What we know and when we allow ourselves to know it is one of the great mysteries the area of decision making psychology continues to unravel.  Denial, over confidence, and fear of loss are but a few of the things that can keep our head stuck in the sand and lead to counter-intuitive results.

In April, op-ed contributor Daniel Gilbert wrote in the New York Times about how despite the fact that Verizon had a poor year in 2005 with earnings dropping more than 5 percent its chief executive officer saw a spectacular 48 percent increase in overall compensation thanks to the recommendation of an independent consultant, who coincidentally receives much of their revenue from Verizon.  When asked about the apparent conflict of interest, the consultants said they had strict policies that prohibited conflicts and that the policies were necessary to preserve their independence and objectivity.

Really?  Sounds like the Emperor’s New Clothes to me.

But it got me thinking about why compliance training sometimes misses the mark, why it doesn’t have the staying power we’d like it to have.  If we don’t have the proper incentives in place to back-up the policies we can easily fool ourselves into believing there’s nothing wrong.  That’s exactly what happened with the fancy accounting that ultimately tripped up business icons like Enron and Worldcom.

Unfortunately, if we don’t create our own reality checks, the government will do it for us and we end up with Sarbanes-Oxley type legislation.  Doesn’t it pay to avoid business blind spots?

This entry was posted on Wednesday, June 28th, 2006 at 11:52 am and is filed under Business Blind Spots, Corporate Governance, Decision Making, Leadership. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.