Summary: A new study highlights the need for corporations to identify and manage “corporate psychopaths” to prevent financial crises.
The research, focusing on Bernie Madoff, the perpetrator of the largest Ponzi scheme in history, underscores how certain psychopathic traits can lead to recklessness and greed, potentially causing organizational and economic collapse.
The study suggests that Madoff’s actions were consistent with psychopathic traits, raising the question of whether similar personalities exist within the corporate finance world.
Key Facts:
- The study examined Bernie Madoff’s life and actions against two established psychopathy scales, suggesting that Madoff embodied many psychopathic behavioral traits.
- Corporate psychopaths, making up 0.6%-1.2% of the adult population, can potentially bring down organizations and economies due to their recklessness and greed.
- The study implies that there are likely other individuals with psychopathic traits within the corporate finance world, emphasizing the importance of identifying them before they rise to power.
Source: Anglia Ruskin University
A new academic study examining the actions of Bernie Madoff, the New York banker behind the world’s biggest Ponzi fraud, suggests companies do more to root out “corporate psychopaths” within their organizations to prevent financial ruin.
The study, published in the International Journal of Market Research, looked at Madoff’s behavior throughout his life including during his business dealings, his trial, and his time in prison.
It warns that while people with some psychopathic personality traits tend to get ahead in corporate finance, their recklessness and greed can bring down organizations and even entire economies.
Author of the research Dr Clive R. Boddy, Associate Professor at Anglia Ruskin University (ARU), is a pioneer in the field of corporate psychopathy.
Around 0.6%-1.2% of the adult population are defined as psychopaths, meaning they possess no conscience, shame, guilt or ability to experience love for or feel empathy towards other people. The term corporate psychopath refers to well-performing psychopaths who work in corporate settings.
Madoff’s Ponzi fraud centred around the asset management branch of his financial firm and it defrauded thousands of investors across the world. The fraud was uncovered in December 2008 and was thought to be worth around $64billion.
He was jailed for 150 years in 2009 and died in 2021 in a prison for inmates with health needs.
Madoff’s actions were examined against two established scales of psychopathy. These include personality traits such as superficial charm and apparent intelligence; lack of sincerity or truthfulness; a tendency to cheat; a lack of remorse; being emotionally shallow; a lack of self insight; calmness; and apparent rationality.
The research suggests Madoff embodied all of these behavioural traits in addition to many others. He was renowned for his bullying towards his detractors, while carefully crafting an image of rationality and competence to those whose opinion was important to him and his business.
His ego reportedly remained intact even when in prison, where he showed no remorse for the victims of his crimes.
Dr Boddy said: “Highly psychopathic senior businesspeople who were quite plausibly genuine psychopaths are visible in commercial history.
“This new study aims to understand whether some corporate scandals and bankruptcies feature senior corporate officials who might be workplace psychopaths, and this has demonstrably been the case.
“People have often wondered whether Bernie Madoff was in fact a corporate psychopath, and he certainly scored highly on the two measures of psychopathy utilised within this study.
“The findings suggest that Madoff’s fraud was an outcome of his personality and that similar personalities such as Robert Maxwell and Ken Lay, have behaved in similar ways.
“There are likely to be plenty of people in the world of corporate finance with similar psychopathic traits to Bernie Madoff. The job for financial corporations and firms, if they want to give themselves the best chance of avoiding crisis, would appear to be identifying them before they ascend to power.”
About this business psychology and psychopathy research news
Author: Jamie Forsyth
Source: Anglia Ruskin University
Contact: Jamie Forsyth – Anglia Ruskin University
Image: The image is credited to Neuroscience News
Original Research: Open access.
“Insights into the bernie madoff financial market scandal which identify new opportunities for business market researchers” by Clive R. Boddy et al. International Journal of Market Research
Abstract
Insights into the bernie madoff financial market scandal which identify new opportunities for business market researchers
This article reflectively applies measurement tools to gage whether a renowned financier and champion of shareholder capitalism, in 20th century business history, might be categorized as a corporate psychopath.
The article examines aspects of the career of the outstanding financial investment manager, Bernie Madoff. Psychopaths and corporate psychopaths are defined as background to the article.
Gauges of corporate psychopathy and psychopathy are outlined which could be modified by market research companies to identify corporate psychopathy in organisations as a way of aiding investment decisions into such organisations.
The current article concludes that insolvencies such as those at Madoff’s investment company, have been distinguished by CEOs being present who were simultaneously the lauded agents of financial market capitalism and who embodied the traits of the corporate psychopath.
The examination of potential corporate psychopaths using this historical methodology helps inform ideas about what the effects of psychopathic leadership may be within economies and gives new insights into the reasons for the greed, risk taking, and unethical practices found in financial markets.
Findings support the accepted view that corporate psychopaths can be discovered in senior roles in the financial services sector.
This current paper provides new avenues for research offerings from market research companies. For example, business to business researchers could undertake research to identify firms more likely to be longitudinally viable, sustainable and less likely to collapse (i.e., non-psychopathic firms).
Investment companies like pension funds could use such research to identify firms that are less risky, more ethical, better led, and therefore safer to invest in.
