Angelo Mozilo, Everybody Did It, and the Wall Street Journal’s Holman Jenkins

Angelo Mozilo, the former CEO of Countrywide Mortgage, whose perpetual tan and leathery look bring the phrase, “Can melanoma be far behind?” enjoyed a defense from the Wall Street Journal’s Holman Jenkins.  Mr. Jenkins never met a slotting fee, an options back-dater, or an insider trading cad he can’t defend. Mr. Jenkins has a good mind that offers brilliant legal and financial analysis of the troubling issues and figures in business. His articles on executives facing overzealous prosecutors are must-reads.  But, Mr. Holman has a blind spot on ethical questions – he never goes there.

In his February 23, 2011 piece on Mozilo, Mr. Jenkins made the point that the former Countrywide CEO simply followed a business model: Giving mortgages to anyone who was able to get a mortgage from anyone else in the U.S.  Mozilo’s business model, Mr. Jenkins assures, simply blew up in his face.  The classic, “Who knew?”

There are three not-so- small problems with this new “but it was just a flawed business model” defense.  Mr. Mozilo was unloading Countrywide stock during the last year before his company’s collapse – a pattern that seems to indicate a tad bit of doubt about his model and, as a result, his company’s future.  As a CEO, Mr. Mozilo was compensated handsomely for his leadership. Following a business model without an occasional revisit and review of economic conditions, patterns, and, oh, say a Wall Street Journal editorial here and there screaming warnings about bubbles is not the stuff of leadership.  Finally, the “Everybody else was doing it” business model is neither unique nor tough to duplicate and is the classic ethical rationalization of a child, an infant terrible.  Ward Cleaver, the wise father in the 1950’s classic, “Leave it to Beaver,” once chided his sons for getting bizarre haircuts like their friends with, “If your friends all jumped off a building, would you do it to?”  Theodore responded, “How high is the building?” CEOs are not paid to do what everyone else is doing, strategically or ethically.  CEOs are paid to know the building, the risk of jumping, and even question why his company is pursuing such a facile and easily duplicated business model.

Mr. Mozilo’s shallow leadership left all of us with a fairly hefty tab.  Mr. Jenkins is correct.  There is no criminal case here.  What Mr. Mozilo did was worse than a criminal act.  He and other CEOs like him were fooling around with capitalism.  Criminal cases are tough to weave out of the sophisticated highfalutin finance that dominated the subprime model, at all levels of the financial markets. But conduct such as Mozilo’s chips away at our trust in companies and markets.  Capitalism doesn’t work without trust – we don’t invest because we know there are criminal sanctions when companies fail or deceive us.  We invest because we want to believe that most companies are following a business model in good faith, coupled with expertise, insight, and diligence.  That type of trust cannot survive in an amoral technician’s world. Mr. Jenkins favors protection of the amoral technician: Executives who trot as close to the legal line as possible, without crossing it, are free from any judgment regardless of the harm they cause.  That’s chilling thought for markets and ethics.  Mr. Mozilo just did what everyone else did.  But as Ward Cleaver would say, “That does not make it right.”                                                                                                                                                                                                                

About mmjdiary

Professor Marianne Jennings is an emeritus professor of legal and ethical studies from the W.P. Carey School of Business at Arizona State University, retiring in 2011 after 35 years of teaching undergraduate and graduate courses in ethics and the legal environment of business. During her tenure at ASU, she served as director of the Joan and David Lincoln Center for Applied Ethics from 1995-1999. In 2006, she was appointed faculty director for the W.P. Carey Executive MBA Program. She has done consulting work for businesses and professional groups including AICPA, Boeing, Dial Corporation, Edward Jones, Mattel, Motorola, CFA Institute, Southern California Edison, the Institute of Internal Auditors, AIMR, DuPont, AES, Blue Cross Blue Shield, Motorola, Hy-Vee Foods, IBM, Bell Helicopter, Amgen, Raytheon, and VIAD. The sixth edition of her textbook, Case Studies in Business Ethics, was published in February 2011. The ninth edition of her textbook, Business: lts Legal, Ethical and Global Environment was published in January 2011. The 23rd edition of her book, Business Law: Principles and Cases, will be published in January 2013. The tenth edition of her book, Real Estate Law, will also be published in January 2013. Her book, A Business Tale: A Story of Ethics, Choices, Success, and a Very Large Rabbit, a fable about business ethics, was chosen by Library Journal in 2004 as its business book of the year. A Business Tale was also a finalist for two other literary awards for 2004. In 2000 her book on corporate governance was published by the New York Times MBA Pocket Series. Her book on long-term success, Building a Business Through Good Times and Bad: Lessons from Fifteen Companies, Each With a Century of Dividends, was published in October 2002 and has been used by Booz, Allen, Hamilton for its work on business longevity. Her latest book, The Seven Signs of Ethical Collapse was published by St. Martin’s Press in July 2006 and has been a finalist for two book awards. Her weekly columns are syndicated around the country, and her work has appeared in the Wall Street Journal, the Chicago Tribune, the New York Times, Washington Post, and the Reader's Digest. A collection of her essays, Nobody Fixes Real Carrot Sticks Anymore, first published in 1994 is still being published. She has been a commentator on business issues on All Things Considered for National Public Radio. She has served on four boards of directors, including Arizona Public Service (1987-2000), Zealous Capital Corporation, and the Center for Children with Chronic Illness and Disability at the University of Minnesota. She was appointed to the board of advisors for the Institute of Nuclear Power Operators in 2004 and served on the board of trustees for Think Arizona, a public policy think tank. She has appeared on CNBC, CBS This Morning, the Today Show, and CBS Evening News. In 2010 she was named one of the Top 100 Thought Leaders in Business Ethics by Trust Across America. Her books have been translated into four different languages. She received the British Emerald award for authoring one of their top 50 articles in management publications, chosen from over 15,000 articles. Personal: Married since 1976 to Terry H. Jennings, Maricopa County Attorney’s Office Deputy County Attorney; five children: Sarah, Sam, and John, and the late Claire and Hannah Jennings.
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