At the peak of his success Bernie Madoff was described by friends as an honorable person; clients often referred to him as warm and charming; and colleagues called him a cherished mentor (Forbes, 2009). After graduating from Hofstra University, Bernie Madoff pursued his entrepreneurial interests eventually leading him to the start of his own firm, Bernard L. Madoff Investment Securities, LLC. His success lead to a reputation of extreme intelligence, integrity and respect which resulted in his appointment as the chairman of NASDAQ. His firm offered reliable returns and become one of the most sought after investment firms attracting billionaires from around the world. Celebrities such as Katie Couric, Kevin Bacon, Kyra Sedgwick, Steven Spielberg and Zsa-Zsa Gabor all flocked to Bernie Madoff noting his knowledge, charm and genuineness(Forbes, 2009). Bernie Madoff’s esteemed reputation was enhanced through his prominent philanthropy; he served on the boards of numerous nonprofit institutions, many of which entrusted his firm with their endowments. Madoff donated over $6 million to lymphoma research; donated large sums of money to political causes; undertook charity work for foundations such as the Gift of Life Bone Marrow Foundation; and he made philanthropic gifts through the Madoff Family Foundation, a $19 million private foundation which and his wife managed. Over his career, Bernie Madoff donated money to hospitals, theatres, cultural centers, education, and health charities in large sums (Forbes, 2009).
From the trait perspective, charisma is the combination of dominance, desire to influence, self confidence, and strong moral values (House, 1976). Personality refers to an individual’s traits, or predispositions to behave in a particular way across situations (Levy, 2013).Traits are people’s characteristic behaviors and conscious motives, combined they form personality types (PSY, 533). Generally, a trait is a description of behavior that is compiled through observations and a personality type is a qualitative label of a person that describes the person as a whole. Considering these definitions, and what was experienced and observed by so many of Bernie Madoff, it once could have been argued he had a desire to influence, was self confident and had strong moral values. Until his demise, Bernie Madoff was regarded as a successful charismatic leader who had a positive, lasting impact on those he served, personally, professionally, and charitably.
The APA ethics code has five principles: A – Beneficence and Nonmaleficence; B – Fidelity and Responsibility; C – Integrity; D – Justice; and Principle E – Respect for People’s Rights and Dignity. Beneficence and nonmaleficence guides psychologists to strive to benefit those they work with and to do no harm; to know their actions affect the lives of others and guard against personal, financial, social, organizational or political factors that might lead to misuse of their influence (APA, 2010). Fidelity and responsibility guides on professional responsibilities to society; professional standards of conduct; obligations; and to avoid exploitation of those they serve. It should also be noted that the Securities and Exchange Commission (SEC) has its own ethics code that investment brokers are required to adhere to both ethically and legally; the SEC ethics code has similar themes of the APA ethics codes and more. Principle C, Integrity, promotes honesty and truthfulness; psychologists do not steal, cheat, or engage in fraud. Principle D, Justice, states persons should benefit from the contributions of psychology, therefore unjust practices should not occur. Respect for people’s rights and dignity speaks to the protection of rights and welfare of persons, communities and the vulnerable.
For many years based on observations and experiences many would have taken the position Bernie Madoff adhered to the APA’s five principles and that he was an ethical person. Through his charitable donations and service he would have been considered doing good for others, giving back to good causes such as medical research and educational funding; clients and communities were benefiting from his hard work and desire to give back. Through his professional work, and given his firm was known for reliable investment returns, he would have been considered to be an honest person, acting in the best interest of his clients and adhering to his professional standards. It appeared Bernie Madoff guarded against financial harm of his clients, did not use his power and position to exploit others including vulnerable populations; he was a trusted advisor to many. The dark side of Bernie Madoff came to light on December 11th, 2008 when he was arrested for securities fraud. Bernie Madoff for years could have arguably been deemed a charismatic leader; in reality he succumbed to the temptation of money, extreme wealth, and power.
