Companies are entitled to profit in capitalist and mixed-economy countries. Provided that a particular company’s activities, products, services, transactions, prices and customer care facilities remain reasonable, business is likely to remain profitable. However, profits must be made lawfully and not fraudulently. While most companies abide by corporate governance rules on across-the-board integrity and ethics, a substantial number do not. These companies have adopted a cavalier attitude towards extracting—if not extorting—money from customers, thereby earning such unedifying labels as “rapacious parasites,” “maggots” and “bloodsuckers.”
It is certainly not a valid, safe or foregone conclusion that all large companies will misbehave. So, what sets the bad ones apart? What characterizes those that cross over to the “dark side”? Why on Earth would they want to court disaster and jeopardize the company’s reputation and antagonize customers and propel them into the arms of competitors?
Answering these questions requires an understanding of particular branches of psychology (e.g., social, organizational, clinical, consumer and abnormal) and contemporary corporate ownership.
The impact of toxic leadership
Corporations that engage in predatory behavior against customers do not do so spontaneously. Toxic leadership is at the root of the behavior. It occurs by deliberate design and systematic application over time as part of what are known as “revenue protection” models.
Ironically, these models were supposed to protect the company against revenue loss from fraud and theft. Some companies use these models to “protect” revenue by dishonestly increasing it. They do this by grossly overcharging customers on their monthly direct debit billing, either with no advance notice or by mid-contract increases. To this, they may add punishing early exit penalties or fictitious charges which they refuse to reimburse.
Despite all their rhetoric about “the customer is our number one priority,” such companies do not want to retain customers unless they are of the kind prepared to continue being bilked. These perverse “revenue protection models” rely on faster revenue growth by forcing out or “churning” once-loyal but disillusioned customers and replacing them with more naïve new ones. This is the “cheat-and-churn” reality.
Nevertheless, such wayward boards will typically exude great public-facing piety, with beaming, friendly, confident trust-me faces and reassuring mission statements. Is the considerable gap between espousal and enactment merely the product of boardroom delusions or deliberate lying? What circumstances drive this behavior?
Tremendous changes have occurred in recent years in the ownership chains of many large corporations. Gone are the days when a sector comprising several independent and direct competitors fought to retain and expand their respective customer bases. Typically, large companies are now owned by even larger ones and perhaps ultimately by private equity funds that will place tough return-on-investment criteria on these companies.
Ruthless profit extraction has become the de facto goal for executives. In addition, supposed competitors now typically take shareholding stakes in each other, changing competition into market symbiosis—meaning it matters much less which company or brand is leading at any given time. Companies expect customers to frequently “churn” or change from one provider to another, so companies feel they no longer have much stake in genuine customer care and retention. The move towards cheat-and-churn requires a controlling mind, typically the chief executive, probably colluding with boardroom colleagues. Corporate leaders, not middle or junior executives, determine strategy and revenue policy operations.
Organizational psychologist Professor Michael Walton has spent several decades studying the dynamics of toxic leadership and what happens when the bad conduct of senior individuals can no longer be explained away or trivialized as assertiveness or drive. He defined toxic leadership as “behavior which is exploitative, abusive, destructive and psychologically—and perhaps legalistically—corrupt and poisonous.”
This does not mean that such individuals outwardly present as demented, ranting bullies, although some do, e.g. Robert Maxwell, the owner of Mirror Group Newspapers who defrauded his company’s pension fund of some £460 million ($485 million) in the 1980s. They are more likely to present as engaging and charming personalities adept at convincing others that egregious conduct is fully justified to achieve revenue targets, shareholder and market expectations and, of course, director bonuses. Such motivations, patterns of thinking and behavior may normalize rapidly into a culture of amoral calculation.
Boardroom and executive psychopathy
Anti-Social Personality Disorders (ASPDs) come in many guises and degrees, ranging from mild and annoying to pathological and harmful. For example, narcissism appears frequently among leaders in corporate organizations.
Feeling essential and unique and claiming superior skills and attributes may benefit a corporate leader and the organization’s success. As psychiatrist Professor Jerrold Post noted, some narcissists learn to positively channel their creativity, self-belief and ego, such as Richard Branson, founder of the Virgin Group. Others, however, demonstrate a super-inflated ego, bombast and a tendency toward vengeful rage and malice against anyone suspected of outshining or challenging them. Former US President Donald Trump is a notorious example of such eggshell-ego narcissism, as profiled by Jerrold Post.
