Martha Stewart’s conviction for fraud and obstruction of justice sent a clear message to the world that ethics apply to everyone and powerful people aren’t above the law. As one of many high-profile people sentenced to prison in the last decade, Stewart is a classic example of what Paul Fiorelli refers to as the “hubris” of powerful people. Fiorelli, who is Professor of Business Law and Co-director of the Cintas Institute for Business Ethics at Xavier University, counts hubris as the main reason powerful people sometimes do unethical things.

Hubris, a sense of arrogance and entitlement, gives high-profile, high-achieving people a sense that rules don’t apply to them, says Fiorelli. Though many of the well-known cases involve celebrities, hubris can be characteristic of people in powerful positions in every field.

“When I talk about hubris, I talk about people like Eliot Spitzer, former governor of New York, who was involved with a high-priced prostitution ring, Mark Hurd, who was the former CEO of Hewlett Packard, involved in a sexual harassment case,” says Fiorelli. “Do the rules apply to these people, or do they think that ‘the rules don’t apply to me’?”

He cites, as an example, the words attributed (perhaps erroneously) to Leona Helmsley, that “only the little people pay taxes”. “That,” says Fiorelli, “is an example of hubris.” He describes people in power has having high self esteem and a positive view of themselves.

“I’m sure they’re all very talented and hard-working people who have been used to great successes in their lives,” says Fiorelli. “The more you’re used to the rewards, the less you think the rules apply to you.”

Criminals and Consequences

Fiorelli sees positive steps in the prosecutions and jail sentences that have been handed down to high-profile criminals in recent years.

“Bernie Madoff going to prison for 150 years, that’s a pretty good message,” he says. “Raj Rajaratnam convicted last month of insider trading, pretty interesting enforcement involved.”

Fiorelli points to some of the recent huge settlements, such as the $1.6 billion fine paid by Siemens and the $2.3 billion fraud settlement with Pfizer. “That’s a pretty good regulatory environment and one could make a good argument that it’s sending a message that no individual or organization is above the rules,” he says.

Values vs Numbers

Keeping this hubris out of an organization can be tricky, as most people are looking to hire and keep high performers, and these are the people who generally have high self esteem. It’s a matter of keeping employees who share a company’s values, over ones who just “make the numbers,” explains Fiorelli.

He refers to Jack Welch’s explanation of the four types of leaders, outlined in GE’s 2000 Annual Report:

Type I: shares our values; makes the numbers—sky's the limit! Type II: doesn't share the values; doesn't make the numbers—gone. Type III: shares the values; misses the numbers—typically, another chance, or two.
None of these three are tough calls, but Type IV is the toughest call of all: the manager who doesn't share the values, but delivers the numbers; the "go-to" manager, the hammer, who delivers the bacon but does it on the backs of people, often "kissing up and kicking down" during the process.

“What is it that you do with that group?” asks Fiorelli. “If you reward them, if you wink at that - they’re making the numbers even though they’re doing it in a bad way that’s contrary to what your corporate culture is - that can be disastrous. That says the rules aren’t important,” he says. Getting those people out of an organization and keeping them out, is critical to establishing an ethical corporate culture.