How to Stop Psychopath CEOs from Looting and Destroying Their Own Companies
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Rather than regulation, insurance screening would be guided by free market capitalism. Insurers have a strong self-interest to limit risk, and a clear legal obligation to act in the interests of their investors. Shareholders of insurance companies should be demanding answers as to why the companies they are investing in are not using the most up-to-date science to limit exposure to costly risk.
A 2012 study by the Association of Certified Fraud Examiners found that companies lose fully five per cent of revenues to employee fraud each year, totaling $400 billion in the U.S. and $3.5 trillion worldwide. Scams perpetrated by executives or owners were three times more costly than those by managers, and nine times more than employees. Fraud in the banking and financial sector was more common than any other industry surveyed.
These rates are also rising. A survey of 500 Certified Fraud Examiners found that between 2008 and 2009, workplace fraud incidents increased by 55 per cent, and losses by 49 per cent. Almost 90 per cent of these experts felt that fraud levels would continue to rise in the future.
There will of course be inertia within the insurance industry to address this issue, especially amongst early adopters who do not want to be put at a competitive disadvantage. Yet until psychopathic screening becomes the industry standard we will continue to build our global financial house on sand -- an obvious risk to the world at large and insurers in particular.
They say there's no free lunch in this world. Yet a small number of abnormal individuals feigning free market ideals have racked up a towering tab that future generations will struggle to pay off for decades to come. This is both unacceptable and unsustainable. We have the tools to start excluding people incapable of behaving responsibly from some of the most powerful positions in the world.
We need to stop ignoring this problem and start solving it. The world will be a far better place for it.
Mitchell Anderson is a frequent contributor to The Tyee.