In business or politics, ill-informed and even reckless risk-taking is a frequent characteristic of toxic leaders whether in business or politics. The spectacular collapse of energy giant Enron in 2001 under the fraudulent direction of top executives Lay, Skilling and Fastow and the high-speed demise of Conservative leader Liz Truss in 2022 are examples of each. The compulsion to engage in high-stakes gambling with no concern about damaging the lives of thousands or even millions of people is characteristic of toxic leaders and indicative of possible pathological personality traits. Moreover, some toxic leaders may engage in criminal activity (as in the Enron case), so-called white-collar crime.
However, it would be false to either suggest or conclude that every CEO, board member or senior executive of every organization accused of atrocious conduct must be a psychopath or sociopath. So, although egregious personalities are indicated, what proportion of them are clinically diagnosable?
Among ASPDs, both categories, psychopathy and sociopathy, are under the general heading of psychopathy. Both display similar characteristics but differ primarily in origin. Psychopaths are regarded as products of a combination of genetic and social environmental factors, notably childhood and early adulthood experiences. Sociopaths, however, are deemed to be created solely by social environment and experiences, again mainly during childhood and early adulthood. Both disorders are difficult to treat, and prospects of a personality change for the better are not high.
Large-scale studies of CEOs and board directors by forensic psychologists Katarina Fritzon, Nathan Brooks and colleagues found that some 20% of subjects showed clinically raised levels of psychopathy. This contrasts with an expected level in the general population of some 3%. Why should there be such a higher concentration at the board level?
One suggestion is that such personalities typically share a compulsive desire to dominate and wield predatory power over others, like staff, customers and suppliers. The attractiveness of the power of board positions may explain why clinically diagnosable psychopathic personalities are seven times more likely to be represented in boardrooms than in the population overall. An increased prevalence would also likely exist among ambitious lower executives compared to the general population.
Snakes-in-suits: what sets pathological individuals apart?
1. Causing harm to others with either no self-recognition of their harmfulness or not caring about it.
2. Lack of empathy for those harmed, although empathy may be feigned.
3. Lack of conscience, remorse or guilt about their harmful conduct.
4. A ruthless end-justifies-the-means and “what can I/we get away with?” attitude and behavior.
5. For psychopaths, an inability to form regular emotional or social bonds, although these may be faked. For sociopaths, a limited ability to form regular emotional or social bonds (for example, bonding with family and close friends but not more widely), although these may be faked.
While “spivs-in-suits” is a pejorative label commonly applied to corporate fraudsters and customer abusers, organizational psychologist Paul Babiak and forensic psychologist Robert Hare coined the label “snakes-in-suits” for corporate psychopaths and sociopaths. All too often, spivs-in-suits are also snakes-in-suits. To help identify individuals that have pathological personalities, various evaluation frameworks and checklists have been created. For example, Hare made a 20-item list of specific psychopathy indicators. The more indicators an individual signals, the more a psychopathy diagnosis becomes likely. Prominent signs in Hare’s checklist include:
— Showing a glib and superficial charm.
— Shallow and insincere emotions.
— Confidence trickery and manipulation.
— A propensity for pathological lying.
— Grandiose self-worth and narcissism.
— Scapegoating and blaming others for their own failings.
— Reacting to rejection badly and excessively.
However, applicable as such tools have become for psychiatrists and psychologists, they are not intended for use outside these professions or for amateur application. This caution reinforces the Goldwater Rule of not engaging in amateur “armchair diagnosis” of particular individuals.
Nevertheless, it is defensible to examine specific organizations and their conduct and to consider to what extent they match the known characteristics of psychopathy. A different question is which, if any, of their senior personnel might suffer from one or more personality disorders. That question can only be definitively answered by clinically qualified individuals who have personally examined and interviewed the persons concerned.
Corporate abuse of customers in the UK
In March 2020, The Times published an editorial and a “name and shame” list of large UK companies allegedly guilty of deliberately blocking customers’ attempts to complain. They did so by removing company e-mail addresses from their websites, ceasing complaint handling by e-mail, forcing customers to engage with dysfunctional automated call centers, keeping customers on hold for two or three hours or more and failing to deliver or offer any redress. These are typically the same companies that boast about customers being their “number one priority.”
Regrettably, the number of such companies is so great as to make it impracticable to cite them all in this article. They cover all sectors: banks and financial services, supermarkets and large retailers, airlines and travel, healthcare, energy providers, phone/IT/Internet/social media and real estate.
For example, Britons’ domestic energy bills have more than doubled and in some cases trebled since early 2022 and are far higher than in other European countries. As far back as 1995, the then-CEO of British Gas, Cedric Brown, came under excoriating public attack in the media, in parliament and among institutional shareholders for his brazen attempt to inflate his remuneration to an obscene level. He was dubbed “Cedric The Pig” and, long before cryptocurrencies, a spoof currency of greed was named after him, “the Cedric.” The greed controversy still dogs BGas, in relation to its huge profits in 2023 during the UK cost-of-living crisis.
