Gordon Gekko - Corporate Psycopath; Why do people view him as a hero?

Peter Allsopp
Aug 31, 2018 · 8 min read

Wall Street is a film about a young ambitious stockbroker who is mentored and corrupted by a legend of Wall Street, who he then betrays by assisting the SEC to jail his former idol.

Gordon Gekko portrayed by Michael Douglas is an example of a “corporate” psychopath, who manipulates, lies and cheats to make money without regard to the damage his actions cause.

The slash-and-burn frenzy of this type of trader and the cathartic effect that the pursuit of extreme wealth and power can have on the soul is encapsulated in the portrayal of Gekko who is oddly seen as a hero by some including many aspiring Wall Street traders of the day.

Famously Gekko addresses a shareholders’ meeting of Teldar Paper, a company he is planning to take over:

“…greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind”

Research has found that those motivated by greed tend to abandon moral principles in their pursuit of self-interest. Financial incentive causes people to be more willing to deceive and cheat others for personal gain. Importantly greed leads to a reduced concern for how your behaviour affects others and motivates greater unethical action.

Wall Street begins in 1985, with Bud Fox a junior stockbroker wanting to work with his hero Gekko a legendary Wall Street player.

Bud calls Gekko’s office fifty nine days in a row trying to land an appointment. On Gekko’s birthday Bud arrives with a box of Gekko’s favourite contraband Cuban cigars. Impressed, Gekko grants Bud an interview but is unimpressed with the stocks Bud pitches him, in desperation Bud provides him with some inside information he has learned in a casual conversation with his father, Carl, leader of Bluestar Airlines maintenance workers union.

Intrigued Gekko places an order for Bluestar stock and becomes one of Bud’s clients. Gekko gives Bud some capital to manage, but without inside information the other stocks Bud selects lose money.

Gekko tells Bud to spy on Sir Lawrence Wildman and learns that Wildman is making a bid for a steel company. Through Bud’s spying, Gekko makes money, and Wildman is forced to buy Gekko’s shares to complete his takeover.

Bud becomes wealthy, enjoying Gekko’s promised perks, including a penthouse on Manhattan’s Upper East Side. As a result of the large commission fees Bud is bringing in he is promoted and given a corner office with a view.

Bud continues using inside information recruiting friends as straw buyers to provide more income for him and Gekko. Several of these trades attract the attention of the authorities.

Emboldened by his success Bud pitches Gekko the idea to buy Bluestar Airlines with Bud as president, using savings achieved by union concessions and the overfunded pension to expand the airline. Bud’s father won’t support the plan but is able to get the unions to push for the deal.

However Bud learns afterward that Gekko plans to dissolve the company and strip Bluestar’s assets in order to access cash in the company’s pension plan, leaving the entire Bluestar staff unemployed. Bud would become wealthy but is angered by Gekko’s deceit and after his father suffers a heart attack resolves to foil Gekko’s plans by driving up Bluestar’s stock before manipulating it back down.

Bud and the other union presidents meet secretly with Wildman and arrange for him to buy a controlling interest in Bluestar at a significant discount. Gekko dumps his stock in the company on Bud’s advice after realising it’s plummeting.

Gekko learns on the evening news that Wildman is buying Bluestar and that Bud has engineered the entire scheme; the following day Bud is arrested for insider trading.

While wearing a wire to record the encounter Bud confronts Gekko who physically assaults and berates him for his role with Bluestar accusing him of ingratitude for several of their illicit trades. Bud later turns the tapes over to the authorities.

Who is Gordon Gekko

Gekko was modelled on Wall Street Traders like Ivan Boesky, Michael Milkin, and Carl Ichan, among others, in the late 60s and early 70’s Boesky worked for several stock brokerage companies in New york city before starting Ivan F. Boesky & Company, his own stock brokerage company, with $700,000 of money from his wife’s family.

Boesky made his fortune in arbitrage — speculating on corporate-takeovers betting that a stock will make a profit if the deal goes through. The art is to measure the risk faced if the deal fails and catches them with stock that nobody wants — either because the target resists, the courts or the Government step in or the deal disintegrates. How much they can find out about a situation often spells the difference between success and failure.

At the heart of all arbitrage dealings is information, in 1985 it was reported that Boesky was willing to pay for every scrap of information, no matter how seemingly inconsequential. Others on Wall Street declared that

‘’ He’s the best in the business….He’s made more money than any of us and that makes him the best ‘’

In 1985 Boesky was the commencement speaker for the School of Business Administration at the University of California, Berkeley. He said to his audience:

``Greed is all right, by the way. I want you to know that. I think greed is healthy. You can be greedy and still feel good about yourself.”

This statement was greeted with laughter and applause by the graduating class.

