Stress and Fear on Wall Street: Confusing What is Real
by Debra Gawrych
Stress kills or at least bends us to the point of breaking. The stress of our ever-increasing pace of life is evident in the world around us. A recent cover story in Business Week was titled "How Corrupt is Wall Street?" and profiled corporate scandals and hints of scandals from Merrill Lynch to Xerox and Enron. Parallels were drawn between infamous scandals of the past: Michael Milken's junk bonds schemes from the 80's, Prudential Securities limited-partnership debacle of the early 90's to numerous present day Wall Street headlines.
We read and speculate about what happened that compelled management to push the envelope. We hear about thousands of families hurt by the downfall or downsizing of these companies and we see television interviews with news analysts discussing the unsavory elements of fraud, misleading investors and questionable accounting practices. We don't often hear about another side of the story-the personal motivations that could drive someone to make these on-the- edge business decisions.
What stressors were present: both corporate and personal? What motivated them? How much did stress influence their actions? Once we can ascertain this information it is easier for us to see that poor business decisions don't occur in a vacuum.
When bad things happen, it is human nature to want to place blame. We want a bad guy, someone to take the fall; some way to make sense out of a catastrophe or nonsense.
Damage from these types of decisions goes beyond the Wall Street firms and the analysts who follow them. It reverberates through the entire economy which depends on the financial system to raise and allocate capital. The financial system is built on the integrity of its information and when the integrity is in question, investors lose confidence. If investors lose confidence, stock prices and markets fall and that begins to affect the individual consumer who may not have had any direct dealings with the company or Wall Street.
The frenzied stock trading of the late 90's had brokers pushing stock to their investors that had little or no real value. Investors ignored common sense and bought only what could give them the quick return, regardless of the reality of what the company was providing. Analysts set the bar higher and higher for buy ratings, raising expectations and adding to the pressure of performance by many companies, especially start-ups and dot coms.
Questions of recent corporate practices brings many astute critics to the same line of thinking of Warren Buffet, who stated in Berkshire Hathaway's 2001 Annual Report that pressure from Wall Street and investors inflated the market and let to investments in the equity darlings that were "….entities designed more with an eye to making money off of investors rather than for them…."
Where were the watchdogs when the investments were skyrocketing? Is it only that the market is down and that stock prices have fallen that makes some accounting practices suspect? A review of current corporate trouble could lead to the conclusion that pushing-the-envelope business decisions are only bad if the company loses money, not when the company is doing well.
The stress and fear that drives managers is ever present whether the company is making money or not. It pushes intelligent people to make not so intelligent or short-term decisions. If not stressed these executives may be in a better position to make decisions for the long term good of their enterprise.
Art Kleiner writes in the second quarter 2002 issue of Strategy + Business,
"A predisposition to arrogant folly will find its way around any accounting regulation. Accounting and other reform intended to make corporate operation more visible to shareholders are all for the best, but we also need to make business organization's core characters more transparent, so that everyone can see where they're going and make an informed judgment as to what the consequences might be."
This stress takes on different faces. It is evident in the decisions to look the other way when a creative way of investing is presented that at least bumps up to the boundary of legality.
It is seen in the hierarchical management style of a more traditional manager who wants to delegate decisions without asking for feedback from subordinates who may very well have important information that could help the company. This manager could also dictate to their service providers, such as accounting, and legal, that if they didn't go along with his/her executive decisions, they would find themselves replaced. Faced with a potential loss of business, the service provider may accede to questionable practices and look the other way.
Unless corporate America is willing to take a hard look at these types of issues, history may very well repeat itself. This look at current reality will be more productive for the individuals involved if each manager could be shown his or her inherent personality tendencies under stress and how he or she could handle things differently.
Of course, it is simplistic to say that stress was the over riding motivator in the lives of these decision makers, but consider the lyrics from the popular rock song (Crawling by Linkin Park):
There is something inside me that pulls
beneath the surface
Consuming, confusing
This lack of self-control I fear is never ending.
Controlling, I can't seem to find myself again,
my walls are closing in
(Got a sense of confidence
I'm convinced that it's just too much pressure to take)
I felt this way before,
So insecure……………
Crawling underneath my skin, these words
they will not heal.
fear is how I fall
Confusing what is real.
Stress and fear, whether it is brought about by external forces, such as the demands of higher rates of return, client demands to look the other way at accounting transactions or internal stress brought about by failing to live up to one's expectations can confuse what is real.
For information about how various personalities aspects react under stress, read Gawrych new book The Seven Aspects of Sisterhood: Empowering Women Through Self-Discovery or email Common Boundaries® for personal coaching or programs or call 954-385-8434.
