September 18, 2008

Leadership lapses

The first two chapters of Bigger Isn’t Always Better explored the connection between executive compensation and flawed business performance. This link provides Wharton’s take on this issue, using the events of the week as a backdrop.

Among the examples Wharton cites:

“In 2006, the Office of Federal Housing Enterprise Oversight (OFHEO), which monitors the financial health of Fannie Mae and Freddie Mac, released a report describing an arrogant and unethical culture at Fannie Mae where employees manipulated earnings to generate higher bonuses for executives between 1998 and 2004. 'Our examination found an environment where the ends justified the means. Senior management manipulated accounting; reaped maximum, undeserved bonuses; and prevented the rest of the world from knowing. They co-opted their internal auditors. They stonewalled OFHEO,' said James Lockhart, the director of OFHEO when the report was released.”


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