Narcissistic Mindset in Financial Institutions

Financial institutions are again grabbing headlines for the wrong reasons. This time it is because of the foreclosure of mortgages without adequate due diligence.  As Senator Robert Menendez wrote to the heads of JPMorgan Chase and Co, Bank of America Corp and Ally Financial Inc-It is simply inexcusable that proper oversight proceedings were not in place, especially when dealing with matters as monumental as the seizure of a family’s home.”  While receiving bailout from tax-payers money, the leadership teams in the banks had promised more responsible behavior. The question which needs an answer is –“Why are the US financial institutions blatantly contravening regulations again and did they not learn anything from the previous debacle?”

In contrast, in India, in the recently held round table forum organized by Economic Times, the chief players in financial institutions reiterated that regulation and growth can co-exist together. Extract from the Economic Times article – “State Bank of India chairman Om Prakash Bhatt and ICICI Bank non-executive chairman KV Kamath told the founder of the world’s biggest buyout firm, Stephen A Schwarzman of Blackstone Group, that regulation and growth are not mutually exclusive”. Indian financial institutions have always been heavily regulated and have simultaneously shown tremendous growth. This indicates that there is a significant difference in culture and approach in banking sector between USA and India.

In the financial institutions crises many thinkers had blamed the narcissistic mindset of the financial institutions. The thinkers stated that the banks management teams are arrogant and believe the banks –“is too big to fail”. With the recent foreclosure issue, the narcissistic thinking is again reflected.

I decided to do some research to determine what healthy narcissism is and what are the attributes of a narcissistic personality disorder (NPD)? Is it possible to analyze the attributes of NPD in respect to organization leaders, culture and society? I am providing here the results from my analysis after reading Sam Vaknin’s book “Malignant Self Love- Narcissism Revisited”   

In the book Sam Vaknin has stated nearly that “According to the DSM-IV-TR, between 2% and 16% of the population in clinical settings (between 0.5-1% of the general population) are diagnosed with Narcissistic Personality Disorder (NPD). Most narcissists (50-75%, according to the DSM-IV-TR) are men.” According to him the gender difference is because the narcissistic traits (aggression, ego, competition etc.) are generally appreciated in males. This indicates that actual number of employees suffering from NPD in an organization would be less than 1%. Hence, the organization may not be at risk because of individual behavior but may be at risk of narcissistic tendencies due to collective behavior and organization culture.

The second aspect is difference between healthy and unhealthy narcissism.  The definition as per the book is –“Healthy narcissism is a mature, balanced love of oneself coupled with a stable sense of self-worth and self-esteem. Healthy narcissism implies knowledge of one’s boundaries and a proportionate and realistic appraisal of one’s achievements and traits.” Unhealthy or NPD is defined as- Pathological narcissism is a life-long pattern of traits and behaviors which signify infatuation and obsession with one’s self to the exclusion of all others and the egotistic and ruthless pursuit of one’s gratification, dominance and ambition.” Well, these are traits which we have seen in our present day leaders sometimes or the other. Interestingly, Sam Vaknin has stated that narcissists can hide themselves in a crowd and it is extremely difficult to identify a narcissist without a proper psychological evaluation and diagnosis. Hence a layperson can only say that he/she has a toxic leader or bad boss, at best. So is it possible for an organization to develop a culture of pathological narcissism?  

The next aspect is the analysis of the attributes in detail and determining how this impacts the organization culture and society. I am listing the nine criteria’s used to assessing NPD as given in Sam Vaknin and determining their applicability in our current business environment.

  1. Feels grandiose and self-important (e.g., exaggerates accomplishments, talents, skills, contacts, and personality traits to the point of lying, demands to be recognized as superior without commensurate achievements);
  2. Is obsessed with fantasies of unlimited success, fame, fearsome power or omnipotence, unequalled brilliance (the cerebral narcissist), bodily beauty or sexual performance (the somatic narcissist), or ideal, everlasting, all-conquering love or passion; 
  3. Firmly convinced that he or she is unique and, being special, can only be understood by, should only be treated by, or associate with, other special or unique, or high-status people (or institutions);  
  4. Requires excessive admiration, adulation, attention and affirmation – or, failing that, wishes to be feared and to be notorious (Narcissistic Supply);
  5. Feels entitled. Demands automatic and full compliance with his or her unreasonable expectations for special and favorable priority treatment;  
  6.  Is “interpersonally exploitative”, i.e., uses others to achieve his or her own ends;  
  7. Devoid of empathy. Is unable or unwilling to identify with, acknowledge, or accept the feelings, needs, preferences, priorities, and choices of others; 
  8. Constantly envious of others and seeks to hurt or destroy the objects of his or her frustration. Suffers from persecutory (paranoid) delusions as he or she believes that they feel the same about him or her and are likely to act similarly; 
  9. Behaves arrogantly and haughtily. Feels superior, omnipotent, omniscient, invincible, immune, “above the law”, and omnipresent (magical thinking). Rages when frustrated, contradicted, or confronted by people he or she considers inferior to him or her and unworthy.

 Some of the examples which come to mind regarding the financial crises and corporate behavior are:

  1.  The financial crises occurred because basic business ethics were compromised on the assumption that nothing will be detected and the products will sail through. Risk management guidelines were contravened as the banks considered themselves beyond failure. The senior management did not give much thought to the morality of their actions. The suffering caused to the general public, customers and employees was not considered relevant in decision making.
  2. There number of cases post recession, where the CXO’s have allocated huge salary increments and bonuses to themselves from tax payers money after creating the financial crises, definitely indicates the sense of entitlement they feel. The senior management cut jobs of middle and junior employees, and retained their own. They also felt entitled to hiring planes for personal and business trips while the common folks were reeling under the crises. They did not hold themselves responsible and accountable for their poor decisions nor demonstrated remorse for damaging the economy.
  3.  The foreclosure debacle shows that the employees and management of the banks did not feel any empathy for their customers when causing trauma to customers. A loss of one’s home is an extremely traumatic experience. It shows a significant level of ruthlessness and insensitivity to others circumstances for achieving one’s own objectives.
  4.  Definitely, the employees below the CXO level have realized that syncopate behavior guarantees rewards and criticism is not without risks. Some organizations have become so dominant that employees do not have the freedom to voice their opinion and jobs have become a refined form of slavery. Anyone who is unwilling or objects to tow the management line is severely punished, as has been seen in various whistleblower cases.    
  5.  Employees are working towards material objectives which are in dissonance with their inner beings. In this society, a person’s worth is being evaluated by material success and public appearances, the employees are developing and projecting a ‘false self’ image. Employees hide their true self and project a false self to obtain promotions, hikes and bonuses.
  6.  The survey reports for workplace aggression, violence, bulling, and sexual harassment are showing an increasing trend. In most cases the percentages are ranging between 20-50% of the employees reporting experiencing such incidents. These reports indicate that organizations are turning exploitative and abusive in nature.
  7.  Organization culture survey reports indicate that financial institutions have an aggressive and competitive culture. Ask a regular employee and he/she will respond- “It is a dog eat dog world, extremely competitive and cut throat”. The general opinion is that to succeed using some unfair practices to destroy internal and external competition is acceptable.

 Considering the above mentioned aspects and other media reports, it looks like there is a trend towards narcissistic behavior in organizations. The question which comes up is that can anything be done about it when top management may be showing narcissistic behavior? Who will give a reality check to the organization when employees themselves participate in the same behavior? Is the public going to witness one debacle after another as has been the case in the last decade? How will the breaks be put and the trend reversed?

Well your guess is as good as mine. What do you think is going to happen? Please drop in a comment and share your opinion with me.