Events are moving so fast these days that a lengthy discussion about what's happening is likely to be out of date before it's finished. So here are a few quick thoughts:
1. It's not illegal for a CEO to lose money. You may not like it if you're a stockholder or a member of Congress, but losing money is not a criminal offense.
2. Fraud is illegal. If there is evidence of fraud, then the company involved and its officers should be prosecuted. Losing money or making bad decisions may be ncompetent, but it is not the same as fraud.
3. AIG's $440,000 off-site retreat debacle would have been a public relations nightmare even it had been cancelled as some on Capital Hill suggested this week. Anyone familiar with booking events at a hotel knows that at some point you have to pay for the event even if you cancel it. My guess is that the AIG retreat was in this situation and, that the company would have had to pay for most or all of the meeting even if it had been cancelled. That would have given members of Congress the ability to criticize the company for wasting funds for a different reason. So the company was damned if it did and damned if it didn't.
4. Should the company have cancelled the spa treatments, or at least required that executives pay for them personally? Absolutely.
5. Speaking of fraud...Is anyone going to look at homebuyers who submitted applications for a mortgage with information that was intentionally incorrect?
>> It's not illegal for a
>> It's not illegal for a CEO to lose money. <<
This is a straw man.
Show me evidence of anyone arguing that its illegal for CEOs to lose money.
What the public is reacting to is CEOs that make bad bets with shareholders money that deliver massive short-term gains to themselves, but harm the company in the medium and long term.
I'm not talking about arguably smart bets that went bad. I'm talking about bets where a reasonable person could conclude that the decision was not in the long-term interests of shareholders. We are going to find a bunch of instances where executives made 'greater fool' bets where the greater fool was the shareholder.
1. If shareholders and their
1. If shareholders and their boards of directors don't care about CEO pay, why should I? They're the stupid ones. Don't invest in the company.
3. There are creative ways out of the resort/spa situation. They should have talked to the hotel owners, agreed to a restitution (50% to the hotel, 50% to some home heating charity or something like that) with plenty of publicity. They all come out smelling like roses.
As to the spa treatments...like I said, the key here is that the shareholders and board members obviously didn't mind. The management team were just doing what they've been taught to do...spend buckets of shareholder cash on themselves and their families. As to the reasons why the board doesn't mind...we all know that they want to justify the same packages at their own companies.
So, until major shareholders (Vanguard, Fidelity, etc.) decide that they've had enough, we can assume that we will not see a change in behavior.
Post new comment