Leadership Means Taking Ethical Responsibility

From today's Wall Street Journal (online subscription required):

Scrushy Is Convicted in Bribery Case
Prosecutors Savor Victory
Over HealthSouth Ex-CEO
After '05 Fraud Acquittal
By VALERIE BAUERLEIN
June 30, 2006; Page A3

HealthSouth Corp. founder Richard M. Scrushy was convicted of paying $500,000 in bribes in return for a spot on a state regulatory panel, a victory for the federal government a year and a day after it failed to pin a massive accounting fraud at the health-care company on him.

The guilty verdict on all six charges against the 53-year-old Mr. Scrushy, including bribery, conspiracy and mail fraud, could put him behind bars for as long as 20 years, though the judge has wide discretion on sentencing. Prosecutors and defense lawyers are likely to argue over how to weigh factors such as Mr. Scrushy's background and the size of the contributions for which he was convicted. Sentencing isn't expected until this fall at the earliest.

The Montgomery, Ala., jury also convicted former Alabama Gov. Don Siegelman on 10 political-corruption-related counts, six of them linked to Mr. Scrushy. During the two-month trial, prosecutors alleged that Mr. Scrushy arranged two hidden $250,000 payments to a lottery campaign backed by Mr. Siegelman, who put the then-chief executive of HealthSouth on a board that approves hospital-construction projects. The charges weren't related to the accounting fraud.

It wasn't clear what swayed jurors after 11 days of deliberation, or ended a deadlock that emerged last week. Mr. Scrushy's defense team clearly failed to win over the jury with its strategy of comparing him to civil-rights icons who suffered injustice. In his closing argument, Fred D. Gray, who represented Rosa Parks when she was arrested in 1955 for refusing to give up her seat on a Montgomery bus, quoted a favorite Biblical passage of Martin Luther King Jr., adding that an acquittal of Mr. Scrushy would mean that "justice will run down like water and righteousness as a mighty stream."

Federal prosecutors denounced the rhetoric as a racially motivated attempt to influence the jury of seven African-Americans and five whites, the same composition as the jury that acquitted Mr. Scrushy last year. They alleged that Mr. Scrushy had used his money and power to gain political influence that helped fuel HealthSouth's growth. Mr. Scrushy was forced out at HealthSouth when the accounting fraud surfaced in 2003.

Charlie Russell, a spokesman for Mr. Scrushy, said the former HealthSouth CEO was "shocked" by his conviction.

Naturally, he'll file an appeal. ButI'm guessing his Houdini days are over. When he talked his way out of a conviction last year, against all courtwatchers' odds, that was a surprise. This verdict isn't.

This is a business and leadership blog. Leadership in my view requires ethical conduct. True, it's possible to be a very effective corrupt, destructive or even evil leader: history's pages are replete with examples. I don't claim to be perfect or to have led a perfect life, but the best thing for Mr. Scrushy to do is take his medicine, admit what he's done wrong, take responsibility and change his ways.

Prosecutor's do get things wrong, and what he's been accused of doing may not exactly correspond with whatever wrong he's done. But in the bigger picture, there doesn't seem to be any doubt he's been quite the accomplished crook. Now that he's been convicted, in spite of a very well financed defense, it's time to get a little more real and a bit more humble.

Leadership, of course, means not committing crimes in the first place. Scrushy's apparent failure to take personal responsibility says to me he's unreformed and unworthy of future leadership responsibility. Maybe he'll be exercising some leadership in the penitentiary courtyard.

In what looks like a growing theme for my recent writings, let's take another look at his crime: he was convicted of half a million in bribes to corrupt a regulatory agency. Rather blunt, but we all know that we in the business community have been buying regulatory access, through legal and some illegal menas, for a long time. We have the money; corporate profits are through the roof nationwide. Politicians want money and they write the rules. We make deals consumers don't see or understand, deals smaller competitors can't fight against because they lack our financial leverage and access to politicians.

