How to stop the executive fakes

Spotting phonies is easy. You hear them talk and there is no way even they can believe what they are saying. But why do they seem to run the world? Why is it that the more powerful people become, the less sense they make to the rest of us?

It happens in business, politics, academia, education. People who presumably started out life as plain-speaking children become adept manglers of thought, language and even ethical codes as they ascend the ranks. And the justification is always that this is how one plays the game.

Roger Martin, the dean of the Rotman School of Management in Toronto, has labelled these powerful cliques "inauthentic communities" and blames them for all kinds of shenanigans.

His theory explains why executives lavish themselves with perks and then seem baffled when shareholders attack them for it. Or why MPs abused their expenses. It was not because they were all crooks but because expense fiddling was such common practice that no one bothered to point it out. Deceit became the norm.

Look at bank chiefs. Having created the subprime mess and demanded taxpayer money to survive, they then pay themselves large bonuses and wonder why everyone is so cross.

Such blindness is typical of an inauthentic community. Not so many years ago, bankers and company owners lived in the same communities as their borrowers and employees. They had to face them every day. Nowadays investors and executives can live thousands of miles from the people who depend on them. When they load up a company with debt or drive it into bankruptcy, they never have to witness the lost jobs or tears.

Martin defines a healthy community as one which values reciprocity over exploitation; long-term relationships over one-off deals; one which protects the weakest rather than gouges them; which worries about the consequences of its actions on others; and which discourages its members from games which endanger the community.

Most of us know exactly what a healthy community feels like, whether it is a family, a school, a neighbourhood, a group of friends at university or work. Which is why it can be so jarring to enter the world of business, where you are told to "play the game", however weird, bogus or outright dishonest it may seem.

But spend long enough inside an inauthentic community and the weird quickly becomes normal. It happens at companies which turn corrupt. Enron was an unspectacular energy distribution company until it began trading in everything from bandwidth to weather futures. Its descent was not attributable to one stunning act of stupidity but to a series of criminal acts which began small then snowballed. The leaders at the firm told lies which everyone around them was only too happy to believe. It was the ultimate inauthentic community.

Take Goldman Sachs's involvement in Greece's public finances. Several years ago, its bankers sold Greece a deal to roll over its debt repayments and move some off the public books.

Goldman later backed a company which ran an index tracking the probability of debt defaults within the EU. Then, in recent weeks, its traders have been betting profitably on the likelihood of such a default.