It was not always the case that Gretchen Morgenson’s job covering financial news at The New York Times, “meant essentially that I was becoming a crime reporter.”

Morgenson, a Pulitzer Prize-winning business and financial editor and columnist, recalled at the recent Wharton Leadership Conference that a great deal of news coverage from the 1980s and 1990s involved companies that were prospering by “doing the right thing.” While she believes many such ethical companies still exist, Morgenson said that nowadays, it seems that nearly every month some new scandal comes to light.

“You could say that’s good for me — it gives me plenty of material. In fact, I’m drowning in material,” quipped Morgenson, who added that she views a failure of corporate leadership as the main cause of this state of affairs. “True leadership is sorely lacking at some of our most esteemed organizations,” said. This is despite today’s big focus on the concept of leadership and its development, she noted. (Her recent search under “leadership” on turned up 22,424 titles.)

Morgenson recapped a litany of the past decade’s corporate financial debacles, referring to it as a “trend” that she called “increasingly disturbing”: “The giant accounting frauds that took down companies in the early 2000s, the corrupt brokerage firm research that harmed so many investors, the Libor [London Interbank Offered Rate] rate-fixing scandal that cast doubt on the basis for trillions of dollars of fixed income instruments.” And of course, said Morgenson, there was “the mother of them all” — the 2008 mortgage crisis, which she called “a debacle so big and so devastating that I wound up writing about it for seven years.”

Each of these crises was larger than the one before, said Morgenson, and all raise serious questions about some of society’s “most revered institutions.” What she finds most troubling is that among the executives at the core of these events, “accountability has been AWOL.”

Crises Born in the USA

Morgenson drew a parallel between the lack of accountability she saw during the mortgage crisis and a similar situation she sees in the current GM recall scandal. She described former U.S. Attorney and Lehman Brothers bankruptcy examiner Anton Valukas’s investigative report on the automaker’s failure for over a decade to take action on a faulty ignition switch linked to at least 13 deaths as revealing “an ugly and shocking list of leadership failures.” Morgenson said the Valukas report sheds light on a corporate culture in which it was accepted practice to shrug off all responsibility for fixing a problem.

“Customers, investors, pensioners, employees and taxpayers all have been harmed in recent years by a reckless disregard at the highest levels of companies.”

“GM’s CEO Mary Barra herself said that individuals inside the company repeatedly failed to disclose the critical pieces of information that would have fundamentally changed the lives — if not saved the lives — of those impacted by the ignition switches,” noted Morgenson. “And, she said there was no demonstrated sense of urgency on the matter right up until this year.”

Much about the GM case rang familiar to her from her coverage of the financial crisis, Morgenson said. The automaker’s evident lack of interest in its customers’ well-being was similar, she added, to how America’s major banks and respected brokerage firms had behaved when they “either knowingly peddled toxic mortgages to their clients, or sold high-cost predatory loans to unsuspecting borrowers.” The financial institutions had viewed their customers as objects for their personal gain, said Morgenson. She quoted Christine Lagarde, the head of the International Monetary Fund, who referred to the mortgage crisis in a speech last month: “Finance executives participated in scandals that violate the most basic ethical norms.”

Another similarity Morgenson highlighted was that the organizational structures of both GM and the financial firms appeared intentionally designed to shield executives from responsibility. While reading the Valukas report — and Morgenson said she read “all 300-and-something pages of it” — one piece of documentation jumped out: “At every meeting convened to discuss the ignition switch problems … no one at GM took notes. This left no record of who attended, of what was said or what follow-up had been recommended. It was a practice that seemed to me designed to avoid accountability.”

She cited an unnamed veteran law enforcement official, who told her that in his experience the organizational structure of large banks also seems intentionally designed to be impenetrable. “Without an insider guiding the way, he said, it has become much more difficult to determine which officials should receive subpoenas for documents, or information requests.”

‘It’s Not a Lie if it Makes Us Money’

Morgenson called some executives’ attitudes a “me-first approach” to business, and said that this constitutes the opposite of being a leader. Leaders, she noted, exhibit behavior that others find admirable and exemplary; behavior we can all aim to emulate. They don’t operate out of self-interest, leaving taxpayers to “serve as cleanup crew.”

Morgenson holds that being a “me-firster” is not only selfish and unethical, but is actually a threat to America’s democratic system. She believes that an “ethical tradition” is a necessary check to populist capitalism. “When you have senior executives walking away from disaster with hundreds of millions of dollars, leaving shareholders and innocent taxpayers to cover the tab, it becomes extremely dangerous,” she noted. “And as more and more jobs disappear from this country, the outsized pay amassed by corporate executives and Wall Street traders becomes even more polarized. This is especially so when taxpayers are forced to bail out companies. We are clearly in a bull market for corruption and bad conduct that I don’t think is good for our country.”