We tell ourselves we have to do it to protect our shareholders and companies. But the regulatory, anti-competitive protection we buy (telecoms against net neutrality), the corruption we abet in the public sector. . . these things carry costs. Squelching inovation husst the larger economy and community; it 's the startups and renegades who fuel new innovation and industry creation. Corruption scandal after corruption scandal will eventually bring about anti-corporate backlash in the electorate: it's happened in American history before. I suppose, like Scrushy, we could decide to get away with all we can for as long as we can, but I think American business would better serve itself by taking a step back to think about the common good.

That, of course, would require leadership, and given the incentives we have in place for CEO's to maximize only short term profits, I doubt we'll reform until the need for change is mandated to us. Just like Scrushy, we'll be "shocked" at our (social and political) "conviction."

Ford Motor Company Struggles to Survive

Excerpt from the Wall Street Journal (online subscription required):

Ford's Chief Cites Hurdles to Turnaround Push

Chapter 11 'Not an Option,'
But SUV Sales Slide More;
S&P Cuts Rating Further

By JEFFREY MCCRACKEN
June 29, 2006; Page A3

Ford Motor Co. is running into a stronger head wind than the auto maker anticipated a few months ago, a development that is stressing the "Way Forward" turnaround plan it unveiled in January, Chairman and Chief Executive Bill Ford said in an interview.

The latest blow came yesterday when Standard & Poor's cut its rating in Ford debt deeper into "junk" territory. S&P cut Ford debt one notch to single-B-plus from double-B-minus, saying it believes "2006 would be a more difficult year for Ford than previously anticipated." (See related article.¹)

In an interview that took place yesterday before the rate cut was announced, Mr. Ford dismissed any talk that bankruptcy was a threat, saying "it's not an option."

He said his family's company has no interest in taking itself private, despite reports that the company has studied doing so amid a falling share price and a flurry of private-equity-backed deals.

Mr. Ford said his company is planning to build fewer gasoline-electric hybrid vehicles in the future than planned, and instead is "rejiggering" the mix it expects to build of hybrids and flexible-fuel vehicles that can accommodate alternative fuels like ethanol.

Since Ford detailed its plan, auto-industry conditions have gotten tougher than the Dearborn, Mich., company planned for, he acknowledged. The tougher treading contrasts somewhat with rival General Motors Corp., which faces similar declines in U.S. market share and reported a $10.6 billion loss last year but since has made some progress in reducing costs.

Ford's shares fell to a 52-week low yesterday of $6.36, down 18 cents, or 2.8%, at 4 p.m. in New York Stock Exchange composite trading, while GM's shares rose 76 cents, or 2.9%, to $26.66.

Mr. Ford said sales of sport-utility vehicles have fallen off faster than planned because of the recent run-up in gasoline prices. That hurts Ford because trucks and SUVs make up more than half of its sales. Prices of metals, plastic and other materials have also risen faster, he said.

This actually makes a decent companion piece to the previous post. Oil prices per barrel are not going to return to any stable levels below $70, and may continue their steady rise as worldwide extraction costs continue to increase due to diminishing yields from reserves and wells. At the same time, demand is increasing for highly fuel efficient vehicles and options that drastically reduce carbon emissions. Detroit has been caught flatfooted as foreign import to the U. S. are once again running circles around the dmonestic producers, who bet on SUV's to the max. I took a cab ride in Las vegas recently, my first trip in a hybrid. It ran extremely well, with very nice pickup. Was it made in Detroit? Are you kidding?

The U. S. auto industry has long relied of favorable regluatory protection to sustain itself in the face of competition, and it's fat, bloated and inefficient. Many heavy indistrial businesses prefer to hire lawyers and lobbyists to protect market power, but protection from innovation always creates an eventual bubble in the competitive environment. Competition will come, though it can be held off a long time. What's good for quarterly earnings in the short term is often not good for the business.

