Fall of a poster boy for capitalism

Capital has just one serious flaw: The capitalists. They are greedy, callous, crooked. Far from all, of course. But an awful lot of them are, or become that way because the temptations are so abundant and because in the business world, money — the making and the display of large amounts of it — has become almost the only measure of value and achievement…Rampant individualism and disdain for collective values, an attitude reinforced by the prevailing creed of neo-conservatism, plus the "greed is good" ethic are, surely, better explanations for the change.

The Toronto Star
November 19, 2003

Fall of a poster boy for capitalism
Richard Gwyn

In all the commentaries about Conrad Black following his departure in disgrace as CEO of Hollinger Corp., there was one often-sounded note that was disturbing.

Repeatedly, he was described as an "anachronism," a businessman who had failed to realize times had changed and that redirecting to his own pockets, and to those of a few close associates, some $32 million U.S. in company revenues — at a direct cost to Hollinger shareholders — was no longer acceptable.

Hogwash. Piffle. Balderdash, as Lord Crossharbour himself would say, and no doubt is saying a lot these days.

In his character, Black most certainly is an anachronism. Of all the many descriptions of him, the one I've always thought came closest compared him to "a pirate galleon in full sail." He is a pirate, but also a rather splendid one — if only when viewed from a safe distance. How many individuals could head a multinational company and at the same time write a well-reviewed, 1,000-page biography of Franklin D. Roosevelt?

What wasn't in the least bit anachronistic about Black, though, was what he actually did. (No doubt more dodgy stuff will be uncovered once all the inquiries into Hollinger are complete).

Rather than some modern version of the old robber barons who flourished in the late 19th and early 20th centuries, Black is a poster boy for contemporary capitalism. In his corporate behaviour, he is wholly of today.

Capitalism is an awesomely efficient and productive economic system. It has produced a cornucopia of goods and services and it has tugged hundreds of millions of people out of poverty.

Capital has just one serious flaw: The capitalists. They are greedy, callous, crooked.

Far from all, of course. But an awful lot of them are, or become that way because the temptations are so abundant and because in the business world, money — the making and the display of large amounts of it — has become almost the only measure of value and achievement.

What's happened at Hollinger is not any different from what happened at Enron and Tyco and WorldCom and in the dot.com boom and bust.

A far worse corporate scandal is now unfolding. American mutual funds, supposedly a safe and sober industry (its companies tend to have reassuring names like Prudential and Fidelity) have been stealing from their own customers, the vast majority of whom are middle-income individuals trying to prepare for their retirement years.

One in four, and probably more, U.S. mutual funds have been allowing large financial clients to engage in illegal practices like "late trading" and "market timing," with regular customers paying with lower returns on investments. There's also evidence of a lot of "churning" or unnecessary buying and selling of customers' stocks on commission.

Regular mutual fees are now reckoned to be unnecessarily high by $10 billion a year.

No evidence of equivalent practices in Canada has yet surfaced, but this may only be because our securities regulation is so notoriously passive.

Calls for reform of corporate governance and regulation have now reached a crescendo. Congress and the Securities Exchange Commission have launched inquiries. Even a Republican senator has damned mutual funds as "the world's largest skimming operation" while the head of the New York Stock Exchange talks of a "fundamental betrayal of the nation's investors."

All of which explains why Black is anything but an anachronism.

We all wish for better corporate governance and better regulation. There's no particular evidence, though, that the quality of corporate boards has deteriorated dramatically in the past decade or so, or that regulation has suddenly become markedly more lax.

The critical change is cultural, rather than institutional. Rampant individualism and disdain for collective values, an attitude reinforced by the prevailing creed of neo-conservatism, plus the "greed is good" ethic are, surely, better explanations for the change.

How, though, to change the culture?

Curiously, Black may have an answer. In his new book, he confirms that one of Roosevelt's great achievements was to save capitalism from being destroyed by the capitalists.

Roosevelt introduced regulations that the capitalists hated. Far more important, he implanted in the body politic the concept of corporate responsibility to the collectives of the nation and of the public.

There's no way that George W. Bush, himself the product of crony capitalism, could do this. But some inspirational leader is going to have to, or we're going to have endless Enrons and endless Hollingers.


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