“When you have senior executives walking away from disaster with hundreds of millions of dollars, leaving shareholders and innocent taxpayers to cover the tab, it becomes extremely dangerous.”

According to Morgenson, there are several reasons that unethical behavior has become more commonplace. One is accumulated shifts over the years in corporate practices, such as those that encourage excessive pay for short-term performance. Another is a relaxed regulatory environment. Above all, she pointed to the absence of sufficient consequences for misdeeds. “This failure to prosecute high-level officials involved in the financial crisis has been the topic of much consternation over the past three or four years — and rightly so,” she stated. “Main Street paid a high price in this debacle, with millions of lost jobs, foreclosed homes and punishingly low interest rates for savers who did nothing wrong. But the key actors in the mess for the most part walked away from the wreckage unscathed. A perverse set of incentives like this does nothing to discourage bad behavior.”

Morgenson holds that some of today’s business professionals have rejected “a powerful social contract that many of their predecessors had once embraced.” She characterizes this as “a duty to others rather than simply to self.” According to this compact, “people in positions of power recognized that they held immense sway over investors, workers, and customers, and they agreed to hold themselves to a higher standard.” She said that this unwritten rule seems to have been supplanted by the idea that personal profit is the most important thing, and that the highest achievement is to have the biggest bank account. “Instead of asking themselves, ‘Am I going to cringe if this ends up on the front page of the Times?’, if [executives] can muster an argument that what they’re doing is highly profitable and not per se illegal, they go forth.”

On Morgenson’s desk at the Times is a New Yorker cartoon that she feels sums up this mindset: An executive at the head of a boardroom table tells the assembled group, “Remember, it’s not a lie if it makes us money.”

Is the GM Case Unique?

Is behavior like that of the GM executives unique in today’s corporate environment? Morgenson said she hopes so, but has her doubts. She referenced a piece by Ben Heineman, Jr., that recently appeared in The Corporate Counsel. According to Morgenson, Heineman,a former general counsel at GE and a senior fellow of the Program on Corporate Governance at Harvard Law School, commented on what GM’s corporate culture might say more broadly about problems in corporate America. He called the Valukas report “a classic study of the dangers of bureaucracy, divided responsibility, lack of initiative, failure to seize problems and solve them.” He indicated that the report would be instructive for corporations and business and law schools.

Morgenson also pointed to an “alarming” recent study of 250 financial services employees and executives — conducted by Labaton Sucharow, a law firm that represents whistleblowers — that suggested evidence of improper activities. Twenty-eight percent of those surveyed said they felt the industry does not put the interests of clients first, and 26% believe that the compensation plans or bonuses at their company actually incentivize employees to compromise ethical standards or violate the law. In addition, 17% felt that leaders in their firm were likely to look the other way if they suspected a top performer had engaged in insider trading. And almost a quarter of those surveyed said they feared retaliation if they were to report wrongdoing.

“At every meeting convened to discuss the ignition switch problems … no one at GM took notes. This left no record of who attended, of what was said or what follow-up had been recommended.”

“Customers, investors, pensioners, employees and taxpayers all have been harmed in recent years by a reckless disregard at the highest levels of companies,” stated Morgenson. “If the people who have created these disasters and profited from them are allowed to slink off into the night, then I think we will be confirming the suspicion that the paths of the powerful are protected, and that the little guy is left to fend for himself.”

An audience member asked Morgenson to talk about what could be done to stop the trend she described. “I find these things out and nothing changes,” she replied. “It’s absolutely exasperating to me.” She described writing recently, for example, about pension funds that are suing Standard & Poor’s and Moody’s for negligence in their ratings, yet paradoxically continue to require that bonds that they buy are rated by Standard & Poor’s and Moody’s.

For a start, investors have to get together and hold these individuals and organizations accountable, said Morgenson. “If [a firm runs] my money, they have a fiduciary duty to me to do the right thing.” She noted that boards of directors also need to change their thinking because many of them strive to maintain the status quo even when they have a duty to do otherwise. Wasn’t Morgenson just playing the role of the “comfortable critic?” asked the questioner. “What else can I do?” she responded. “No one’s going to invite me to be on a board.”

Morgenson was also asked if she agreed with Tim Geithner’s point in his recent book, Stress Test: Reflections on Financial Crises, that since many executives responsible for the mortgage crisis lost their jobs, or their stock fell, that this constituted being held accountable. (Geithner, president of the Federal Reserve Bank of New York from 2003 to 2009, and then U.S. Secretary of the Treasury until 2013, was a controversial figure in the mortgage crisis.) Morgenson strongly disagreed: “I think [Geithner’s] entire book is skewed by the vision [that] ‘These were just really good guys and gals who just lost their way.’ He uses a phrase that I love: ‘We really didn’t want to have to conduct Old Testament punishment.’ Well, I’m a big fan of Old Testament punishment.”