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I've tried many times to understand what caused the economic collapse of the past two years. I've listened to some experts blame the use of financial instruments called derivatives. Others have blamed a lack of government oversight over the financial markets. Still others say it was "greed." A few even blame the entire capitalist economy.
If you listen to others, you'll hear them blame Congress for encouraging banks to give mortgages to everyone who wanted to buy a home, regardless of the buyers' ability to pay back their loans. Some blame real estate speculators for driving up the prices on houses to unsustainable levels. Still others say uncontrolled government spending is to blame. And some blame the American consumer for compiling an obscene amount of credit card debt over the previous era of good times.
No doubt all of these, and more, are factors in what many have called The Great Recession. But the one thing all of these factors have in common is the absence of accountability. You'd know what I mean if you watched the Senate hearings on Goldman Sachs last month. Here you had senators, who mostly looked the other way as government financial institutions like Fannie Mae were collapsing, grilling Goldman Sachs executives who said they did nothing wrong in betting against the same risky investments into which they were steering their clients. Even if you overlook the irony that the Obama administration is full of Goldman alumni, the lack of accountability on both sides was astonishing.
No less an authority than Warren Buffett, CEO of highly successful Berkshire Hathaway Inc., pointed the blame squarely on business executives who led their companies down a risk-filled path, but never faced the consequences for their actions. Recently, in his annual letter to shareholders, Buffett sternly urged companies to develop harsh penalties for executives who get into trouble with risky investments.
"In my view, a board of directors of a huge financial institution is derelict if it does not insist that its CEO bear full responsibility for risk control," Buffett wrote. "If he's incapable of handling that job, he should look for other employment. And if he fails at it -- with the government thereupon required to step in with funds or guarantees -- the financial consequences for him and his board should be severe."
I'm still flabbergasted every time I read a story about some CEO who ran his company into the ground, exits with a gold parachute, and then gets hired to repeat the exercise at another company. I'm sure you can think of a half-dozen examples.
The government bailouts of so-called "too big to fail" institutions are very obvious examples of those institutions avoiding responsibility for their actions. But lack of accountability is evident in many smaller, insidious ways that can affect the credibility of your business.
Do you stand completely behind your products and services? Do you live up to the promises you make to your employees? Do you do what you say and say what you'll do? I think one of the reasons convenience stores have survived the recession in better condition than many other businesses is that many of these mostly privately held (and many family-run) retailers never abused the trust of their workers and customers. Accountability isn't telling people what they want to hear. It's being honest and trustworthy, and expecting the same values in return.
The best companies in business are the ones that customers and employees can count on to do the right thing, all the time.