No Company for Old Men: The Downsides of Longevity and Loyalty

We have come to expect that our political leaders will fail us. Morally, if not operationally. We even seem to expect that as a fair exchange for the pressures of the jobs.

But we retain a childish belief in the rectitude of great coaches. As if the lessons of the playing field, harking back to Lord Wellington's comments after defeating Napoleon at Waterloo, that the victory was forged on England's school playing fields, still apply in our far more complicated age. We must think that such men and women somehow transcend normal human behavior. And that their loyalty to the institutions they serve reflects well on the rest of us for supporting their steadfastness.

So especially in the US, we revere great coaches and permit them to dodder on past their prime, assuming somehow that we all benefit from their example. In other cultures, like Japan, longevity and loyalty is also revered and considered a fundamental cultural strength.

For those reading this who are not American, this country has been shaken to its core this week by revelations that almost ten years ago 50-ish university football coach was seen raping a ten year old boy in his team's locker room. Not only were civil authorities not told, but the 28 year old assistant coach who inadvertantly witnessed it -approximately 6'4" and 230 lbs - did not intervene. He told his head coach, an 84 year old who had repeatedly refused to step down and had been exalted by some who admired his grit. He told the university authorities, quietly, who hushed it up. Most of the men involved were Roman Catholics, who had to have known of the scandals then breaking across the world involving priests and young boys. The rapist in question was permitted continued access to the institution for over a decade after the fact - and to the boys through a charity he created - despite the fact that his behavior was known.

Listening to otherwise conservative talk radio shows, one is struck by the sense of horror and revulsion. None of that 'she was asking for it or she was a golddigger' narrative we hear automatically in political cases. Aside from the reaction to the repulsiveness of the act itself, the despair and anger seemed aimed at the society itself. How could men so honored behaved so dishonorably? How could they not have intervened? But perhaps most uncomfortably of all, would any of us have behaved differently? Many are quick to say they would. But we created this social structure: the young assistant feared for his job, the coach for his reputation and his program, the administrators for their institution. Are the rest of us really so different?

In Japan a less horrific tale is unfolding. The common elements are that the fraud perpetrated was done so by men who were honored members of the business community who had worked for the company in question for decades, some as long as 40 or 50 years.

The point is not that all old people are out of it or that one culture or religion is better than another or that sports is a corrupting influence. All may have played a role but the point in most cases is that the exception proves the rule. The point is that when we sacrifice our judgment and our standards of what is right and fair, we risk all. Those involved in the Penn State University scandal have been fired - and publicly humiliated. Most will never work again. Some will be jailed. Similar outcomes seem likely in Japan at the Olympus company.

The good news, if it can be called that, is that the societies affected are as appalled as they are. But as societies, we can not rest there. We must identify the values that matter to us. And we must never permit ideology, or sentiment, or personal attachments to diminish their importance. Because if we do, we devalue all that we stand for. JL

Holman Jenkins comments in the Wall Street Journal:

One of the mysteries of human existence is the willingness of people to sacrifice themselves for institutions, often in ways that don't do the institutions any good.

Two leaders of Penn State's administration have been indicted for perjury and for failing to report child sex abuse, which they presumably did to protect the image of Penn State, even at considerable risk to themselves (as they perhaps belatedly realize). Uncharged so far is the assistant coach who nine years ago allegedly witnessed child rape by a fellow coach in the team's locker room and didn't intervene, didn't call the police.

The other freak show in the news, the Japanese company Olympus, has its own inexplicable elements. But consider that now-disgraced company Chairman Tsuyoshi Kikukawa has been with the company 50 years.
His two top aides, both implicated, have been around for 40 years. Even the British executive who pulled the string that unraveled their scheme, Michael Woodford, had worked for Olympus for 30 years.

A fact lost in certain mediaaccounts today is that a 28-year-old "graduate coach" is an adult.

Lachrymose former jocks on TV look upon all this and seem to believe that all were trying to protect a child molester. They weren't. They were trying to protect Penn State.

These events are hard to fathom, but understanding surely begins with the following facts: The two officials indicted had each been associated with the school in some fashion for 40 years. Mr. Paterno had been a Penn State coach for 61 years. Jerry Sandusky, the alleged criminal pedophile, had been involved with Penn State football for nearly 50 years, beginning as a student player.

For those who find football more interesting than a Japanese company best known for gastric endoscopes, here's the CliffsNotes version:

The scandal appears to have its roots in the late '80s, when a previous management tried to boost revenues and profits with speculative securities purchases during Japan's famous and lamented bubble years. Mr. Woodford, as a senior executive, apparently knew nothing of these investments when he began asking questions about strange fees and odd acquisitions recorded in the company's books in succeeding years. His questions were inconvenient. He was kicked upstairs, then fired, at which point—unlike anyone at Penn State—he went public with his concerns. An investigation became inevitable and last week the company's leadership finally admitted the inflated acquisitions were actually accounting gimmicks designed to allow Olympus to bring back on its balance sheet the losses management had spent two decades hiding.

We live in two worlds when it comes to authority: A primitive one, in which daddy figures like Mr. Paterno and Mr. Kikukawa are morally hectored not only to be exemplars in performance of their own duties, but also to make up for the failures of everyone around them.

We also, in our more adult moments, want to rely on impersonal mechanisms of accountability that reinforce the desired behavior, rather than simply demanding it from a pulpit.

In this latter quest, U.S. business has been leading, with such reviled practices as golden parachutes, commonly denounced as a "reward" for failure. But rewards are after-the-fact, and why pay anybody for performance that's already in the bag? Such big-buck carrots are all about shaping behavior before the fact, not after. That's the cold logic of business incentives.

No, the system isn't perfect and doesn't always deliver the results we'd like. Nor is it obvious how it might be extended to other institutions in society, which lack a constituency (shareholders) whose interests can be reduced to a single metric (share price).

But notice something else: Despite public and press hostility, such incentives have become virtually mandatory in the ecosystem of relentless natural selection that U.S. companies inhabit.

Notice, too, that such incentives tend to demote the self-protective and tribal loyalties and other interpersonal values so evident in the Penn State and Olympus cases—and that putting such human values in the shade is a feature, not a bug.

Notice, finally, that when the loop of accountability is closed in such fashion, one apparent result is conspicuously shorter CEO tenure. The average CEO nowadays sees the door after six years, down from nine years in the late 1990s. In publicly traded U.S. companies, you won't often find a Joe Pa or Tsuyoshi Kikukawa, somebody whose personal influence (even innocently) can cause internal culture to drift dangerously out of touch with societal expectations.