Laurence Small, the former head of the Smithsonian Institution, finally resigned in the wake of revelations that he spent public funds like it was Monopoly money. Still, his irresponsible conduct, and the willingness of many of his colleagues to defend it, once again raises a persistent question that goes far beyond Small. It embraces former American University president Benjamin Ladner, whose personal spending habits using tuition funds make Small look like Mr. Thrifty; the looting of Tyco by CEO Dennis Kozlowski, who purchased, among other things, a $6,000 shower curtain with company funds; and so many other examples of successful leaders in business, politics, sports, entertainment and non-profits who come to the conclusion that they can spend, say and do whatever they want. The question: what disease of the conscience causes this behavior? Can it be prevented? Is there a cure, other than disgrace, dismissal, or imprisonment?

A review of Small’s case is in order. In 2000 Small became the eleventh Smithsonian secretary, earning him well over $900,000 a year in total compensation. He also received compensation for making his house available for official functions, adding another $1.15 million to his total over the last six years thanks to some creative accounting on his part. A recent report by the Smithsonian inspector general questioned nearly $90,000 in unauthorized spending by Small from 2000 to 2005, including charges for private planes, the tab for his wife to go to Cambodia, lavish catered meals, floral arrangements and expensive gifts. When he needed to fly to San Antonio on business, he charged the Smithsonian $14,509 to rent a jet rather than take a commercial flight. Although Small was required to abide by Federal Travel Regulations, which mandate that federal employees use government travel rates, he ignored them, spending, for example, approximately $27,000 on car service over the course of the 6-year period reviewed by the inspector general. These and other expenses were charged to Smithsonian accounts that officially prohibited them. When a rule stood in the way of some expenditure, Small’s favorite solution was to change the rule.

As with the regents at American University, most of whom looked the other way when confronted with Ladner’s profligacy, the Smithsonian’s board only raised alarms after the Washington Post published the IG’s report. Even then, many of them didn’t see what all the fuss was about. The comments to the Post of Roger Sant, chairman of the audit committee and the executive committee, in defense of Small and his compensation speak volumes:

I think that any of that [the spending abuses]is far outweighed by his performance as secretary in the past seven years. On any measure I can think of, his results have been outstanding…The guy took over a place that was really sort of falling apart There was hardly any fundraising capability. He’s raised almost a billion dollars personally. What more could we have asked for as a regent?

Eureka! We have found the dreaded virus, and perhaps its origin! Small earned the right to spend public money like a drunken sailor, you see, because he was so good at his job! Sant, who was previously an executive with the Marriott Corporation, is simply repeating the predominant ethic of the corporate board room, not to mention pro sports locker rooms and the offices of elected officials. This is the germ behind U.S. CEOs’ absurd salaries, a sense of entitlement that overwhelms any common sense ethics or logic. And when an individual comes from this environment into the non-profit sector, as Small did (he took over the Smithsonian after serving as president and chief operating officer at Fannie Mae, where he earned $4.2 million in his final year), they carry the contagion with them. It is the “star syndrome,” in which individuals are held to the rules, regulations and ethics of an organization or profession with vigor that is directly inverse to their accomplishments in the job.

Yes, our mystery disease is none other than the same ethical illness that makes law firms ignore sexual harassment by their biggest rainmaker, that caused Republicans to ignore the rampant ethical violations of Tom DeLay, that makes the San Francisco Giants tolerate Barry Bonds while he stays just one step ahead of the law, that guarantees that Michael Jackson will never starve as long as he can sell records.

The star syndrome is destructive to an organization’s morale and integrity, and it is unfair to its employees, customers and supporters. But even though it often ends in catastrophe when a “star” becomes so arrogant, self-centered and careless that he brings embarrassment and scandal down on everyone connected to him, the star syndrome is hard to resist. It takes courage and principle—ethical values—to risk losing a high level performer who repeatedly breaks the rules. So many others will be willing to accept the star and his talents on whatever terms he wants. It is so much easier to just bend the rules or eliminate them rather than enforce the rules, because, as Small’s defender Sant said, the infractions are “far outweighed by his performance.” And the message this sends is that following the rules and ethical conduct are for losers. It is a small and inevitable step to the conclusion that following rules and ethical conduct make you a loser.

Identifying Small’s ethics disease is relatively easy. Stopping it is far more difficult. It will require our culture, which has been a fertile breeding ground for the star syndrome since 1776, to recognize that it is wrong and dangerous. Stars need to be examples, not exceptions.

Maybe the Smithsonian can do an exhibit on the subject. Wait…it already did!