Ford continues to teeter on the edge. Tick-tock, tick-tock. Then again, my father used to sell Fords in the 70's and 80's, and they didn't seem much stronger back then. Is there such a thing as a good business that "succeeds" forever on the brink of failure, even bankruptcy?

Science, Business and Climate Crisis

The AP reports that the new film An Inconvenient Truth gets the science right. I saw the film last weekend, and basically everywhere I turn, I see validation for the film's science from scientific quarters. The controversy around climate change is a political controversy and a business controversy.

From the AP:

WASHINGTON (AP) -- The nation's top climate scientists are giving "An Inconvenient Truth," Al Gore's documentary on global warming, five stars for accuracy.

The former vice president's movie -- replete with the prospect of a flooded New York City, an inundated Florida, more and nastier hurricanes, worsening droughts, retreating glaciers and disappearing ice sheets -- mostly got the science right, said all 19 climate scientists who had seen the movie or read the book and answered questions from The Associated Press.

The AP contacted more than 100 top climate researchers by e-mail and phone for their opinion. Among those contacted were vocal skeptics of climate change theory. Most scientists had not seen the movie, which is in limited release, or read the book.

But those who have seen it had the same general impression: Gore conveyed the science correctly; the world is getting hotter and it is a manmade catastrophe-in-the-making caused by the burning of fossil fuels.

"Excellent," said William Schlesinger, dean of the Nicholas School of Environment and Earth Sciences at Duke University. "He got all the important material and got it right."

The scientific argument on this is over and done. The political fight is, shall we say, heating up. There's loads of business opportunity and job growth possible in developing solutions to market: the necessary technologies to turn the emergency around already exist.

Oil companies and their allies will fight and finance opposition to political change tooth and nail to protect their industries and shareholders. Unless popular will overtakes them, they'll win, at least in the short term. Long term if nothing is done, we all lose, and long term could be just the ten years we have to turn this around, according to informed opinion. If another big hurricane hits the U. S. this year, all bets on the political dynamics are off. If the stakes weren't so high, I'd say, grab some popcorn, it's going to be quite a fight.

Quotes of Note

"When someone asked Abraham Lincoln, after he was elected president, what he was going to do about his enemies, he replied, 'I am going to destroy them. I am going to make them my friends.' "
Abraham Lincoln

"Great souls endure in silence."
Friedrich von Schiller

"Since the general civilization of mankind, I believe there are more instances of the abridgment of the freedom of the people, by gradual and silent encroachments of those in power, than by violent and sudden usurpations."
James Madison

Howdy, Cousin!

According to CNN today, people in China are now able to buy access to genetic testing that would tell them if they are descended of 5th Century B.C . social philosopher Confucious.

I can save them their money.

If Steve Olson, author of Mapping Human History, is correct in the research he has assembled and detailed, we can all empirically trace a common genetic ancestor within 1,600 years of human history.

That's right: the genetic record shows that all humans walking the earth today must have some common ancestor within 1,600 years, and in many cases, less time than that (for example, people descended from the same country of origin are more likely to show less idiosyncratic genetic variation, and so will likely have more recent common ancestry).

It is therefore a mathematical certainty that not only all living Chinese, but all living people, share some degree of genetic descendence from Confucious, and anyone else who lived more than 1,600 years ago.

The genetic test in China costs about 1,000 yuan or about $125.oo US. Copies of Olson's book now sell at Amazon for under $5 new and used.

Do I know how to find you a deal or what? Oh, and one more thing:

Howdy, cousin!

What Do You Want to Be When You Grow Up?

I was talking to a young friend recently who was sorting out for himself what he wanted to do with his career after finishing his four year degree. I pointed out to him that when I was at that stage in my life, I had no real idea what I wanted to do. Here are some things to point out to recent graduates:

Figure Out What You DON'T Want to Do
Nowadays, there are so many options open to recent graduates, given the information glut we wade through every day, it can be hard to know what you want to do. The trick in life is to get paid for what you love to do, and it just so happens the things you love to do are probably the things you do best anyway. That's where our talents lie. It follows, therefore, that knowing what you really don't want to do, because it just rubs you the wrong way, helps you narrow the field of what your future should probably hold.

