In his article ‘The Bathsheba Syndrome: When a Leader Fails’ , Donelson Forsyth considers the moral failures of those who are powerful.

The failure may be illegal, as in the case of Enron and the like, or it can be a perceived failure of morals where leaders behave to norms that are well outside the wider society’s expectation of moral norms. This problem can be exacerbated when an influential stakeholder group, such as institutional fund managers, behave to the same set of norms as out-of-kilter company leadership.

A recent example of this reported in FTfm, was the news that the chief executives of the world’s largest fund management companies received bonuses that were on average 15 times larger than their salaries last year. This compares poorly even to the traditional accepted home of greed, investment banking, where the chief executives of the five largest US lenders received variable pay that was on average only 10 times larger than their salaries last year.

Now, there may have been a case to be made for such levels of pay if the fund managers had been shooting the lights out in performance and producing spectacular returns to their investors. But they weren’t, with many articles written about active funds underperformance, particularly according to Standard & Poor’s SPIVA report.

So fund management companies, which have investment products that underperform their benchmark indices, allow their chief executives to receive bonuses that were on average 15 times that of their salary. No wonder there is a tacit acceptance of chief executives of major companies receiving bonuses even when the company they run has a downturn in performance, even though studies show that the higher a CEO gets paid the worse the company does over the next three years.

This self-reinforcing belief system between influential fund managers and company chief executives shows just how financial elites suffer from the same moral groupthink. Performance doesn’t seem to matter, the elites still believe they deserve such high levels of remuneration, which is light years away from most performance management conversations for employees further down the food chain.

Hollander and Offerman suggested that the power that is accrued with higher management insulates them from feeling troubled by the harm they inflict on others and they feel that they have earned the right to deviate from their principles.

And if we, as their ultimate owners, say nothing then we accept the behaviour as a norm and nothing will change.