Dire Straits
With each passing day, the U.S. financial sector’s culture of greed comes more sharply into view. Today marks the release of an Associated Press study reporting that, at the 116 banks that have received government bailout funds, the top 600 executives received a disquieting $1.6 billion in compensation. That is not to say that the bailout has provided the funding for that compensation, which represents the aggregate payout for 2007 salaries, bonuses, and other benefits. However, it is a very clear indication of how these corporations found themselves in such a perilous economic state. The burden of these absurd figures hollowed out the foundation of their enterprise. The concentration of lavish compensation at the top enabled a culture of neglect and indifference that poured from the top down. Certainly, finance is not the only industry susceptible to this trend, the recent turmoil of our economy is representative of abuses that are endemic across corporate America and beyond. Yet it is the financial sector that has appealed to, and won, the backing of the federal government, and therefore enabled us a glimpse into their warped value system. Despite the previous collapse of diseased giants like Enron, WorldCom, Arthur Anderson, and Tyco, the C-level push for greater power and wealth never abated. Any public outcry was directed only at the fallen giants, and we receded further into our own chosen oblivion, working and waiting for our own financial windfall.
The economic events of 2008 have now displayed the cost of our inaction. As more and more people join the ranks of the unemployed, we can only hope that this time, for ourselves and for generations forward, we shine a light of social responsibility and awareness on our captains of industry, who have previously behaved more like captains of piracy. Yes, the top 5 executives at Goldman Sachs have announced that they will forego any bonuses for 2008. But, despite some articles below that express sympathy and admiration for that action, how can any of us feel sympathetic towards men who received a combined $242 million in 2007? As CEO, Lloyd Bankfein alone received a staggering $54 million. Now, after posting their first loss since going public in 1999, these same men have graciously conceded to cap their 2008 compensation at their base salaries of $600,000 apiece. Such behavior deserves no merit, it is responsible business. If the company posts a profit, the wealth should be shared. If the company posts a loss, bonuses have to be scaled back. But when compensation reaches the dizzying heights that these 5 men and others of their ilk became accustomed and entitled to, it is absolutely no wonder that our economy is collapsing.
John Thain, now CEO of Merrill Lynch, led all corporate bank leaders with $83 million in compensation last year. Part of that was for his time with his former employer, Goldman Sachs, but when he ascended to the top spot of Merrill last December, he was awarded a $15 million signing bonus, in spite of the fact that company posted an annual loss of $7.8 billion. And as the year progressed, the once venerable Merrill sunk even further into the morass. In order to survive, Merrill agreed to be acquired by Bank of America, a move that has received all necessary board and federal approval. But despite the failure of his own leadership to rescue Merrill Lynch, Thain had the audacity to ask the board for an additional $10 million bonus. Not only has the value of the impending merger with B of A diminished by over 40%, Merrill Lynch has won $10 billion in federal funds to stay afloat. In that sense, all taxpayers are now minority owners of the company, just as they are with Goldman Sachs and 114 other banks. And we have earned the right to say that these compensation levels are egregious, outrageous, and in need of extermination.
No executive is worth the kind of money these fools have determined for themselves. I am not in favor of putting caps on salaries but I do believe in the principles of social responsibility. If Goldman is now cutting overall corporate compensation by 42%, with the aid of shedding 1500 jobs, it is clear by their previous practices they are inefficient and in need of a drastic overhaul. But the predicament is certainly less likely the responsibility of the 1500 individuals cut loose at Goldman than those that are still sitting at the top level expecting sympathy for their pay cut.
Goldman is not alone, all of these companies, and the environment they have reveled in, need to be shaken up. The bailout assistance provided by the government cannot be reduced to a subsidy for maintaining the status quo. Profits have been inflated, imagined, and created, they have not been earned. The result is an economy in tatters. The pillars of finance are shaken. The relentless avarice of C-level execs demanding higher and higher payouts simply to compete with one another like children comparing toys has devastated our nation and the world. The complete price of their selfishness has yet to be paid, we cannot expect to know the true cost for years to come. And allow me to reiterate that this rampant gluttony has not been exclusive to the finance industry, but their appeal for government assistance has allowed this window into their distorted ways. Perhaps we will soon see concrete evidence of similar abuses by the Big Three automakers. For now, this is what we know, and each day we are learning more. And each day you can look at your morning news and see other examples of further corrosion from Tom Blagojevech to Bernard Madoff and beyond, they are everywhere and in every sector. As more of us lose our jobs and our savings, we can focus our anger on those that have betrayed us. But it is not a spectator sport. While those that have profited from their plunder may be hurt or halted in their tracks, it is only with continued public vigilance that we can ensure greater regulation and oversight to prevent such entitlement and abuse from contaminating our society any further. What we are experiencing now is not new, it is a story as old as human history, and it will never be extinct. But for those of us that don’t care to remember back that far, just think of Enron, or WorldCom, and those corporate abuses that struck as all a few short years ago. And realize that if we just turn the page or click on another site, and allow the focus to move onto another story, the plague will metastasize and become greater than anything that we have ever experienced. That is where we find ourselves today.
AP study finds $1.6B went to bailed-out bank execs
http://www.google.com/hostednews/ap/article/ALeqM5j4du5x_AukGeVZ5Rli1iFTG1jEWgD957KSMG0
Responses by Banks on Their Use of TARP Funds
ABC News’ Survey of 16 TARP Banks
http://abcnews.go.com/Business/Business/story?id=6479932&page=1
Goldman Sachs slashes executive bonus packages
Morgan Stanley Pay Expense Drops 26%; Some Bonuses Cut by Half
http://www.bloomberg.com/apps/news?pid=20601087&sid=aIus5wFD9LOY&refer=home
Big Bonuses for CEOs? Not So Fast
http://www.msnbc.msn.com/id/28070187/
Goldman Sachs posts $2.1 billion loss
http://money.cnn.com/2008/12/16/news/companies/goldman_sachs/?postversion=2008121610