Give Yourself Some Time
I admire people with the focus in life to know what they want to do from a young age. I was not one of them. It's taken me a number of years to grow into my prime niche, and I had to find my way by trial and error (and more error). I've made progress by doing what seemed to me to be the next correct step, and I made up my business as I went along. I met great people, learned from great people and carved out a way of using my talents in ways that my clients seem to appreciate and value. Every experience along the way has been helpful to me, and I've learned more from my failures perhaps than from my successes.

Make an Aptitude for Change One of Your Core Competencies
In this modern, global economy, change and potential dislocation are the norm. The question is not "what your career will be," but what your "careers will be." I know many professionals who make unanticipated changes during their mature years. I have forty years behind me, and while I expect to continue to do what I am doing in some form or other, my company allows me the flexibility to take on new kinds of projects as I learn and grow. Most people work for other people and companies, so they need to be flexible enough to keep learning, remaining open to new things, because change will come, and it won't always announce it's arrival in advance. If you can make a penchant for adaptability one of your core abilities, you will have the best chance to succeed at any point in the life cycle of your career(s).

Make Lots of Friends
The other key part of success in an age of dynamic dislocation is to cultivate a wide array of friends and contacts in many walks of life. Social capital is real capital. Don't just get to know people who you think can help you in the short term: you may develop a reputation for being solely self-interested, which can hurt you in the long run. Get to know all kinds of people. Find out what they like to do, what interests them, what they take pride in. You never know when that understanding may help you put other people together in a way that helps them both. When you build up a lifetime of doing things like that, many people will be interested in helping to catch you before you fall when unwelcome change comes your way. And it will.

Find Mentors Who Help You Cultivate Your Strengths
The best mentors are not the ones who tell you, "This is how I did it," though experience from others is helpful. Role models count for a lot. But beyond that, the best mentors ask questions like, "What's been your best recent success? What made it successful? What were you doing that you enjoyed the most? What did you learn along the way? What could you have done better? What do you think your strengths are?" Those are just a few. In other words, the best metors help you discover your own way to success, rather than offering you their way. If you can find people like that, hang on to them. Wisdom is always more valuable than mere information.

Good luck, recent graduates!

Enron and Corporate Culture

I wrote this article a couple of years ago, before the Enron litigation had run its course. Since Enron has been in the news again, and since the arcticle is still popular on my business web site, I thought I'd share it on the blog:

We are still learning the facts about Enron’s corporate culture. But even now, it seems clear that the strengths and limitations of Enron’s culture led to its demise.

Individuals are responsible for their actions. As I write this article, it is not yet clear who did what, who knew what and whether or not any laws were broken at Enron. But unethical or illegal individual actions are sometimes symptoms of systemic problems, and Enron’s systems of accountability, oversight, ethical disclosure and corporate priorities were seriously flawed.

Enron’s corporate culture best exemplified values of risk taking, aggressive growth and entrepreneurial creativity. These are all positive values. But these values were not balanced by genuine attention to corporate integrity and the creation of customer - and not just shareholder - value. Because the Enron corporate culture was not well grounded, a single scorecard - maximized price per share of common stock - became its reason for being, and even its positive values became liabilities.

Enron’s corporate culture also seemed to embrace a value - massive size - that is not so much a value as it is a strategy through which to achieve a larger mission. This dedication to sheer size, left unchecked, made the company prone to use of its size to bully and intimidate those who, for example, questioned some its balance sheet practices. Enron became arrogant.

Once the values of risk taking and creativity led to more and more aggressive partnership arrangements to maximize share value and, for example, hide debt, the company failed to check its “creativity” with an equal commitment to integrity. I’ll bet many insiders came to believe Enron could not fail to grow - the company promoted the myth of its own invulnerability so effectively. That must have made it easy, at some point, for decision makers to secure risky partnerships with Enron stock, betting that the stock would never fall.

