Fast growing economies, such as those found in frontier and emerging markets, have a symbiotic relationship with fast growing companies. Good company performance drives economic growth which in turn drives business. The flip side of the coin is that economic downturns hit companies hard. Both of these scenarios are fertile ground for the development of a toxic corporate culture.
In a fast moving economy, as witnessed in the UAE in 2003–2008, it can be difficult to differentiate between corporate performance due to management skills and performance due to growth in the economy. This environment favours the narcissist manager who believes that every positive thing that happens is due to him and anything negatives is due to other factors. As the narcissist manager trumpets his supposed successes to the board the more professional, and honest, managers who correctly attribute a large part of the performance to the economy are seen as underachievers. The predictable result in extreme growth is that the narcissistic manager rises to the top.
Incredibly the same result happens in difficult times, such as 2009–2012. When everything is going badly the honest managers will take responsibility for their mistakes. The narcissistic manager, on the other hand, will not only absolve himself of all blame he will use it as an opportunity to blame others around him to discredit them and push them out of the corporation. Once again we see the narcissistic manager rise to the top in the other extreme of an economic slump.
The rapid cycling of the frontier and emerging economies results in a high number of narcissistic managers running the companies in the economy. A narcissist, who must at all costs always look perfect to the world, will automatically seek to control all information flows between managers, to the board and to the public. The only way the narcissistic manager can do this is by breaking down the pillars of corporate governance, such as distributed authority, multiple information flows and inclusive management structures.
The end result is a power culture that is divisive with the narcissist retaining all authority and compartmentalising the business so that he can better control information flows. Decision making is rarely, if ever, taken in minuted meetings but always one on one behind locked doors. Employees are only ever included to be “communicated” at. This culture is toxic to the company, but due to the stranglehold on communication the board and shareholders rarely have a clue as to what is going on.
Boards need to regularly check what kind of culture exists. Is authority formally distributed via a matrix? Is decision making inclusive? Are there management minutes? Is there an independent HR audit to collect employee feedback? These and many other easy to check behaviours can quickly identify any trouble spots.