http://www.nytimes.com/2002/07/29/technology/29NECO.html

NEW ECONOMY Executives Are Smitten, and Undone, by Their Own Images
By TIM RACE

There's nothing wrong with a little self-esteem. It's grandiose delusion that
causes all the trouble.

How else to understand the case of the 78-year-old founder of Adelphia
Communications, John J. Rigas, and his two sons? The three were led away in
handcuffs last week by federal authorities, who accused them of "rampant
self-dealing" and using Adelphia, a publicly held company, as a "personal
piggy bank." If guilty as charged, the Rigases may represent yet another
example of the narcissistic entitlement that permeated so many companies in
recent years.

Few of the nation's executives now accused of fraud may have set out
initially to break the law. What's more likely is that they became lost in a
narcissistic fog in which they imagined that they were above the law - that
the rules no longer applied to people as grand as themselves.

And so, if federal investigators are to be believed, we have seen narcissism
on parade in a variety of costumes:
 

¶The Rigases, the authorities say, took out loans to themselves using the
company as collateral.
 

¶Samuel D. Waksal, the socialite founder of ImClone Systems, is said to have
given his friends and family stock guidance not available to hoi polloi.
 

¶L. Dennis Kozlowski, one of the world's highest-paid executives as chief of
Tyco International, had the wherewithal to spend $13 million for paintings
by Renoir and others, but not the inclination to pay sales tax on them,
according to the grand jury indictment.
 

¶Scott D. Sullivan, the financial architect of WorldCom's wondrous ascent,
is accused of buffing the books rather than risk tarnishing his image as a
corporate wunderkind.
 

Narcissism isn't meant here as mere metaphor, but in the sense of the
psychiatric personality disorder recognized and classified by the American
Psychiatric Association. The condition is named for Narcissus, a beautiful
youth in Greek mythology who fell in love with his own reflection and then
pined away, not realizing the object of his fancy was a mere image. Beyond
simple self-regard, the narcissistic disorder refers to a destructive
pattern of thought and behavior whose traits include an unrealistic sense of
one's importance and power, an excessive need for admiration and a lack of
empathy for the feelings or needs of others.

Whether the Rigases or any of the other executives under indictment or
investigation would clinically qualify for the narcissistic label, is beside
the point: the stock bubble - in which paper wealth created auras of power
and invincibility - seems to have bred an environment in which the
narcissist who may lurk within many of us was able to emerge in feverish
full bloom.

"It happens every decade; the proportion of these cases increases during
times of market euphoria," observed Jay A. Conger. He is a professor at the
London Business School and a widely published author on management behavior,
whose 1990 article, "The Dark Side of Leadership," is widely cited in the
literature of narcissism in the executive suite. (The article's case studies
include the rise and fall of the charismatic entrepreneur John Z. DeLorean,
whose DeLorean Motor Company's dubious books - let the record show - were
audited by Arthur Andersen.)

Professor Conger, in an interview, said the "romance of leadership" that is
common in the business world tends to put top executives on a pedestal.

"This can become a liability if the leaders begin to believe they are
geniuses," he said, calling Enron a classic example. "They begin to believe
they and their organizations are one-of-a-kind, that they're changing the
face of industry. They desire entitlements beyond any other C.E.O.'s."

And if problems arise - the debts mount, the revenues fall short of
grandiose forecasts - "the narcissists want to restore the image, they may
do things to protect the image," he said. "And it may not be the C.E.O. who
does the unethical things. It may be their subordinates, who want to protect
the C.E.O. and themselves, who are in the ecosystem of narcissism."

The destructive nature of narcissism makes it "Malignant Self Love,"
according to Sam Vaknin, who has written a book by that title (Narcissus
Publications, 1999), an overview of psychiatric narcissism. Mr. Vaknin, 41,
who was born in Israel, now lives in Skopje, Macedonia, where he runs a Web
site about the narcissistic personality disorder (http://samvak.tripod.com/)
and is an economics correspondent for United Press International.

Mr. Vaknin's expertise stems in part from his having received a narcissistic
personality diagnosis from a prison psychologist in Ramla, Israel, in 1996.
Mr. Vaknin served 11 months there for engaging in stock manipulation while
he was a well-known and widely celebrated director of an Israeli investment
firm, Mikbatz Teshua.

In a lengthy e-mail dialogue, Mr. Vaknin declined to discuss the specifics
of his own case, but he did offer his analysis of the narcissistic
personality in the context of financial fraud.

"The narcissist lacks empathy - the ability to put himself in other people's
shoes," he wrote. "He does not recognize boundaries - personal, corporate or
legal."

"The narcissist regards himself as one would an expensive present: he is a
gift to his company, to his family, to his neighbors, to his colleagues, to
his country," Mr. Vaknin wrote, saying that such a person's sense of
inflated importance and entitlement "makes him feel immune to mortal laws
and somehow divinely protected and insulated from the inevitable
consequences of his deeds and misdeeds."

To talk to the experts is to get the sense that narcissism is an
occupational hazard of the corporate world. Ask David S. Gerson, a doctoral
candidate at the University of Washington's business school, who is
finishing his dissertation on narcissism in the workplace. When he first
proposed the topic, Mr. Gerson recalls, his dissertation committee worried
he would be unable to unearth enough examples of the grandiosely
self-deluded. As it turns out, Mr. Gerson said, "it's fairly prevalent in
organizations."

And while psychiatrists say that the narcissistic disorder tends to develop
before or around age 4, when the afflicted may have trouble maturing beyond
the me-centricism of early childhood, Mr. Gerson is among the business
management researchers who argue that, in a conducive corporate culture,
adults "can learn to be narcissists."

"Rather that thinking that these business people were evil to start with,"
Mr. Gerson says of the recent parade of rogues, "we should recognize that
they were in a system that encouraged that behavior."

He, like Professor Conger, argues that because narcissism is a latent human
condition that periodically flourishes, the only business antidote is
oversight and accountability - perhaps the sort of measures provided for in
the corporate-conduct legislation Congress passed last week.

Of course, rules are one thing, effective enforcement quite another. It all
depends on whether the narcissists are running the asylum.

Harvey L. Pitt, the chairman of the Securities and Exchange Commission, has
been under fire lately from members of both political parties. But Mr. Pitt,
who recently proposed a promotion and pay raise for himself even as his
critics called for his resignation, has remained adamant that he is by far
the best man for the job.

As Mr. Pitt put it in a recent interview with The New York Times, "it is an
enormous advantage to the public to have somebody who knows about the
securities business and the securities law as I do, and it would be
unthinkable to deprive people of my expertise."

Monitoring this news from Skopje, Mr. Vaknin e-mailed that Mr. Pitt's was
"one of the more narcissistic statements I ever came across."