But then the bubble burst from the overheated, overvalued marketplace, and many of Enron’s speculative ventures sank. But as the market began to fall, so too did Enron’s stock, and then creditors required more than Enron stock as payment or security. The actual financial tools and processes were far more complex than this, but Enron essentially fall apart by a complex process of “margin calls.”

But before the end, it became more and more apparent to insiders that the bottom was falling out, which then led to more and more aggressive measures to prop up stock values by whatever means necessary - Enron’s corporate culture did not change. Corporate officers deceived shareholders and employees, as part of a pattern that apparently had developed, incrementally, over time.

But the death spiral had already begun, and Enron’s collapse became as inevitable as its true believers had once presumed its success to be.

As reports from inside Enron come out, it appears that many people were aware of the company’s questionable financial practices - aware also that Enron’s corporate culture was out of control. Whistle blowers are never very common, but a corporate culture that makes it hard for ethical objections to be heard - or which fails to take them seriously - is a corporate culture that is already failing. Otherwise ethical people remain silent when they see the most highly rewarded people in an organization are the ones who commit some of the worst violations.

That’s important, because one way to describe a corporate culture is that is is made up of the sum of the personalities of those people who are selected, promoted and rewarded in an organization. When a corporation fails to select for integrity in leadership, it certainly won’t find it there later.

Corporate officers at Enron seem at best to have been neglectful of their responsibilities for oversight, or, at worst, outright criminal and abusive in their levels of greed and deception. It takes a special person to blow the whistle in such an environment.

All of this was preventable, long ago, but Enron failed to create a sustainably successful corporate culture that included values such as customer service, or maximizing customer loyalty and satisfaction, which would have balanced the company’s overemphasis on pure, short-term stock price.

But even more important, Enron’s corporate culture had evolved so that it only paid cosmetic attention to integrity. That is and was the responsibility of the Board of Directors and the executive officers of the company. A well tended garden is never choked by weeds.

And that’s how corporate culture matters: the attention we pay to corporate culture pays dividends in creating sustainable growth and profit. Enron’s failure to create the right kind of corporate culture ultimately killed it.

For a video post-mortem on Enron and what went wrong, check out this link. Brad DeLong's perspective is admittedly political, but then, there's no apolitical stance in economics, actually, and his is an informed and intelligent perspective. He argues against the notion that Enron had been brought down by the actions of a few rogues, consistent with my old analysis, relating Enron's fall to a fundamentally flawed, corrupted corporate culture.

Big Business versus Small Business?

I'm still studying the whole net neutrality debate.

The big telecommunications companies argue they need to be able to put tollbooths on the Internet to create VIP fast lanes for access and eyeballs to those who can afford to pay. My friends in the industry argue the industry needs this regulatory change from the original founding rules of the Internet for American telecoms to survive. We're talking here about AT&T and Verizon, among others.

On the other hand, creating a multi-tiered online world fundamentally changes the Internet. My business, for example, is a small one, but anyone can find my web site who searches for the content I provide. Some of my content is quite popular and has organically risen to the top of some Google searches in the marketplace of ideas. I never paid for that placement. But if the telecoms get their way, I'll be pushed aside by the big name consulting houses, relegated to greater obscurity, because I won't have the business scale to pay for preferred access.

It won't just be me, of course. Any smaller, innovative business will suffer if the telecoms succeed in gutting net neutrality from the law. The executive branch has already changed the regulations at the telecom lobby's bidding, and now Congress is wrestling over putting net neutrality back into the law. Telecom lobbyists are lining up and spending money to fight this, and a broad alliance that includes Google, Craig's List, Paypal and political groups on the left and the right are fighting a populist campaign against the telecoms.

