“For a CEO to say, ‘I didn’t know’, I think is quite unacceptable. I think either the person intentionally didn’t know or, alternatively, wasn’t doing the job.” (Professor Thomas R. Piper, Harvard Business School, 2002, re: Enron.)
How much responsibility do CEOs have when scandals engulf their companies? How accountable are they for systemic problems, rather than the actions of a single, unethical employee? Where does the buck stop for a culture that not merely permits but facilitates unethical and illegal behaviour?
The term “willful blindness” was bandied about frequently around Enron, the giant energy company that became a byword for corporate malfeasance and greed after its collapse in 2001. It refers to executives choosing not to be aware of systemic problems. More specifically, it’s a term used in law to refer to an individual seeking to avoid civil or criminal liability for a wrongful act by intentionally putting themselves in a position where they will be unaware of facts which would render them liable.
Someone tell James Murdoch. When asked about the concept by MP Adrian Sanders he denied any knowledge of the term.
Rupert interjected — as was his wont over his three hours in front of the culture select committee — to say that he was familiar with the term, but “we were not ever guilty of that”.
Whoever words James up on willful blindness should also whisper in his father’s ear about executive accountability, given this exchange:
Jim Sheridan: Mr Murdoch, do you accept that you are ultimately responsible for this whole fiasco?
Rupert Murdoch: No.
JS: Who is responsible?
RM: The people that I trusted to run it and the people they trusted. I worked with Mr Hinton for 52 years and I would trust him with my life.
The Murdochs’ stance is based on the idea of plausible deniability, that each layer within News International and News Corporation operated without consulting higher levels even on important decisions, allowing Rebekah Brooks, and James Murdoch, and Rupert Murdoch, all to claim they knew nothing about phone hacking and the ensuing cover-up.
The problem with plausible deniability is that it leads to moral hazard. It frees executives to permit riskier behaviour without any of the consequences that would come from being held accountable for the actions of subordinates.
Indeed, moral hazard is a consistent theme in the phone-hacking scandal, from the journalists and editors who outsourced their information-gathering to external private investigators, thereby relinquishing any accountability for how information was obtained by bottom-feeders, to the executives who claim to have delegated financial responsibility down the lines and remained oblivious to how it was used, to Rupert Murdoch, who claims to have remained in splendid ignorance of the whole affair even as it wreaked havoc on his companies’ reputations.
Indeed, it extends even to the News Corporation board, which has in effect outsourced all control to the Murdoch family and an aging patriarch obsessed with continuing a dynasty.
The Murdochs and the directors of News have now discovered that moral hazard is not merely a theory conjured up by economists, but a real-world phenomenon that has been at work within their company for years. Their willful blindness hasn’t protected them from the consequences of a corporate culture that encouraged lawbreaking.
Either they intentionally didn’t know, or they weren’t doing their jobs. Neither is acceptable.
Didn’t Rupert change the share structure so there were voting & non voting shares.
He controlled /held the voting shares so he retained control although not full ownership.
If he retained control then he has responsibility and there can be no argument about this.
He is culpable and guilty.
Alternatively if he was not then he would not be entitled to any performance bonus as he wasn’t responsible for any positive performance
Dr Harvey M Tarvydas
They are paid that heavyweight in dollars (too heavy to carry by hand) because (their justification) of the overbearing heavyweight of responsibility that the job makes them bear on their (little weenie/big broad) shoulders.
The moment the ‘responsibility’ turns up bathed in the tears of others they run off to be tickled naked by all those dollars that they ‘don’t know’ why they were paid.
All the appropriate intelligent questions that clearly deserve answers are actually a total waste of time in the circumstances only serving ourselves a sense of justice.
I think it was president Truman who had a sign on his desk “The Buck Stops Here” and I think it would be appropriate to somebody to send a replica to Rupert who does not seem to understand accountability for control or alternately for control failure.
Without wishing to draw the crabs, I understand that Adolf Hitler could have claimed no complicity in either World War II or the Holocaust because his signature didn’t appear on anything.
It doesn’t matter how big the corporation is, instruments of delegations from board to management normally contain checks and balances, and settlement of legal claims in excess of a reasonable amount normally requires a board mandate.
As I understand there was a settlement in the vicinity of GBP 1 million, I would be very surprised if such authority was delegated to downstream minions. I would also be very surprised if an organisation would pay the legal fees are one of its employees charged with criminal acts unless the intention was to buy silence.
Rupert Murdoch’s denial of responsibility follows the pattern set by another News CEO John Hartigan.
Mr Hartigan blamed “rats in the ranks” for the salary cap rorting at Melbourne Storm.
Mr Hartigan will no doubt state that the NRL, 50% owned by News Ltd, and an independent investigation by Deloittes found no wrong doing by News Ltd. However most fans would be amazed that $3.170million dollars can be expended in rorting without some over sight by the most senior management!
Another example of wilful blindness or maybe accountability is not in the guidelines for corporate governance at News Corporation?
My impression of the hearings was:
1. Police/govt: Stephenson and Fedorcio (sp?) blame it all on Yates. Yates blames some of it on Fedorcio. Other than that, Stephenson, head of the whole shebang, knows nothing. Yates drops the bombshell that Llewellen at number 10 told him not to discuss phone hacking with Cameron. Maintaining plausible deniability for the boss? So it’s not just in corporate life that this occurs.
2. News staff: None of Rupert, James or Rebakah knows anything about anything. Miraculous how this disaster came about without anyone in senior management having a clue. They’re idiots or they’re lying – either way the Board should come down like on the Murdochs like a tonne of bricks. But they won’t of course – like managers, boards seem to run at the first hint of responsibility, but if anything boards are worse.
“Dr Harvey M Tarvydas
They are paid that heavyweight in dollars (too heavy to carry by hand) because (their justification) of the overbearing heavyweight of responsibility that the job makes them bear on their (little weenie/big broad) shoulders.
The moment the ‘responsibility’ turns up bathed in the tears of others they run off to be tickled naked by all those dollars that they ‘don’t know’ why they were paid.”
There’s been comments to that effect on the Grauniad live blog as well – how do you get one of these jobs where you’re paid so much to have so little responsibility?