As things started to collapse, company executives, along with Mozilo, formed a groupthink bunker mentality, refusing to talk with the media. People started to complain to elected officials when they lost their homes and the media started covering this story aggressively. Consequently, because of the media scrutiny, the Securities and Exchange Commission got involved. These are a direct cause and effect of groupthink.
He was eventually charged with mass fraud by the SEC and was headed to trial in 2010, but four days before opening arguments in a Los Angeles court, he settled with the SEC and agreed to pay $67.5 million; he was not given any prison time. Subsequently, Bank of America bought the remnants of Countrywide and still suffers losses from those toxic mortgages.
One L.A. business executive understands this problem and looks for business students who have an educational background that includes more than just accounting, finance and statistics. Earl Feldhorn is senior vice president at Wedbush Securities, one of the largest brokerage and investment banks based in Los Angeles.
Feldhorn, who has been with the firm since the early 1960s, told me: “When I look for graduates now, I’d rather they study English literature, communications or humanities, because just knowing numbers, statistics and finance is not enough. Few of these graduates know how to write or communicate, and that is a problem on Wall Street.”
Was it only a decade ago when the Enron scandal spurred the teaching of ethics classes in business and law schools? But what good is one ethics class if students treat it like just another class they have to take, with no consequences? Business and law schools have to make communications a fundamental skill that is to be rewarded and learned so that future business leaders will understand that groupthink is a thing of the past and harmful to executives, its employees and a company’s reputation.
Famed management professor Peter Drucker once wrote, “Management is a liberal art and eventually the good leaders are those that draw on all of the knowledge and insights of humanities and social sciences.” When added to a rigorous study of accounting, finance and other business classes, this should help mold future leaders in Los Angeles and nationally, creating a corporate climate where groupthink will become less of a factor in boardroom decision-making during a crisis or litigation.
David Silver, APR, is chief executive of Silver Public Relations in Los Angeles and author of the forthcoming book, “Managing Corporate Communications in the Age of Restructuring, Crisis and Litigation: Revisiting Groupthink in the Boardroom.”