You've Gotta Be Crazy to Be a CEO. Literally.
Jul 21st 2011 6:00PM
Updated Jul 22nd 2011 7:34AM
Being a chief executive officer of a publicly traded company is good work if you can get it. The job comes with great benefits: power, respect, media attention, and massive paydays. Alas, it's also great work for folks who occasionally exhibit behavior reminiscent of several major psychological disorders.
Sooner or later, certain manifestations of "the crazy" can become very bad for investors' portfolios. Let's look at some arguably aberrant actions from the highest ranks of major American corporations over the years.
Narcissistic personality disorder: An inflated perception of self-importance; an extreme preoccupation with oneself
The privacy-devastating phone-hacking scandal at News Corp. (NWS) gives us our first example. When Rupert Murdoch testified on the tumult before Great Britain's Parliament, he talked about feeling "humbled." Then he pushed aside the idea that he might take personal responsibility, and showed no intention to step down from his post.
Murdoch believes he's "the best person" to fix the problems at News Corp. But wasn't he in charge when the problems occurred in the first place? Talk about an inflated sense of self-importance -- and a lack of true humility.
Antisocial personality disorder: A long pattern of manipulating, exploiting, or violating the rights of others; often criminal
Look no further than the 2008 financial crisis for sociopathic behavior among financial companies' top brass. Executives exploited the public's desires for the American dream, using lax lending standards to further an unsustainable housing.
Related trips down the foreclosure-riddled Antisocial Lane included AIG (AIG) executives' insistence on paying bonuses promised before the crisis, even after the U.S. government shelled out $170 billion to bail out the company. The public paid AIG's way out of complete failure, but these guys and gals still thought they deserved big bucks in their own bank accounts.
Goldman Sachs' (GS) list of offenses is no less lengthy. Just look up Rolling Stone's Matt Taibbi's extensive writings on the company. (He coined the investment bank's "vampire squid" moniker.)
Paranoid schizophrenia: Losing touch with reality (psychosis); delusions and hearing things that aren't real
Overstock.com's (OSTK) CEO Patrick Byrne provided one of the best examples of this tendency to blame company problems or stock underperformance on unrealistic or unsubstantiated sources.
In 2005, Byrne insisted that an unholy collection of shortsellers and "miscreants" (including journalists, investigators, the SEC, etc.) led by an unnamed Sith Lord -- yes, he actually called the person a "Sith Lord" -- was attacking his company. In 2009, a Byrne-affiliated website published a database of journalists (and, in an adorable aside, all their Facebook friends -- who "likes" this?) under suspicion for the weird conspiracy.
Intermittent explosive disorder: Repeated episodes of violent, aggressive behavior out of proportion to the situation; may include angry outbursts or temper tantrums
Let's set the wayback machine to April 2001 for one of the most impressive outbursts of CEO fury ever. Before Enron's devastating failings were known, analyst Richard Grubman posed a very legitimate concern on the company's conference call: "You're the only financial institution that can't produce a balance sheet or cash flow statement with their earnings."
CEO Jeffrey Skilling's response: "You, you, you... Well, uh... thank you very much. We appreciate it... a--hole!"
Granted, it's arguable that outburst wasn't particularly "out of proportion," given what we all later found out about Enron's true financial condition. People who are doing the wrong thing probably don't enjoy exposure to anything close to critical thinking. Still, Skilling's outburst seems pretty nuts.
Kleptomania: An irresistible urge to steal items one doesn't really need
Although few CEOs have been convicted outright of theft or fraud, plenty have squandered shareholder money on unnecessary items. That may not actually be stealing, but... well, it still sounds like somebody's got slightly sticky fingers.
Remember when John Thain presided over beleaguered Merrill Lynch? His office-redecorating bill added up to a cool $1.22 million, and included such "necessities" as an $87,000 area rug, a $35,000 commode (make your own jokes here), and a very memorable $1,400 trash can -- excuse me, "waste basket."
If you want more technical CEO thievery, consider Tyco (TYC) ex-CEO Dennis Kozlowski's bizarre $2 million toga party for his wife. Tyco footed the bill for about $1 million of this extravaganza, which included toga-clad guests, gladiators, Jimmy Buffett, and an ice-sculpture replica of Michelangelo's David whose naughty bits dispensed alcohol. Crazy, right?
Curiously enough, Kozlowski and Tyco ex-CFO Mark Swartz were later convicted of grand larceny and conspiracy, falsifying business records, and breaking business law.
A sanity check for investors
This little trip down corporate America's lunatic fringe by way of the DSM is meant to be humorous and tongue-in-cheek. But for investors, assessing the stability of your stocks' leaders should be no laughing matter.
Many CEOs are among the smartest folks around. Still, let's remember the old saying about how power corrupts. Scientific studies have proved that sometimes, humans in powerful positions can't handle their roles with grace, fairness, and humility. In the psychological research field, they call this "power holding theory," which shows that high-paid and powerful people often get pretty mean. A similar lack of empathy represents a major component of some of the disorders noted above.
So give your portfolio a sanity check once in a while. If a CEO's behavior starts sounding a little too over-the-top, investors should question whether that corporate leader's really the best steward for shareholders' hard-earned money. There's nothing crazy about that.
Motley Fool analyst Alyce Lomax owns no shares of any of the companies mentioned. She is not a licensed mental health care professional.