The Culture Of Lying

The recent story of the Indian tech company YesMadam firing all their workers who reported that they were stressed on the job in a company survey again brought forward the usual warnings to workers when responding to company surveys. Although it was not clear whether the YesMadam survey was supposedly confidential, it should generally be assumed that any company survey is not and, likewise, it should also probably be assumed that any interaction with HR will also not remain confidential. In this case, it appears to simply be a thinly veiled effort at finding a way to cut staff, but the company certainly added insult to injury by laughably claiming that the firings were designed to relieve the stress the workers felt.

While the story is about an Indian company, it has a more general relevance about how capitalism fosters a culture of lying that has infected American business, corrupting both management and workers, and spilling over into the political and personal sphere. In this case, the company, unsurprisingly, lied about the purpose of the survey, and the employees who survived the layoffs were probably the ones who were willing to lie and tell the company what they wanted to hear. Of course, testing which employees are willing to lie is one of the many, often duplicitous, proxies that firms use for testing their loyalty not so much to the company but to those who run it. And, as studies have shown, loyal workers are the ones that tend to be more often exploited and manipulated.

Needless to say, exaggeration and embellishment have always been a part of business. The stereotype of the snake-oil salesman and the sleazy car salesman exists for a reason. Indeed, the great early 20th century economist Thorstein Veblen believed that lying was an essential and integral element of business and capitalism, and decried its deleterious effect on the community as a whole. But the brazen lying and open corruption throughout entire organizations has seemingly become endemic in the last couple of decades. Worse, the lies and corruption have become not just tolerated but accepted and applauded. After all, the country just elected a man who has committed serial fraud, has a felony conviction for falsifying business records, and is indicted for three other entirely separate felonious actions.

It wasn’t too long ago that things were much different. The managerial ethos of the post-WWII period was focused on technical expertise combined with a more societal role that included care for the employee and the community, or at least the appearance of such. That spirit was perhaps exemplified by Eli Black, an immigrant former rabbi who came from poverty to build the United Brands conglomerate in the 1960s, attempting to rectify the abuses of United Fruit by acceding to union demands in Honduras and working with the United Farm Workers union, even becoming a friend of Cesar Chavez. But United Brands was rocked by the first energy crisis of the 1970s, and as the company came under increasing financial pressure and the imminent revelation that Black had personally approved a bribe to Honduran officials to lower the banana tax, Black committed suicide by jumping out of the window of his 44th floor midtown New York office.

That post-war ethos began to change in the late 1960s and 1970s as companies decreasingly built their executive class from employees within the organization and increasingly relied on building them from the ranks of business school graduates, making an MBA the ticket to business success rather than actual employment experience or organizational knowledge. More importantly, business schools themselves adopted the view of the “primacy of the shareholder”, where, as Nick Butler writes in a review of a Rakesh Khurana book on the history of business schools, “managers were charged with neglecting the interests of investors who owned company stock: instead of maximizing the value of assets for shareholders, managers were said to be more interested in increasing their own salaries and accruing large bonuses. In a curious twist, management was now seen – at least by those adhering to the ideology of shareholder primacy – as an agent of mismanagement”. The result of this “anti-managerialist thought”, as Butler labels it, was an explosion of business school graduates moving into financial services and consulting where they completed the decimation of a true managerial class and any sense that the corporation had any duty to its employees or community over the next two decades. [I’ve written in more detail about the history of this process here.]

As Khurana concludes, the destruction of that post-war managerial ethos and any hint of a wider social mission for business created an ethical vacuum in business schools. These days, lying is actually taught as a fundamental negotiating skill at a place like Harvard Business School. A graduate student at the University of Chicago Booth School of Business, one of the premier business schools in the country, recently said, “I think our acceptance [of lying and deception] is both a function of how widespread…it is, and also because it’s seen as legitimate…due to our expectation/perception that this is all in the service of a higher ideal, the maximization of economic value via maximization of self-interest”. The statement is a remarkable incantation of both “everybody does it” and “the ends justify the means” rationalizations all in one sentence.

With that kind of training, it is easy to understand why lies and fraud have become endemic in American business. The lying and deception at the top inevitably filters down and both rewards and enforces lying and deception throughout the organization as those who remain at YesMadam surely realize now, if they did not before. Willingly or unwillingly, to advance their career or protect their livelihood, employees become complicit. For decades, the tobacco companies lied about the lethality of their cigarettes and the oil companies lied about climate change. To facilitate these lies, across multiple companies for multiple decades, probably takes hundreds if not thousands of complicit employees beyond the senior executives. For over a period of nearly a decade and a half, Wells Fargo employees opened around 3.5 million fictitious accounts, using, according to the DOJ, “practices [that] included forging customer signatures to open accounts without authorization, creating PINs to activate unauthorized debit cards, moving money from millions of customer accounts to unauthorized accounts in a practice known internally as ‘simulated funding,’ opening credit cards and bill pay products without authorization, altering customers’ true contact information to prevent customers from learning of unauthorized accounts and prevent Wells Fargo employees from reaching customers to conduct customer satisfaction surveys, and encouraging customers to open accounts they neither wanted or needed”. The extent of the this level of egregious banking fraud for so many years requires the complicity of thousands of employees and, of course, senior management, who were aware of the fraud almost from the moment it began but did nothing to stop it, and instead, along with their shareholders, were handsomely rewarded for operating what was generally considered one of the most well-run banks in the country and receiving glowing, typically sycophantic coverage from the business press. Those thousands of employees had to stay loyal to the lie, and the executives who controlled them, or else they had to leave willingly, or mostly, unwillingly.

