Extreme narcissistic organizations are unable to behave ethically because they lack a moral identity. While such organizations are not necessarily unethical intentionally, they become self-obsessed and use a sense of entitlement, self-aggrandizement, denial, and rationalizations to justify anything they do. Extreme narcissistic organizations might develop formal ethics programs, but such programs will have little effect on behavior.

Organizational participants learn that "getting ahead" in organizational life comes from dramatizing a fantasy about the organization's perfection. The fantasy is the return to narcissism, in which the organization and its highest participants are seen as the center of a loving world. Since the return to narcissism is impossible, orienting the organization to the dramatization of this fantasy means that the organization loses touch with reality. The result is organizational decay-a condition of systemic ineffectiveness. Organizational decay is illustrated through the (...) case of General Motors. Specific dimensions considered are: commitment to bad decisions; advancement of participants who detach themselves from reality and discouragement of reality-oriented participants who are committed to their work; creation of the organizational jungle; isolation of management; development of a hostile orientation to the environment; transposition of work and ritual; loss of creativity; dominance of the financial staff; development of cynicism or the loss of reality; and overcentralizatior. Organizational decay may be compared with the consequences of hubris. (shrink)