Friday, October 23, 2009

When a Senior Leader is Charged With a Crime

I found myself in shock last week when the New York Times, CNN, and other news organizations reported arrests for insider trading in what is being called the biggest ever hedge fund insider trading scheme.

One of those charged was a Senior Vice President at the corporation I worked for, and was in fact the leader of the division I worked for. He was one of just a handful of people who reported directly to the CEO. He had been a top leader in many organizations of the company. He had risen fast and was relatively young to reach the position he had. He was considered a contender for the top job.

The point is – by all measures he was wildly successful.

So what’s it like when a former big boss – a top leader in your company – is accused of being a crook?

I suspect that the tens of thousands of others who worked under this man at some point in their career and I feel the same way. We are shocked. We are outraged. We are angry. And that’s putting it mildly.

While this might not be quite the same as the feelings of the families of politicians who are accused of scandals, there are similarities. We were taken by surprise. We feel betrayed.

This is not supposed to happen in our family.

Now I’m not sure employees actually liked the man in question. He had a reputation as a hatchet man – the word on the street was that he would go into a new organization, streamline, cut budgets, and lay off employees – and that proved true in my organization. In fact, he may have been more feared than liked as a leader. But undoubtedly he had the authority, and the power.

I have no idea whether he truly committed a crime. The courts will decide. According to the FBI press release the allegations include that inside information was shared based on potential confidential deals between companies. And whether or not he committed a crime, it sure does look like he violated company policy.

My company was extremely careful whenever a deal with another company was discussed. Only people who truly had a need to be involved were included – this was usually a very small number of people. These people had to sign a special agreement – essentially it was a reminder (in case they forgot the business conduct guidelines) that they could discuss it with no one else – not others in the company, not their friends or family, not their boss, their spouse, their pastor, or their mother. You get the idea. No one.

What the heck was he thinking???

It wasn’t enough that he was head of a critical division at a top corporation? It wasn’t enough that he reported to the CEO of the company and was responsible for a multi-billion dollar business? Surely he didn’t need the money – at least not by any reasonable standard. Surely he didn’t need to worry about paying the mortgage, or the college bills, or buying a new car. I have long held the opinion that senior executives do not do what they do (at least not for very long) for the money.

So what was it then? Power? Excitement? The need to be part of a special club where he alone held a key piece of information? An overwhelming need to make the Forbes 400 Richest Americans list? A feeling that he was untouchable or invincible?

I think last Friday was a sad day for Corporate America. What do you think?


Anon_e_mouse said...

A sad day? Perhaps. A typical day? Most definitely. This kind of stuff goes on all the time, at all companies - even teeny tiny ones, like the small retail business where I worked nights and weekends for many years. These folks just happened to get caught with their hands in the cookie jar. (And no, I'm absolutely not excusing their alleged behaviour - it's wrong, whether it be on a small scale, a medium-sized scale like they are accused of doing, or a large scale like Bernie Madoff. But it's typical. Power corrupts, and too many people think that because they're powerful that they can get away with doing things they shouldn't.)

Anonymous said...

I am a retiree of IBM and I can assure you that the community of IBM Retirees and former IBMers also feel betrayed. I am sure those from Intel and McKinsey & Co feel the same way too.

There was clearly something motivating this behaviour. Typical examples are money, power, sex, even blackmail. Sadly the motivations will come out in the trial.

It is a good thing to express your feelings and get them out. I shared your outrage and sadness.

I am also reminded that these are accusations and not yet a conviction and maybe, just maybe, it cannot be proven But where there is smoke, there is often fire and it is sad for us all just the same.

Thanks for sharing.

Anonymous said...

No sympathy here for that person. I am one of those "hatcheted" by him and his minions. Having joined that company at a time when employees were valued -- not viewed simply as commodities -- and treated with dignity, it makes me very sad to see how far things have fallen.

Colette said...

Anon e mouse -- it's so sad that we have to come to think of this bad behavior as typical, isn't it? I also agree with the other posters that more will come out in the trial (I for one will be watching and posting more), and I also remember when employees were not viewed as commodities. Maybe this is a wake up call.

Anonymous said...

Sadly, this bad behavior is typical in many, many companies. I'm wondering whether the behavior is tacitly tolerated, meaning that the powers that be suspect that it's going on but will tolerate it as long as the stock price goes up, knowing that the minute that the illegal behavior is identified, the individuals in question will be given the sack.

