… Very insightful and rewarding article by Wadhwa from BusinessWeek. The article and Mr.Beer numbers and the comparison with the Great Depression are shocking! They prove undoubtedly that ethics have an over lasting benefit. – Mouaz.

“A focus on short-term profits to the exclusion of all else led to the current financial crisis. And guess what? Companies with the steadiest moral compasses have sailed through it.

With everyone still buzzing about the outrageous bonuses Wall Street continues to pay, it seems like now might be a good time to write a column about ethics. No, I don’t want to write another article calling greedy bankers unethical. Plenty of pundits have already done that. Rather, I’d like to speculate on why some executives are so greedy, the role it played in their downfall, and how an inability to change organizational mindsets will probably lead to future banking crises.

I was privileged to hear Harvard Business School professor Michael Beer at a recent meeting hosted by the Yale CEO Institute. Beer lectured CEOs on building companies that can perform at high levels for extended periods. He started with some interesting statistics on the root causes of the worst financial crisis since the Great Depression:

• Of the original Forbes 100 in 1917, 61 ceased to exist by 1987. Of the remaining 39, only 18 stayed in the top 100, and their return was 20% less than the overall market during the period from 1917 through 1987.

• Of companies in the original Standard & Poor’s 500-stock index in 1957, only 74 remained in 1997; of these, only 12 outperformed the S&P 500 in the period from 1957 through 1998.

• The average CEO tenure in the U.S. is 4.2 years, less than half the 10.5-year average in 1990.”

Read the full article.

Why Be an Ethical Company? They’re Stronger and Last Longer
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