Overpaid CEOs

[make_tomorrow]

In the run up to WaMu's pending doom as their foreclosure rate skyrockets (up 60% in Feb), the WaMu board is bending over backwards to revise what it means to be a successful executive, essentially securing bonuses for executives as the company fails. Who will lose? Non-executive employees and shareholders.

It's no secret that CEOs make lots of

Comments

[rabidtimes]

You make me remember a speech by Ralph Nader I heard during his '00 Prez run. He called for expansive consumer protection standards for the banking industry, pointing out that a consumer must either sign the contract the bank's attorneys (and those of the car dealer, the home seller, the credit card company, et alia) or walk away from the product--consumers do not have even the simple right to take a contract to their own attorney, make changes and negotiate the new changes. Take it or leave it. A difficult option when you're considering something as basic as a checking or savings account.

He also pointed to the hypocrisy of those who decry social welfare programs that benefit the poor. The banking industry (and, more broadly, the entire financial services industry) privatizes its profits but spreads its risks across the people--so a wildly profitable bank (like Bear Stearns) has NO obligation to build its community, but the cost of its incompetence, hubris, and pathological greed is borne by taxpayers.

This is corporate welfare.

What should have happened is that Bear Stearns collapsed. People would be harmed. As a "corporate citizen" (a pox on the liar who coined that phrase), the Board of Bear Stearns, that is the individual PEOPLE, would be criminally liable for their actions. Further, Nader proposed a death penalty for bad corporations--the entire management team would be fired, the company would move under a court's receivership, until such time as the employees and shareholders could rehire a new management team. No golden parachutes, just the same unemployment line for bad managers that they so glibly offer to their employees.

Herein lies one of Barack Obama's most discordant, but most necessary, themes: a reinvigoration of the ethics of responsibility. "I'm sorry (and having said so I'm scot-free)" is a ridiculous, Joel Osteen version of christian ethics. "I'm sorry and now I've got to work, for free if necessary, to make restitution and amends for what I did" is old school Germanic blutgeld (blood money). "Sorry" don't cut it; actions do.

As for the SEC, they have recently imposed rules that LIMIT shareholder participation in companies. The trend is to codify "I took this, I'm keeping it no matter how much you are harmed, and if you bitch about it I'll disenfranchise you or even place you in prison."

I'm waiting for Homeland Security and Treasury to criminalize the use of the term "recession" as a threat to national security. Frankly, I think $5 gasoline and $3/dozen eggs is a greater threat.

Good post!

[make_tomorrow]

You bring up a point that I had in the original post, but it wasn't on-target enough to keep it. Now I can talk about it:

When corporations fail financially and legally, the general public too easily accepts the line of "it's hard to point fingers because so many people are involved in decision-making, blah, blah, blah" bullcrap.

I'll tell you who's responsible: the Board and CEO. Plan and simple. The Board is responsible for ensuring adherence to regulations and providing general direction for the organization. The CEO, as the title states, is responsible for their implementation. When corporations get into regulatory trouble, the buck stops at the Board (responsible for oversight) and the CEO (responsible for implementation).

In the unlikely event that the Board and CEO are on-point during a regulatory debacle, then we can start scrounging around for others.

It's crazy--in pretty much every other sphere of law, the person(s) responsible for wrongdoing are the targets of prosecution. But here, Boards and CEOs can fudge things a little, implement ex-post facto standards to protect their buddies, and the people who suffer for their lax interpretation and implementation of the law are pretty much anyone but them.

Also, both Boards and CEOs of corporations receive some hefty cash pay and other perks--all prima facia compensation for the great responsibility they are supposed carry. But if they fail, most still get their money without being held responsible. Sheesh.