CEOs -- Clueless at the Top
"Getting it" is a big topic today. Republicans may not be exactly sure which direction to go, but they "get" that the party has to change. Democrats seem to get that the results were a mandate for change, but not for hurling the country far to the left. And Americans get that we're in a crisis that will require belt tightening and sacrifice. Most Americans, anyway.
The upper echelons of corporate America are personally so far removed from economic pain that the concept of sacrifice seems quaint and antiquated as telephones with dials or sitting down to play a rousing game of Pong.
You don't have to look further than yesterday's appearance by the heads of the Detroit's Three auto companies before the House Financial Services Committee to see that their multimillions in salaries and bonuses aren't enough to buy a clue.
In a stinging article, Washington Post writer Dana Milbank describes how the three CEOs were dumbstruck by suggestions that coming to Washington in three separate private jets to make the case for a bailout for their companies was about as astute as ... well, as banking the industry's future on SUVs even more outsized than their hubris. "Couldn't you all have downgraded to first class or jet-pooled or something to get here?" one committee member asked.
While the auto industry execs made themselves a particularly juicy target, they are, sadly, far from alone. Remember the clever characters at AIG who went on an all-expense paid retreat (that's "junket" to most of us) at a swanky spa? And if you're generous and set aside the scandalous behavior as aberrant, that still leaves scandalous compensation packages (salaries are so passe since they are so easy to understand that pay is made up of perks, bonuses and options whose value are hard to total up).
People living in this world apart aren't evil or even selfish. But they have allowed themselves to become so isolated and insulated that their judgment is skewed. And the failure to see that gas wouldn't be cheap forever or that securitizing loans made to people who were not required to prove they could repay them might carry considerable risk is far more damning evidence of impaired judgment than tooling around in a near-bankrupt company's jet.
That's why these folks may need a little help. They may not understand what's wrong with top managers and boards approving kajillion dollar salaries for one another in an age when retirement nest eggs are being cashed into buy real eggs and entire neighborhoods have become ghost towns. But Americans and even their lawmakers, not necessarily the most in-touch group of folks around, do. There is some good news in all this. CEO compensation has been a scandal for years. Peter Morici, a professor at the University of Maryland's business school, believes the financial crisis may finally force the country to address it. Just as the credit crisis began to unfold and Lehman Bros. hit the rocks, Morici warned, "Once enough dominoes fall, compensation structures and business practices will return to more conservative norms of 10 and 20 years ago. Only then will the credit crisis resolve and the economy have a decent shot at full recovery."
Indeed, some small movement can be seen. In deference to the crisis, Goldman Sachs canceled end of year bonuses, which often are far higher than annual salaries on Wall Street. How many others in the industry will follow suit isn't clear. But while it would be nice if Wall Street and the rest of corporate America would voluntarily share the burden with the rest of us, I wouldn't count on it. But given the outrage that greeted jet-setting Detroit executives yesterday, I think you can count on Congress and the White House to volunteer to do the job for them.