Studies have shown that greed is a determinant of unethical behaviour; this simply confirms observations as old as Plato and Aristotle who deemed greed to be at the root of personal immorality, as it drives desires for material gain at the expense of ethical standards.

By 1986, Boesky had had amassed a fortune of more than US$200 million through arbitrage and appeared on the cover of time magazine.

During 1987, a group of partners sued Boesky over what they claimed were misleading partnership documents, the SEC investigated him for making investments based on information received from corporate officers. Boesky cooperated with the SEC and as a result of a plea bargain received a prison sentence of three and a half years and a fine of US$100 million

Although he was released after two years, he was permanently prohibited from working with securities.In a plea bargain, Boesky told the US authorities of the share dealing arrangement involving Guinness Breweries take over of the drinks Company Distillers.

In the Guinness share trading fraud Guinness shares were inflated in price in order to assist its takeover of a much larger company the Scottish drinks maker Distillers. The Distillers board favoured Guinness as partners and were facing a hostile bid by Argyll. The Guinness executives purchased and guaranteed to cover any losses in the value of shares in Guinness plc.enabling Guinness to take over Distillers, a much larger company.

All four were convicted of dishonest conduct of share support in the Guinness Affair. One of the board members had invested US$100 million with Boesky to invest in shares; the fee for managing this amount was Boesky’s reward for supporting the Guinness share price

Milken

Michael Milken developed the market for high- yield bonds (“junk bonds”). Becoming the highest paid banker on Wall Street reportedly Milken condoned unethical and illegal behaviour viewing the securities laws, rules and regulations as a hindrance to the free flow of trade. Under scrutiny from the SEC from 1979 onward Milken was indicted for racketeering and securities fraud in 1989. Agreeing to a plea bargain he was sentenced to ten years in prison fined $600 million and permanently barred from the securities industry by the SEC. His sentence was later reduced to two years for testifying against his former colleagues and good behaviour

Gekko’s insists, “I am not a destroyer of companies — I am a liberator of them!” however his business model is built on asset stripping where a business is bought in order to be broken up and profiting from the sale of their parts — particularly the retirement benefits of hard working men and women.

Icahn

Carl Icahn, whose hostile takeover of Trans World Airlines (TWA) was the inspiration for Gekko’s battle over Bluestar, Icahn bought more than 20 per cent of TWA stock in 1985, (with union support) and took it private, enriching himself with a $469 million payment. Icahn then loaded TWA with $US540 million in debt. However his decision to sell the airlines valuable London Routes for $US445 million irreparably damaged the airline.

In 1993, Icahn resigned as chairman of TWA after negotiating the “Karabu ticket agreement,” allowing him to buy any ticket that connected through St. Louis at significant a discount. Although it precluded him from selling tickets through travel agents, he established Lowestfare.com and sold the discounted tickets online. It has been estimated that the Karabu deal had cost TWA $US100 million per year.

A small, preliminary study found that 4 per cent of the corporate managers tested– as opposed to 1 per cent of the general population– had significant psychopathic traits. Gekko’s use of insider information, his manipulation and exploitation of others for his own gain, his lack of remorse and empathy for his victims and other unethical acts make him a prime candidate for inclusion in the 4 per cent.

Many people have mythologised Gordon Gekko to the point that he is no longer a villain but a hero — which says something about the people who think that a character that is an aggressive, shallow, money seeker is a role model.

Where are they now…

After a couple of years in prison, Milken tried reinventing himself into a leader in business education and crusader against cancer after suffering from prostate cancer. He describes himself as a medical research innovator, philanthropist and financier.

Boesky has shunned the limelight and became involved in projects helping the homeless.

A noted philanthropist Icahn has donated money for medical research, education and for housing the homeless. As an investor Icahn has taken an increasing interest in entertainment-related ventures including Netflix. Following his investment in Donald Trump’s troubled casinos Icahn has forged a close relationship with Trump. Icahn became his “special adviser” on issues pertaining to regulatory reform following inauguration but stepped down after concerns were raised about conflicts with his continuing investments.

In the sequel to Wall Street Money never sleeps Gekko gains credibility through his London firm’s astounding success: by correctly predicting the coming financial collapse, Gekko traded the market in such a way that he has turned the $100 millions he fleeced from his estranged daughter’s trust account by manipulating her boyfriend into an incredible sum in excess of $1 billion, he feels that giving back that relatively small amount from his empire would be an act of charity.

Gordon Gekko is asymptomatic of a culture that it’s more important to do what’s profitable rather than what’s right. An investor must tolerate bad behaviour to get good returns.

However, research reveals that unethical behaviour does not merely disgust the public and result in bad customer service investors expect decent, though not perfect, corporate ethics. Which is at odds with the laudatory view that some in the banking community have for Gekko and those he is modelled upon.

Peter Allsopp

Written by

Independent creative media lawyer; WIlls & Estates; Distributed Ledger Technology expertise