From Bloomberg “They were blinded by the fees they were earning” in placing their own clients’ money with Madoff, Galvin said of Fairfield Greenwich. The firm ignored “any fact that would have burst their lucrative bubble,” he said in the complaint.
The Madoff Securities ponzi scheme is classic. It utilized deceipt, avoidance and a fair amount of dancing around the issues to avoid getting caught. And to reinforce the desired outcome, he used money, in the form of fees, to keep awkward inquisitions at bay.
Last week, I wrote here about how some of Wall Street’s sharpest analysts were silenced by their employers. A growing number of analysts who were either critical of the financial sector or were early raisers of red flags in the mortgage market are getting the cold shoulder from their employers, which has led to the analysts being forced out or silenced. Highly regarded mortgage analyst Laurie Goodman, who when she worked at UBS was one of the first researchers to sound the alarm about the dangers of the subprime market, is said to have drawn the ire of UBS brass as her clarion calls crimped the bank’s ability to sell billions in bonds backed by subprime loans.
Likewise, there is an interesting discussion over at the Harvard Business Blog titled, “Are Business Schools to Blame?” I make the case that Silent Problems are a core problem relative to mortgage crisis, financial meltdown… I wrote:
Interesting, yet terrifying discussion. Predicting how humans will react under a given set of circumstances is difficult to simulate, even more difficult to predict. I believe that each of us has a Bozo switch inside us that given the right incentives, following the right leaders, and society encouraging us along the way, can be extremely distructive. Barbara Kellerman illustrates these points perfectly in her book, Followership. My second point ties back to a theme I discuss at length in my book, Without Warning, which relates to silent problems. Organizations will never be perfect organisms. They will always have silent problems on the sidelines being avoided or neglected. I propose how to dislodge these silent problems out into the open for people to see and deal with. I firmly believe that every MBA class must address the silent problem theme, because its the good apples inside the organization that must be held responsible for disclosing the bad apples that are present. This is the watchdog we need and must embrace.
The “Silence” theme transcends each of these scenarios. Silence is not “golden” but rather its toxic. Organizations must break the Silence theme - period.
Tags: harvard, Leadership, madoff, Silent Problems
