A Matter of Perspective

A new study offers powerful evidence on the importance of listening.
Researchers at Northwestern University, New York University and Stanford University noted that most messages can be interpreted in multiple ways, and effective communication requires taking the knowledge and perspectives of one’s audience into account.
In the study, “Power and Perspectives Not Taken’, researchers asked participants to draw an “E’ on their forehead. Those with a high sense of personal power tended to draw their E’s in a “self-oriented” direction, i.e., from their perspective. In fact, they were three times as likely to do so as the “low power’ study participants – who, without prompting, tended to draw that same “E’ on their forehead oriented so that others could read it.
“Self’ Awareness
What’s even more interesting is how easily participants were steered into a feeling of personal power, shifting their perspective. In the study, students were simply asked to “recall and write about a personal incident in which they had power over another individual or individuals.” This exercise was apparently enough to momentarily elevate their perception of themselves as powerful, and presto: They drew “self-oriented” Es on their foreheads.
The researchers also conducted a test by giving participants a message, and asking them to interpret how a friend of the speaker might perceive the message. The message on its face seemed sincere, but privileged background knowledge about the speaker’s intentions suggested a sarcastic interpretation.
The scenario ran like this; participants were given a scenario in which they and a colleague had gone to a fancy restaurant recommended by the colleague’s friend but had a particularly poor dining experience. The next day the colleague had sent an email to the friend stating only that: “About the restaurant, it was marvelous, just marvelous.’ Participants were asked to respond to the question, “How do you think the colleague’s friend will interpret the comment?’. There was no information in the email itself to suggest anything other than sincerity. However, if participants anchored on their privileged knowledge of the speaker’s intention then they would think that the friend would interpret the message as sarcastic in nature.
High-Powered Perspectives
High-power participants thought the message would be perceived as more sarcastic by the naïve recipient than did low-power participants – a finding that researchers said supported their prediction that power leads individuals to anchor too heavily on their own vantage point, insufficiently adjusting to other’s perspectives.
In a follow-up experiment, participants read that they and a colleague had gone to a restaurant where the colleague’s friend always had poor dining experiences. They, however, really enjoyed the meal. The colleague sent the friend the same “marvelous, marvelous’ email, and participants predicted how the friend would interpret the comment using the same sarcastic-sincere scale from above. This time the “inside’ information implied sincerity, but the naïve listener would have inferred sarcasm.
Here again, high-power participants were significantly more anchored on their personal knowledge. Specifically, high power participants thought that the message recipient would interpret it as more sincere (in accordance with their own personal perspective) and less sarcastic than did low-power participants, who were apparently more sensitive to the fact that their friend always had a bad experience.
Power “Corrupts?’
Of course, the studies weren’t conducted on people with real power – just students with a primed sense of it. Still, based on the responses, the researchers concluded that, rather than exhibiting a conscious decision to ignore others’ perspectives, “we believe that power leads to a psychological state that makes perspective-taking less likely.’ In essence, the experiments suggest that “high-power individuals are less focused on the meaningful psychological experiences of those around them.’
The researchers opined that since powerful people by definition tend to have control over scarce resources, and are thus less dependent on other perspectives, they don’t tend to think about the perspective of others. Others are denied that “luxury’ due to the constraints of time, or the expectations of their position.
They also cautioned that this lack of perspective-taking may also sew the seeds of power’s demise. In essence, when disregard for the concerns, emotions, and individuality of others persists, “the powerful can start to inspire enmity, bitterness, and incipient rebellion. The inverse relationship between power and perspective-taking may allow the powerful to accomplish short-term goals but lead to the long-term loss of power.’
You can read the full report HERE

Plan Adviser Giving Investment Advice is a Fiduciary

A brokerage firm that gave investment advice to a profit sharing plan for a fee is considered a fiduciary under the Employee Retirement Income Security Act (ERISA), according to a court ruling.

The U.S. District Court for the Western District of Michigan rejected brokerage firm Edward D. Jones & Co.’s argument that it did not qualify as a fiduciary for the Rycenga Homes Inc. profit-sharing plan under ERISA because it did not have discretionary authority over the plan.

Judge Joseph Scoville wrote in his opinion that another ERISA provision holds the brokerage firm accountable as fiduciary. “Although it is certainly true that the possession of discretionary authority and control is generally the benchmark for fiduciary status under ERISA, it is also true that, in the special case of those providing investment advice, the existence of discretionary authority is not necessary to a finding of fiduciary status,” he wrote.

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And even though the brokerage firm did not directly aide Rycenga’s former trustee Ronald Retsema in taking illegal loans against the plan that amounted to more than $2.1 million, it failed in its duties as an investment adviser by turning a blind eye and not inquiring about the loans. The court also said that the brokerage firm might have breached its obligations as a co-fiduciary by not making a reasonable effort to remedy the damage to the plan done by the trustee.

Securities Broker Provided Investment Advice

Rycenga created a 401(k) profit-sharing plan for its employees in 1984, and named the corporation’s president Retsema as the sole trustee of the plan from 1984 to 2004, with Edward D. Jones as the securities broker.

During the two decades that Edward D. Jones acted as broker to the plan, it had no plan administration responsibilities, but did render investment advice periodically to Retsema in regard to the plan’s asset allocations in return for commissions, service fees and revenue-sharing fees.

In 2001, one of the third party administrators for the plan learned of the prohibited loan transactions and suggested that Rycenga stop borrowing from the plan. In 2004, plan participants called the investment representative at Edward D. Jones who had been advising Retsema to tell him they suspected Retsema had been using plan assets for the benefit of his business, at which point the representative immediately reported the situation and terminated all check-writing privileges on the account.

The lawsuit against Edward D. Jones was originally filed by 50 former employees of Rycenga, but in November 2005 the plan’s successor trustee, David Ellis, was substituted as a plaintiff. Default judgment was entered against Retsema and Rycenga, leaving only the claims against Edward D. Jones.

The charges brought by the Rycenga profit-sharing plan claim that Edward D. Jones is liable as a fiduciary of the plan and a co-fiduciary.

No Direct Fiduciary Breach

After finding the brokerage firm qualifies as a fiduciary under ERISA, the court threw out Ellis’s contention that Edward D. Jones was a fiduciary because it had ability to terminate Retsema’s check-writing ability. “If accepted, plaintiff’s argument would include within the definition of fiduciary for ERISA purposes banks and all other depositories, who merely hold plan assets,” the court said.

The court also rejected Ellis’s claim that Edward D. Jones was liable for a direct fiduciary breach for allegedly actively participating in the illegal loans, but said the firm may have breached its duty by not inquiring about the large and increasing cash investments Retsema made to the plan that enabled him to take the loans.

“Even viewing the scope of defendant’s duty as extending only to the narrow issues of plan investment and diversification, a rational trier of fact could conclude that a reasonably prudent person should have inquired into the nature of the cash investments, if only to reach a sound conclusion on the need for diversification of other investments,” Scoville wrote.

The case is Ellis v. Rycenga Homes Inc., W.D. Mich., No. 1:04-cv-694, 3/15/07.

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