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Curing Incompetence Can incompetence be cured? No, not while we are cultivating it so intensively. However, its impact can be reduced. Capitalism and democracy are systems that detect and punish incompe- tence, even though the systems don't function perfectly. Failures like Enron occur because people behave illegally. Such behavior cannot be legislated against, although there would be fewer white-collar criminals if the crime and punish- ment were less asymmetric. The punishment is harsh for those who rob a bank, even though the cash stolen is an impercep- tible fraction of the bank's worth. However, if, like Nick Leeson, you destroy a bank and write off billions of dollars of investors' wealth, you might get away with a short sentence and enough fame to create a best seller. Governance and auditing should be checks on the most incompetent man- agers. The iron trinity of independent board chair, nonexecutive board members, and audit committee exists to keep a watch over shareholders' investments. A smart CEO would choose board members who question strategy and practices in order to keep top executives on their toes. However, in reality, the concentration of power among top corporations means that CEOs and board members swap positions regular- ly. They are less likely to be harsh judges when at times they will be plaintiffs before the same people. Even if a company's board is self-serving, an independent audit committee and auditors can act as checks. However, for an all-powerful chair/CEO, what is the incentive to create a troublesome audit committee? In the case of Enron, auditors were also acting as consultants to the company. They would have been abnormal indeed if their behavior was not influenced by the fact that they were on the payroll. Once again, the role of plaintiff and judge were confused. with business ethics and incorporates business logic. In the field of strategic management, students learn the importance of building strategies on relative advantage and differentia- tion rather than doing what everyone else is doing. This leads to lessons in entrepreneurship and innovation, where students learn the importance of good ideas. Decision mak- ing classes should stress the need for questioning strategies. Students also could use a rigorous understanding of the value of corporate governance. Organizational behavior is the home for much of our understanding of business incompetence. MBAs must learn to identify the groups and structures that encourage incom- petence, as well as the ways that people rise to incompe- tence. Then, perhaps, they will have the skills that will pre- vent them from making these same mistakes. That is why so many people, from world leaders to top CEOs, behave badly. They are seduced by their own myths, their delu- sion of omnipotence, and the attitudes of paid sycophants. Business incompetence will never be eradicated entirely. Remember: Power corrupts, but absolute power is really nice. Smart stakeholders will look for the signs that a business envi- ronment and a business's relationships are shaped to suit managers, not shareholders—signs that relationships have become too cozy. Smart executives will look for signs that these same conditions exist in their own companies—and they will look for ways to eradicate them before the results of incompetence become catastrophic. ■ z John Saunders is head of the Aston Business School at Aston University in Birmingham, England. BizEd NOVEMBER/DECEMBER 2002 51