It's clear that net neutrality is good for consumers. For example, when somone in your family is sick, you can do research for health care information from public organizations not biased to sell you one solution or another. But if net neutrality goes away, you'll likely be steered when you look for answers to information sites that are really just advertising their own agendas. On the other hand, the telcos argue that a failed telco industry is also bad for the country, though I have not examined the financials and industry dynamics to know how seriously threatened they may be. I have to admit, some of the public relations campaign the telcos have been running looks dishonest: they argue against "regulating" the Internet, when it has always been subject to rules or regulations. They just want the regulations tilted in their favor, away from the way the Internet has always functioned otherwise.

No matter what, it seems the net neutrality fight is pitting big business against small business. As one who strongly favors innovation, I tend toward the small business side. Smaller businesses create the most jobs and stengthen the economy (in this case, small businesses include, in my mind, those with a few hundred million in revenue, as opposed to multibillion dollar big guys). If the big telcos can't handle the competition, is that small business' fault? The Internet was built with much public investment. I get that the telcos may need some form of public help or regulatory assistance, since the nation's communication's infrastruture is really like the highway system of the new century. But gutting net neutrality seems like the wrong way to assist the telcos, giving them additional regulatory favoritism, in my opinion. They already write the laws through their lobbyists. Who stands up for small and medium sized businesses? I sure don't see the U. S. Chamber of Commerce doing it.

What do you think?

Always Be Curious

CNN reports today scientists have found a rock in Arizona that may depict and ancient artistic rendering of a large supernova, visible in 1006. Imagine what such a thing must have sparked in the minds os a people accustomed to observing the world around them, especially the skies!

Did they think of the sky as a dome? Were the stars and planets to them evidence of the gods? The CNN article does not tell us anything about the presumed culture that produced the art, but some things (to me, anyway) are certain.

First, it has always been the nature of our species to be curious, and to wish to record that which fascinates us. Second, science advances our understanding of the world around us, but it is up to ourselves to give our lives and work meaning.

I encounter many working people who struggle to find meaning in their jobs and careers. Furthermore, we live in an age of much economic and social dislocation on a global scale. Seeing multiple systems of meaning fight for dominance among groups of people can be highly unsettling. Those who succeed the most in deriving pleasure and enjoyment from their work are the ones who remain curious, and who remain willing to imbue their efforts with meaning, no matter what others around them may think or say.

How Cheap is the Market?

With the Fed apparently trying to engineer a soft, slow devaluation of the dollar so as not to destablize the U. S. "wealth effect," real estate driven economy (we'll see how that works out), it's interesting to take a look at the market again. P/E ratios based on trailing earnings suggest decent values, by historical standards:

This is the first part of a two part series asking the question, "How cheap is the market right now?"(part II is here).

The answer might surprise you. It certainly raises some very interesting questions as to what cheap is, the importance of having a long term perspective. It also begs the question of how much patience long term investors have when it comes to thinking about various metrics.

The question itself involves a combination of data analysis and opinion. To fully explore this issue, we will listen to two different perspectives on the subject: One says the S&P500 is cheap, the other asks, how much cheaper might it get?

For part one, we go to Eddy Elfenbein of Crossing Wall Street: Eddy observes "S&P 500 is now trading at just under 16 times trailing operating earnings. The P/E ratio hasn't been this low since October 1995." Note that he references actual trailing earnings. This is more accurate than using forward forecasts, which tend to be very wrong at key turning points.

New Comments System

I saw some friends tonight at the annual Wharton Club of DC dinner, which honored Marshall Chawla, Geoff Corbett and Elizabeth Duggal: friends all, and most deserving honorees.

I also learned how much people HATE the embedded default comments system here, so I''ve installed another system I hope you'll all find easier.

Let me know how it works. Unfortunately, the comments already left are no longer visible, so we're now dealing with a clean slate.

Are Young People Lazy and No Good?

No.

I get a version of this question in many of the management programs and speaking engagements I do. Executives and managers lament that they don't find the same work ethic among younger people they believe they had themselves when young.

Some of this is nostalgia bias: we always tend to bathe memories of our own youth in a glorious, romantic light.