Genuine charisma has an aspect of morality in it; pseudo-charisma is a dangerous personality quality for a leader to have. Unfortunately, there is a sizable population of leaders with pseudo charisma (PSY, 533). Pseudo-charisma is the result of a combination of personality traits that can mimic true charisma. For example, there is a correlation between extraversion and narcissism, these traits overlap. Extraversion is a trait most associated with leaders and because a subset of extraverts are likely to be narcissistic there will be some people who rise to the top, appearing to be charming, warm and concerned for others, even though they have an excessive amount of self interest and worth and are focused on their own wants. Madoff serves as an example of pseudo-charisma. The reality of Bernie Madoff tells us he was a dangerous and unethical person who was very self serving at the cost of so many people. Through his extensive fraudulent activities and ponzi scheme Madoff violated all APA ethics codes and his own professional codes and laws of the SEC. Madoff did not work for the benefit of those he served professionally, personally and charitably; in fact he caused enormous harm to his clients, family, friends, colleagues, and the charities he served. He deliberately failed to guard against personal, financial, social and organizational harm of others. Madoff used his position and power to exploit thousands of people. A large portion of his career lacked honesty and truthfulness as Madoff stole millions of dollars from clients, companies and vulnerable populations by routinely engaging in fraud. Clients were robbed of billions of dollars and some were left devastated as their entire net worth was gone. The charities (mostly for the benefit of vulnerable populations) that entrusted Madoff to handle their finances were also left devastated; and several of the charities the Madoff Foundation contributed to were left without necessary funding; this impacted communities as well.
In many ways charisma is indispensable for leadership, it is an effective trait to keep followers engaged. However, pseudo-charisma has long term consequences. Charm is based on emotional manipulation and therefore can defy rational reasoning. As the details of Madoff’s ponzi scheme were revealed it was shocking to learn how long he got away with his scheme and its scale. Were people emotionally manipulated by his charm and therefore less likely to be more suspicious? It appears for Bernie charisma could have been addictive: the more money he made, the more money his clients thought they were making, and the more philanthropy Madoff engaged in the more adored he became; he appeared to crave the attention, stature and life style which perpetuated the severity and scope of his ponzi scheme. All humans are entitled to make mistakes, even unethical mistakes. However, when making unethical mistakes becomes a pattern of behavior for a person they are regarded as an unethical person. Bernie Madoff was fully aware of what he was doing; the scope and duration of his fraud reveals the calculated and malicious intent of his unethical actions. Bernie Madoff is an unethical person. Despite the dangers, the dark side of charm is more often than not overlooked. On December 11th, 2011, the three year anniversary of Madoff’s arrest, his son Mark Madoff committed suicide. In an email to his wife Mark stated he could not live with the public shame of his father’s crimes. Perhaps, for Bernie Madoff the suicide death of his son spoke to the depths of his unethical and devastating behaviors and actions.
American Psychological Association. (2010). Ethical Principles of Psychologists and Code of Conduct. Retrieved from http://www.apa.org/ethics/code/
Forbes (2017). Retrieved from https://www.forbes.com/2009/03/12/madoff-guilty-plea-business-wall-street-celebrity-victims.html
House, R.J. (1976). A 1976 theory of charismatic leadership. In J.G. Hunt & L.L. Larson (Eds). Leadership: The cutting edge (pp. 189-207). Carbondale: Southern Illinois University Press.
Levy, P.E. (2013). Industrial organizational psychology: Understanding the workplace. New York: Worth.
Myers, D.G. (2013). Psychology: In modules. New York: Worth.
Northouse, P.G. (2015). Leadership ethics. In Leadership: Theory and practice. Washington, DC: SAGE.
PSY 533. (2017). L09 Five-Factor Model of Personality. Retrieved from https://psu.instructure.com/courses/1834796/pages/I09-five-factor-model-of-personality?module_item_id=21902247
U.S. Securities and Exchange Commission (2017). Investment Advisor Codes of Ethics. Retrieved from https://www.sec.gov/rules/final/ia-2256.htm