What is at play today is, perhaps, a 21st-century progression from the “unacceptable face of capitalism” complained of by British Prime Minister Edward Health in 1973 and the fat-cat conduct of corporate executives in the 1990s. The following dire case conveys the nature and scale of the contemporary problem.
EE Mobile—the cheat-and-churn supremos?
EE Mobile is one of the UK’s largest mobile phone and internet service providers, with upwards of 23 million mobile customers as at June 2023 out of a total EE customer base (including fixed line) of some 32 million cited in August 2023.
EE, formerly Everything Everywhere, was purchased by Altice using British Telecom (BT) in 2016 and is now the central part of BT Group’s Consumer Division. In 2023, Altice came under serious allegations against board members and senior executives relating to money laundering, fraud and corruption, with a number of formal investigations by authorities continuing in the US and Europe. Few people remember the original “Everything Everywhere” tag, while wags continue to assert that surely EE means “Exceptionally Egregious.”
Like many large companies, EE’s website portrays glowing profiles of its CEO Marc Allera and his top executive team of ten directors with a line-up of flattering “butter wouldn’t melt in their mouths” portrait photos. The CEO’s proclaimed mission includes language such as, “so our customers trust us,” “top priority to provide great customer experience” and “making sure we do the right thing.”
Contrast these self-righteous virtues with all the overwhelmingly negative posts by aggrieved customers on Trustpilot. Of over 13,000 Trustpilot reviews of EE, 71% give the lowest 1-star rating, and only 20% provide the highest 5-star rating. The highest number of posts about EE complain about over-charging monthly bills, unilateral mid-contract increased charge rates, unfair contracts with high early exit penalties and slow responses from EE customer service or being fobbed off or ignored entirely. EE has had an alarming history of overcharging going back to 2017 and 2018.
Complaining customers being fobbed off is commonplace across retail service corporations and highlights the policy of many of them to deliberately deter and block customers’ attempts to obtain redress. Complaints by telephone get shunted into automated call center queues that often take hours to clear, even if the caller is not summarily cut off first. Online complaint forms typically receive evasive blandishments that fail to address the actual complaint. Complaint letters or e-mails to chief executives are usually passed to a customer service function to answer. As with online complaints, any response will likely comprise only evasion and blandishments.
These “customer complaint resolution” functions are clearly under instruction to evade and deflect every complainant—whatever it takes to ensure that the company denies any mistake or wrongdoing and so “justifies” giving no redress.
The curious position of EE’s mascot, Kevin Bacon
For years, Kevin Bacon, the Hollywood actor, has been the public face of EE. He is the star of TV advertisements that extol the wonders of EE’s mobile telephone and broadband services. Reportedly, Bacon has already received substantial fees for his EE work, well over £1 million ($1.3 million). Bacon cuts an engaging figure and is popular in the UK as a movie star, so it is understandable why EE should employ him as a celebrity endorser of their brand and services.
Customer complaints about EE on Trustpilot have included some unflattering reviews about Bacon’s association with the company. Whether he is aware of all the criticisms of EE and of the growing backlash is unclear. It appears EE has been rather crafty in making Bacon their public face or, perhaps more cynically, their fall guy. Since EE’s apparent anti-customer excesses have become such a national disgrace, aggrieved customers and the public now generally identify him as the only EE figurehead. Therefore, he is the ready target and lightning rod for their anger. He will likely pay the price in reputational damage, whereas EE refuses to recognize such damage.
Yet, according to a Deloitte 2014 survey, reputation accounted for more than 25% of a company’s market value. Unchecked reputation risk was the single most significant cause of revenue and brand value loss. Some 87% of global respondents saw reputation risk as their number one risk concern. The 2021 survey report from WTW reflected similar concerns. What Altice and other institutional investors in BT Group, EE’s immediate owner, think about EE’s conduct is unclear.
Should Kevin Bacon tolerate EE’s evident anti-customer conduct damaging his reputation and brand? A lot may depend on which he values most—his reputation or EE’s fees.
As customers have noted, EE’s alleged gross overcharging, unfair and punitive contracts and highly defensive responses to complaints appear not to be accidents but deliberate policy, without any evident conscience or remorse. EE executives’ glib, superficial charm and what-can-we-get-away-with ruthlessness appear to underpin a cheat-and-churn culture. Whether they are mere spivs-in-suits, or more dangerously also snakes-in-suits, is open to conjecture.