I am sure that the trial of the individuals involved will yield a selection of interesting facts, no matter how extensive a coverup is attempted. I am also sure that we'll see any number of executives shaking their heads and claiming that they knew nothing, absolutely nothing, about what transpired. And in a few years, we'll be seeing their names in the newspaper as the arrestees du jour.

I view all of this as a direct byproduct of the philosophical change in corporate behavior that now identifies people as resources/commodities/butts in seats. Manipulate those resources and the stock price responds accordingly. When corporate ethics are again truly valued, resources will again become people and we can look forward to company executives not comprising the Monday morning lineup at the jail.

Anonymous said...


Frank Breslau said...

IMHO, when respect for the individual disappeared at IBM, individual respect for the company went with it. In an atmosphere of the individual is the only thing that counts, everybody tends to grab whatever and whenever. One can only surmise that what is happening at the top, to some degree is pervasive. There are a lot of really great and dedicated IBMers but their ranks are thinning out either by resource actions or by "I've had enough". When Lou Gerstner took over, he was advised that "IBM is a great company; don't mess it up". In that respect, Sam has succeeded in making IBM just another profit driven company whose employees are being motivated to make another buck today and not worry about tomorrow.

Anonymous said...

I share your outrage. I don't think any financial gain on his part was involved. I think he believed that he was 1) above the rules, an overwhelming sense of entitlement, and 2) he would not get caught. Sad, very sad. I hope his lawyer gets him to roll-over, plea out, and get on with his life, maybe in the service of others.

Anonymous said...

I, too, am an IBM retiree that embraced the Basic Beliefs that were a key part of IBM culture whenI started back in 1977. The day that the corporation pushed them to the sidelines is the day that Moffit was given license to act the way he did. It is surprising it has taken til now for somebody to get caught doing what he did.

That well-paid senior-level people can still attempt to steal is an indicator that the corporate culture today is one of unbridled greed. Who "needs" millions of dollars in salary, bonuses, options, and retirement benedfits each year...particularly when so many people are being furloughed and laid off. This is not a reflection on the capabilities of the workforce, but the greed of senior management. Instead of asking the question "How can I guide my team to achieve more?" they are asking "How can I get more for me?" That is a sad way to run a life.

How many unemployed people could have a decent wage right now just using Moffit's salary and benefits from IBM?

Colette said...

Oh you are all so right. Do we think we'll ever see this shift back?

Anonymous said...

Colette, I am afraid the train has left the station and it is not turning back any time soon.

Colette said...

We'll watch it and see. I am still holding out hope that this is an isolated incident -- at least where IBM is concerned.

Alex said...

Hi Colette,
Great blog and great post. As a former IBMer, I share your regret and sorrow that a senior IBM executive has allegedly behaved so badly and brought such disrepute on himself and his employer. As someone who liked IBM's values and what they stood for, it is disappointing that a senior leader didn't feel that they applied to him.

What I find bizarre is the motivation. Moffat was very well paid. Indeed executive pay at IBM is good enough to be a significant shareholder concern (!), as shown by the ever increasing pages of the annual report devoted to the intricacies of the executive compensation packages. He didn't need the money as far as anyone can tell and it seems strange that perhaps he wanted the thrill & power of inside knowledge when he had a senior executive position as one of the US's greatest companies.


Colette said...

Alex, I agree -- the motivation is certainly a mystery. Hopefully we will learn more as this unfolds.

Anonymous said...

Great commentary! Sad part is so many of the loyal, hardworking, upstanding "good guys" were swept out last year by his broom. Guess he should have paid closer attention to those Business Conduct Guidelines! What is that old addage, actions speak louder than words? It is a sad commentary on where our economic/business climate is right now. Thanks Colette - well said.

Anonymous said...

Colette. The man we are discussing was all about power. The fact that he allegedly passed on information to a woman a good decade younger than him, says to me, that he did it because he felt powerful and could show how much he knew... ego and power. If the allegations are true, my first thought was that he had fallen for the oldest trick in the book!!! I'd think that he made more in bonuses every month than he made in this transaction, so it wasn't about money - based on what has been written.. it was about ego and power. And this particular "gentleman" was ALL about power and ego.
When I read the allegations, my first thought was for all of those people whose lives he had so negatively affected. If he's guilty I hope he languishes in a cold dark place. I don't think are many people who miss him. If he's guilty, I think there are many who will also question the ability of the CEO to chose his innermost team.
Thanks for your post