Penn State Scandal: You can't teach leaders morality

COMMENTARY. I wracked my brain trying to come up with some lessons for leaders learn from the whole Joe Paterno Penn State scandal but, to be blunt, I couldn't come up with a damn thing.

Not to say I couldn't come up with some trite nonsense to attract eyeballs. I just couldn't bring myself to do that because the truth is you can't teach morality to leaders. By the time you reach that point in your career, you either get personal responsibility or you don't.

So why write about it?

Because, executives and business leaders may know that, but the rest of you may not. And while this may be a somewhat unpopular view, I'm here to sprinkle a little reality dust on everyone who believes in fairy tales and Utopian logic, that right and wrong is always black and white, that everyone's taught unshakeable work ethic from the time they can walk, and powerful people never turn to the dark side.

I mean, at some point you've got to take a good hard look at all the white collar crime, all the scandal and fraud, and ask yourself how so many good and smart people can do such amazingly dumb and immoral things.

Now, don't get me wrong. Some of this stuff is very much black and white. The psychopaths that brought us Enron and WorldCom, the Bernie Madoffs and Dennis Kozlowskis of the world, are nothing short of vile criminals that deserve to spend the rest of their pitiful lives rotting in prison.

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And of course, when it comes to knowledge of a heinous crime like child molestation, I can't even fathom how anyone can cover it up or lie to investigators or a grand jury. But you've got to admit that Joe Paterno does not fit the description of a bad man. Rather, he made an error in judgment with huge consequences.

You see, if you spend enough time in the corporate world, you can't help but become aware of a surprisingly large gray area where denial runs rampant, slopes are slippery, and executives can dig some pretty deep holes for themselves without even realizing they've got a shovel in their hands.

Just so you know, I'm very much aware that some of you are ready to set fire to the keyboard with an angry flame comment aimed right at yours truly, something to the effect of, "Wow, those are the kind of excuses for greed and corruption that got us all into the financial mess we're in today."

Maybe you're right and maybe you're wrong, but one thing's for sure: if you quit reading now, you're essentially closing your eyes to the reality of what goes on in big business America. Call it "keep your friends close and your enemies closer" if you want, but knowledge is power, my friend. And here's some of the inside variety.

Dysfunction and denial run deep in leaders

Look, I'm not going to pretend to understand, let alone explain, the psychology or sociology of why some people grow up with a visceral feeling for the difference between right and wrong and others don't. All I know is, once you reach a certain stage of human development and professional achievement, your brain is pretty much hard wired in terms of your psychology and belief system.

If you're a CEO, an executive, or any other kind of leader, and you don't have a firm handle on the meaning of personal responsibility and ethics, if you can't make mature decisions that put the greater good above your own ego, then you're not going to learn it from a blogger, a mentor, or anyone else, for that matter.

That doesn't mean you can never change. It's just not likely to happen unless you truly feel that your survival is threatened and you have no choice. And that tends to happen after a crisis, not before. In other words, you won't be sufficiently motivated to change until after you get caught doing something you shouldn't.

More on: Change? Not unless your life depends on it

The doctrine of unclean hands

Another significant factor in white collar crime is that laws are often enforced erratically and subjectively. Not to be cynical, but that often seems to coincide with the political aspirations of various federal and state attorneys general and prosecutors. And sometimes those laws are not enforced at all.

Like it or not, when laws related to the likes of insider trading, conflicts of interest, leaking material confidential information, securities fraud, and accounting fraud go unenforced for years or decades, then an "everyone is doing it" sort of mindset sets in.

And while nobody wants to hear this, it's entirely true that, once you start down that slope, not only does it become more and more slippery as you go, but just about everyone who gets nailed for this sort of thing will tell you that, at the time, it didn't feel like they were crossing a line. It felt like business as usual.

I can give you a long, long list of examples of top executives who should have known better but didn't. And, for the most part, they're not bad people, either. Examples:

Remember all the stock option backdating scandals of four or five years ago? Two high-ranking Apple executives went down for that. The only reason that Steve Jobs didn't is because his options were underwater and he traded them in on restricted shares and therefore never benefited from the backdating. He also claimed he wasn't aware of the financial reporting implications. Also he was Steve Jobs.

The Galleon insider trading scandalsnagged top executives from IBM, Intel, and AMD. What's ironic about those particular folks is that they never benefited from the material information they leaked. They were just blabbing like little school boys to their friends about big, upcoming acquisitions and earnings surprises. Bob Moffat, a senior vice president at IBM who blew a long and distinguished career, cried at his sentencing, for God's sake.

Rajat Gupta, the former head of McKinsey and board director of Goldman Sachs and Procter & Gamble, was recently charged with passing inside information on Berkshire Hathaway's plan to invest $5 billion in Goldman to Galleon CEO Raj Rajaratnam before it was made public. I actually knew Rajaratnam when he was an analyst and later president of Needham. I remember him telling me he was leaving to run a hedge fund. I wished him well. Who knew?

Then there's Eliot Spitzer who, as New York Attorney General, famously championed ethics in government, fought Wall Street corruption, even went after prostitution, of all things. And after being elected Governor, the guy gets caught in a prostitution scandal and is forced to resign. Did he think the laws applied to everyone but him, or was he just doing what benefited him all along? What do you think?

The foxes are guarding the hen house

Look, there are three things going on here. One, you can't teach morality to grown, successful men and women. They either have it or they don't. Two, the business world is absolutely full of ethical gray areas and slippery slopes that, at the time, feel remarkably like business as usual. Three, government regulators and prosecutors have far more skin in this game than anyone wants to admit. And it's never a good idea to have foxes guarding the hen house.

Put them all together, and you've got one big, hairy dilemma that I like to call the real world. Like it or not, you're living in it.