Countering corporate anti-customer excesses
Many corporations currently appear not to understand their purpose. A radical new paradigm, the “framework for the future of the corporation,” was proposed by the British Academy in 2018 to replace the present dysfunctional one:
Corporations were originally established with clear public purposes. It is only over the last half-century that corporate purpose has become equated solely with profit. This has been damaging to corporations’ role in society, trust in business and the impact that business has had on the environment, inequality and social cohesion. In addition, globalization and technological advances are exacerbating problems of regulatory lag.
Similarly, 181 CEOs of major US corporations at the US Business Roundtable also issued a joint statement in 2019 redefining the purpose of a corporation to focus on benefitting all stakeholders and not just shareholders. Business press articles have also favored the theme.
As Peter Bloom and Carl Rhodes have examined in depth, corporations, frequently authoritarian ones, have now taken over everyday life in many respects. The worldviews of many corporations still focus on profit, personal greed, personal gratification, predatory unilateral competition and a belief that the only stakeholders to be protected are themselves and corporate shareholders.
Other observers, such as Joan Donovan and Shoshana Zuboff, argue that the totality of online platforms, social media and mobile telephone services are already enabling pathological corporations to make millions of users addicted to their products and services. Artificial Intelligence (AI) software will simply accelerate the abuse. Zuboff asserts that through “surveillance capitalism” users, who already hand over vast amounts of personal data to such companies, will soon find that their behavior patterns will be monitored by remote AI software to not only predict a user’s general behavior but also to subliminally predict and manipulate specific responses of individual users for commercial gain.
The new corporation paradigm inherently and explicitly rejects all characteristics of this kind of corporate authoritarianism, amoral calculation and malfeasance. Increasingly, shareholders will be expecting boards to adopt this model. This implicitly requires boards to curb, if not terminate, any director or CEO whose attitude and conduct smacks of the “old” paradigm.
Organizational, professional and peer group strategies
At an organizational level, several policies and strategies as part of corporate governance and risk management are available to counter authoritarian excesses. These would include such routine protections as:
— Separation of CEO and Chairman/President functions as two separate individuals to prevent a joint Chairman-CEO becoming too powerful, self-serving and beyond effective control if indulging in decisions and conduct damaging to the corporation.
— Appointment of fully independent non-executive directors to help steer executive directors away from potentially egregious or damaging decisions and conduct.
— Establishing an effective Board Risk Committee (separate from a Board Audit Committee) tasked with ensuring that the board address “all significant risks” to the business, including the organization’s own conduct.
— Requiring effective due diligence background checks (negative or positive vetting, as appropriate) on all staff appointments, staff promotions, contractor appointments, agent appointments, partnering and joint venture contracts, licensing agreements and proposed mergers or acquisitions.
— Requiring a psychological evaluation for all individuals subject to positive vetting as an integral part of due diligence.
The requirements for an organization’s corporate governance and risk management are well established. Although the formal framework for corporate governance and risk management generally does work to prevent harmful conduct in corporations, there are numerous instances of failure.
Such failures arise from defective formal frameworks and weak or toxic leadership. As Clive Smallman has laid out, the characteristics of positive versus toxic leadership are precise and well-known. Ensuring that only positive leaders are appointed is another crucial aspect of due diligence. This emphasizes the need for psychometric and psychological evaluation and searching for tell-tale signs of offensive attitudes and conduct.
How fast the new model corporation is adopted is likely to depend on several factors, including the enlightened self-interest of corporate leaders. This is especially so in the context of the fragile global economy of the post-Covid era, the policy positions and codes of ethics of professional and sector/trade bodies, and how rapidly the overall management of higher education are reoriented to reflect the new model. However, potential push-back by determined old-model diehards is highly likely.
Persuading corporate delinquents to change
The prospects for beneficial change in a delinquent corporation boil down to three main kinds of persuasion:
— Moral argument or enlightened self-interest.
— Judicial and non-judicial punishments.
— Market forces and risk management failures.
While all three kinds of persuasion may operate in any particular case, the moral argument or enlightened self-interest is least likely to be successful in hard-bitten old-model organizations.
Cheat-and-churn rogues are, by nature, “chancers” who think they are untouchable and invincible. Therefore, they are unlikely to acknowledge the argument and believe they can evade market forces as well as criminal prosecution, civil lawsuits and adverse publicity. Their feelings of superiority and entitlement to steal customers’ money may convince them they can get away with it.
The modern corporate spivs-in-suits are analogous to medieval robber barons. Customers, investors and markets may increasingly treat a company run by such spivs as a lost cause, and, ultimately, the business may fail. To lift the iconic slur against US President Richard “Tricky Dick” Nixon at the time of his downfall in the 1970s, “Would you ever buy a used car from any of these people?”
[Lane Gibson edited this piece.]
The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.
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