mining is safe and burning coal produces clean energy. With over 22,000 lobbyists in Washington, D.C., aggressive lobbying has become an accepted element of the American democracy with special interest groups effectively trumping our constitutional guarantees of representation in government.
Envy: Envy is played out among Wall Street firms and Main Street businesses day after day, year after year. In 2011, many corporate CEOs and boards are once again taking capitalism down the wrong path, repeating many of the same mistakes that created the Great Recession of 2008. They continue to lay off employees, outsource work to nations with cheaper labor and complain about high tax rates holding them back from investing when in fact they are earning the highest profits in decades and are sitting on more than $1 trillion in cash. They are investing in automation or moving plants overseas rather than hiring back workers. This comes at the cost of the American middle class -- their customer base -- that is floundering, if not disappearing.
Pride: The debtly sin of pride is the hubris that makes companies and their leaders arrogant and overconfident about their own self-serving behaviors. We saw pride operating during financial crash of 2008, when the leaders of the Wall Street banks believed they were "too big to fail." Those same banks remain unapologetic today as they return to the same self-serving habits that led to the Great Recession.
Lust: This last debtly sin refers not to the desire for money (as that is covered by greed) but to the meaning of the word that relates to sexual indulgence. However, it seems that money, power and sexual impropriety are highly correlated. In recent times, countless CEOs, executives and politicians have compromised their careers, both here in the U.S. and in Europe, testifying to the corrupting influence of power and how it affects what power brokers think they can get away with.
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With a persistently depressed economic climate, with stock markets taking historic tumbles almost on a daily basis, and with a gloomy forecast for the future, we would do well to learn from the lessons of history and begin adjusting our moral compass about capitalism. We simply cannot afford to allow the seven debtly sins to continue taking capitalism down the wrong path. How we make the change is simple, yet it necessitates a profound commitment that must be made on several levels.
First, at the C-suite level, CEOs and corporate executives must accept the fact that a short-term focus on profits damages the well-being of society, the subsistence of the middle class, and the very customer base on which they rely. They must fall back on the core values of their brands and bring them to life in meaningful ways to not only temper their own excesses but also to earn back consumer trust, which ultimately will benefit their bottom line. As the Edelman 2011 Trust Barometer report indicates, consumer trust in companies to do the right thing fell 8 points since 2010, leaving the U.S. only 5 points above Russia. The 2010 GoodPurpose report also notes that 86 percent of global customers want brands to put society's needs on the same level as the company's needs. As such, the marketing of products and services should be framed around the values propositions that make a company and its brands meaningful in the eyes of their customers. This will improve that company's bottom line and the sustainability of the practice of capitalism.
Second, corporations must bring these core values to life with their employees. The benefits to their bottom line are several, including employee retention, the ability to attract top talent and the fact that an employee force that knows what their company stands for also serves as their first line of word-of-mouth advertising.
Third, shareholders, as part owners of their company, must also recognize that their long-term interests are best served by tempering their desire for short-term gains that come at the cost of the very society on which their company's survival depends. As such, they should recognize that the best interests of the company are intertwined with the best interests of the society at large. Shareholders must seek to achieve positive results for both.
Lastly, the way a company relates to its customers, whether it is face to face in a retail store or on a social networking platform like Facebook or Twitter, needs to be informed by these core values if the brand hopes to resonate with their customers and demonstrate alignment between what a company says it stands for and how it behaves. One of the keys to this is an understanding that companies now need to build their bottom-line profits through community-building strategies that leverage social technologies to relate to their customers.
These are critical steps that companies need to take to adjust their moral compass and the practice of capitalism that stems from it. Only through a commitment to these actions can we realistically expect to see a shift in behavior that will benefit the long-term prospects of companies and share prosperity with a greater number of people.
To ignore or avoid this challenge is to invite another disaster. A world in which government is burdened by historic debt, philanthropy has limited resources, and the private sector is only interested in its own personal gain is simply unsustainable. Franklin Roosevelt noted this fact in his second inaugural address, when he stated, "We have always known that heedless self-interest was bad morals; we know now that it is bad economics."
Let's hope that the lessons from the Great Depression and the Great Recession will not be lost, because doing so will not just compromise the lives of this generation, but countless generations to come.