What’s worse is, since the 2002 debacle of the massive frauds at Enron and Worldcom, enabled by the accounting fraud at Arthur Andersen that led to its demise as well, accountability for executive criminality and corporate malfeasance has essentially ceased, particularly for large companies. Regulators and prosecutors have decided that the potential cost of a corporate criminal conviction, which could result in the collapse of the firm and loss of jobs, as well as the cost of prosecution against a wealthy executive or well-funded firm that can drag things out in our dysfunctional legal system for years, simply isn’t worth it. Instead, they have resorted to fines and deferred prosecution agreements that never prevent corporate recidivism or are followed up on when that occurs. Twenty years after the collapse of Arthur Andersen white collar prosecutions in general have reached an all-time low, and prosecutions under Sarbanes-Oxley, which was supposed ensure greater compliance, are virtually nonexistent.

This post-Andersen world has only created a sense of entitlement, impunity, and immunity among business leaders. Only one Wells Fargo executive was ever criminally charged for the aforementioned massive fraud, and she avoided prison time by paying substantial fines. And Wells Fargo continues to operate to this day, largely untouched by the crimes in its name. The Wall Street wizards who created the greatest financial crisis since the Great Depression just took their golden parachutes and walked away untouched or even failed up to run the banks that survived. Those who remained then had the gall to complain that Obama wasn’t giving them the respect they deserve. Recently, a billionaire founder of Sun Microsystems and early investor in Google was convicted of insider trading for a profit of just $415,000. He obviously didn’t need the money. He did it simply because he knew he could get away with it and he essentially did, paying a $900,000 fine and prohibited from being an officer at a publicly traded company for five years.

In 2012, the business school ethic crossed over into politics when Harvard Business School graduate Mitt Romney, the leveraged buyout and private equity mogul who specialized in maximizing shareholder value often at the expense of actual jobs, became the Republican nominee for President. By the time Trump, the pretend MBA from Wharton, came along, the rot in the system was so deep that the liars and fraudsters who “get away with it” had become new folk heroes and Trump was the ultimate personification of that trend. His rental racism, the numerous bankruptcies even as he himself got richer, the brazen tax evasion, the serial sexual assaults, the foundation frauds, and his constant abuse of the legal system to avoid any accountability all became celebrated as markers of success. Worse, he gave his supporters the permission to get away with it too – with their hatred, their violence, their lying, and their fraud, as long as it was in service to the Trump line. It is no surprise that small business owners, where cheating is simply the standard practice of doing business, were a significant percentage of the 1/6 insurrectionists and overwhelmingly supported Trump in the 2024 election. A recent study in Portugal showed that higher income small business owners transferred anywhere between 20% and 30% of their personal and household spending onto a business expense and a tax write-off, costing the country about 1% of GDP. We know similar shenanigans happen here in the US.

The Trump presidency 2.0 is going to resemble a corporate criminal enterprise on steroids. The only credential that virtually every appointee has had so far is a willingness to lie for Trump. To extend the business analogy, in his first term there were still some employees who could thwart his worst and most criminal ideas. This time, those employees will be far less numerous and far less able to thwart him. This will always be the result when the demand is to run the government like a business, because, as Veblen noted, lying and deception are essential to the enterprise.

If you want to trace the corruption of America society over the last half century, there is no better place to look than to Eli Black’s family itself. Where the father worked with unions trying to build jobs and communities, his son, Leon Black, another Harvard Business School alum, helped found Apollo Global Management which he ran until his association with Jeffrey Epstein and other sexual escapades forced him to step away last year. Apollo is one of the biggest and worst job-killing private equity funds that is responsible for gutting hospitals and health care and recently was caught running a fraudulent human life wagering scheme.

With the re-election of Trump, the business-school ethos and (lack of) ethics completes its takeover of the economic and political spheres of our society. As the workers at YesMadam and Wells Fargo, the Never Trumpers, the judges and prosecutors who tried to enforce the law, the election workers who did their job, the men and women in Congress who upheld their constitutional oaths, and so many more in the coming years – they all have or will discover that if they refuse to be complicit in the lies and the frauds, they will be targeted and their livelihoods, even their lives, will be threatened. And it will be done, as the University of Chicago business school student admitted, “all in the service of a higher ideal”.