Greed or Fear: What Drives the U.S. Corporate World?

It is often said that, aside from productivity, it was greed, pure and simple, that drove U.S. corporations to new heights of financial performance in the 1990s. Alas, that theory of corporate motivation does not capture what was really going on back then — or is today, for that matter.

To say that greed alone drives U.S. corporations — and leads them to overreach and occasionally breach the law (a la Enron and Sunbeam, remember them? or more recently Madoff and AIG) — is a travesty at best. The reality is far more sobering.

What has gripped U.S. managers and corporations for quite some time now is fear — not greed. To see how this came about, you have to go back to the late 1980s.

At the time, the United States was in the throes of a near-psychosis about its inability to compete against countries such as Germany and Japan. That mindset — off-target as it largely proved to be — nevertheless had a lasting influence on the minds of many executives.

No longer just the working class

Why? Because they saw people all around them – their friends, their neighbors – being slashed from payrolls by the hundreds in each corporation and in successive cost-reduction waves.

What made these managers so uncomfortable was that they had always believed that executive status (other than for the very top guy) would inoculate them from such pesky firings. The people to be let go were blue-collar workers. No longer.

Rather, the people now being let go were their own peers who had survived the previous rounds of cuts. Going, in particular, were all those “middle managers” — the folks in the corporate bureaucracy who had long been the hallmark of the big and mighty and, staffing-wise, resource-deep U.S. corporations.

Living in permanent fear

That cut-cut-cut experience also has had a profound impact on managers still on the rise. While they are adept at corporate survival, they were also conditioned, almost without knowing it, to live in permanent fear.

That fear is also very much about being included oneself in the next cost-cutting round. The fear about being transferred “laterally,” to a position from which a further advance does not seem possible, isn’t much solace.

There are also other forms of fear, prevalent especially among those still climbing up, about missing the quarterly profit target or putting together next year’s zero-based budget.

It makes those executives supposedly in charge feel like clandestine guillotine operators. Something seemingly innocuous, the corporate budget, becomes the blade that decapitates people.

All this fear has been going on in deadly earnest for a couple of decades now. In the aggregate, this way of spreading fear throughout all levels of the corporation, rather perversely, had positive but very temporary effects on productivity.

Compared to other societies, this fear that invaded U.S. corporations so deeply translated into a remarkable ability to undertake — and absorb — changes. Quite a few other countries are still resisting the kinds of changes that have long become commonplace in the United States. That reticence put those societies at a distinct disadvantage. Think Japan.

The system unravels

But there can be too much of a “good” thing. The corporate survivors, especially those at the very top of the corporate ladder, may still feel properly “incentivized.”

They are, after all, included among those who share the profit pot. But many outside the senior-most ranks are not. As a result of this curious split inside corporations, the top people increasingly adopt an attitude of feeling that, like investment bankers, they deserve ample rewards.

So, despite all the talk about corporate governance reforms, U.S. corporate CEO’s keep on stacking their boards, or at least the compensation committee — that is, the corporate body that really matters — with their friends. This may well ensure the maximization of their own personal well-being in material terms. In a “winner take all” society, that is perceived as fair: To the victor go the spoils.

But it is key to understand that this greed that everyone likes to talk about doesn’t happen in a vacuum. It is one extremely peculiar form in which all that bottled-up fear manifests itself. Having pushed on and on, it feels fitting to reward oneself that way.

The problem with the constant pressure to improve productivity is that it never ends. It is not so much that it is relentless than that it is eternal in nature.

Humans have a natural tendency to seek a way to relieve all that pressure, in order to allow themselves to cope.

How do U.S. managers do it? They have learned to live with a great amount of risk. Neither on the personal front nor in the marketplace do they feel they had — and have — much of a choice.