Some of this is sample bias: the executive audiences to whom I speak are made up of people who probably were more oriented toward acheivment than were their peers when they were young. That's how they got to be where they are today.

It's fashionable for older, wiser leaders to bash the young, but it's entirely off base. Consider this Business Section headline, from today's New York Times: "Big Bonuses Still Flow, Even if Bosses Miss Goals." The article goes on to say, in part:

Four more top executives of the Las Vegas Sands, which owns the Venetian Resort Hotel and Casino, received more than they should have. The total in excess bonus payments for the five men was $2.8 million.

The compensation committee of the board conceded that it had made an error. But it said that "the outstanding performance of the company in 2005" justified the extra money, and it allowed the executives to keep it.

Shareholders of Las Vegas Sands did not fare as well. The value of their holdings fell 18 percent last year.

As executive pay packages have rocketed in recent years, their defenders have contended that because most are tied to company performance, they are both earned and deserved. But as the Las Vegas Sands example shows, investors who plow through company filings often find that executive compensation exceeds the amounts allowed under the performance targets set by the directors.

Executives of companies as varied as Halliburton, the military contractor and oil services concern; Assurant, an insurance company; and Big Lots, a discount retailer, all received bonuses and other pay outside the performance parameters set by the boards of those companies.

It is the equivalent of moving the goalposts to shorten the field, compensation experts say.

"Lowering the hurdles is especially disconcerting because very often the goals are not set all that high to begin with," said Lucian Bebchuk, professor at Harvard Law School and author with Jesse Fried of "Pay Without Performance." Mr. Bebchuk said shareholders should be especially alert to increases in bonuses because more companies were shifting away from stock options and into cash incentives.

Some employment agreements actually stipulate that they will provide bonuses even if company performance declines. The agreement struck in 2004 by Peter Chernin, president and chief operating officer of the News Corporation, entitles him to a bonus even if earnings per share fall at the company. If earnings rise by 15 percent in any given year, Mr. Chernin's bonus is $12.5 million. But if they fall 6.25 percent, Mr. Chernin's bonus is $4.5 million, and an earnings decline of 14 percent translates to a $3.52 million bonus.

These kinds of articles get written all the time. As income disparity across the population increases in the United States, they will continue to be written. Real middle class wages have been flat for a long time, and the middle class wealth effect brought about by rising real estate values is tailing off. Enron executives Ken Lay and Jeffrey Skilling have now been found guilty of multiple felonies by a jury. If workers, and even middle managers, are a bit disaffected, that disguntlement comes from within a larger social and economic context.

Young workers oftentimes don't trust their working institutions, and that lack of trust comes from a recognition that entry level workers are expendable as jobs move overseas. Perceiving no loyalty from their employers, young people behave more like economic free agents ready to jump at any better opportunity. That, to many executives, looks like a lack of commitment, even like laziness. But taking care of themselves first by not becoming too attached to their jobs is, for many young people, a rational survival strategy in a global economy.

I'm not saying top executives are bad. I'm not saying young people are bad. I'm not saying all top executives or executive compensation systems are corrupt or flawed, though I am pointing out that this idea is continuing to gain momentum in the wider U. S. culture. I'm not saying anyone is bad! I'm saying scapegoat thinking is typically lazy and self-serving.

I appreciate the desire to find simple answers that confirm our first reactions, but it's simply not true that young people today are any less talented or motivated than the rest of us were when we were young. Human nature has not changed. If you offer young people a real opportunity to grow, show them their talents and efforts matter to your organization, and in particular, to their direct supervisors, they will run through brick walls for you. Just as many of us did when we were young.

I see this in my work for clients on mentoring systems all the time. You have to select the right people for the right jobs, and then, if you want high productivity and loyalty, you have to invest time in your talent. On the other hand, if your business treats its people like cogs in a machine, making little allowance for the expression and understanding of individual people's talents, you'll get just what you expect. We can all congratulate ourselves for being young go-getters once upon a time, but how, exactly, does that help our businesses?