Greer McVay’s Web Log (BLOG)

Volume 1, Issue 3

February 20, 2009

Corporate CEOs’ multi-million dollar paydays at taxpayer expense seems to be a problem for many. But why? Why would hard working Americans begrudge a fair wage to fellow workers who negotiated an iron-clad employment contract that happened to reward them with more unbelievable wealth in a year that than the rest of us will likely see in a lifetime? Why are we upset that the senior executives of companies like Lehman, Citigroup and Goldman Sachs figured out how to pimp the system? Because we are haters, that’s why. Yes, you! Hater! But you need to hate the game - not the player. 

Most people I know are secretly in awe of the corporate CEO who rakes in ten’s of millions of dollars a year in salary and bonuses, yet does not appear to have done enough quality work to keep the company from swirling down the toilet. After all, I believe I could run AIG well enough to reduce the stock price from $52 per share to 90 cents in a year. As a matter of fact, I’m pretty sure I could have kept the value up over the one dollar mark and I would have gladly worked for $5M, thus saving the company over $16M last year alone.  

We are outraged not because we necessarily think that these guys earn too much or even because they did not do a good job (while that may, indeed, be part of our outrage). We are outraged because we assume that people who do much better than ourselves financially are somehow more qualified than we are. If they cannot do any better than we do, then why the hell are we languishing away in dead end jobs making pennies on the dollar—and if you’re a woman, making even fewer pennies on the dollar? We are mad at ourselves because we screwed up. Obviously, we either had the wrong parents, major in college or we just haven’t mastered the art of negotiation, otherwise we’d be counting our money all the way to the bank - that no longer exists. 

Furthermore, we are now being asked to pony up cash to get us all out of this mess and we still cannot get a break. It’s a slap in the face that all of our voices shouting in unison or foreclosure assistance and a stable job market still do not have the negotiating power that one of these CEO’s seem to have even in the face of global economic catastrophe. What do we have to do to get a few kibbles or bits thrown in our direction? The choice between Main Street and Wall Street should be obvious. People are really hurting right now. 

We need to start by understanding the game; AND the enemy. The problem is not the CEOs. While they are not exactly victims, the issues are so much bigger than them. Sure they are selfish sons-of-bitches who could care less about the suffering of the masses. Of course each of us would have made some personal sacrifices if we were in their Wingtips. At minimum, we would forgo our bonus in the year that we actually laid off 40,000 workers and posted losses unrivaled since the Great Depression. But even those changes do not address the real problem here - that is, the Boards of Directors of the corporations that are in financial distress. 

Let’s look more closely at what is happening here. A publicly traded company has a Board of Directors that effectively serve as the boss of the CEO. In the case of the companies now being bailed out by government [read: taxpayer] funds, the respective Boards of Directors have not been very effective. Why on earth would a Board agree to an eight-figure compensation package and not include within it a requirement of strong performance, success or even competence? And more importantly, why would we be mad at the executive who was smart/fortunate/clever enough to negotiate such a deal? I’ll tell you why - because, again, we are haters. 

Last week, Major League Baseball’s Alex Rodriguez confessed to using performance enhancing drugs during his professional baseball career. His excuse was that the pressure was on as a result of his jaw-dropping $252,000,000 ten-year contract. You are damn right the pressure was on. Why else would anyone pay you $252,000,000? Yes, Alex, you are expected to bring fans to the park and sponsors to TV, but you are also expected to be a better player than everyone else. Even when the pressure us on. Especially, when the pressure is on. Any schmuck on the street can take steroids and hit a ball further or run faster. When you receive that kind of income [and accolades and preferential treatment and women (or men, if that’s your predilection) and all the other goodies that come along with it], you are expected to be superior. Juicing is a copout.  

So too are you expected to bring it, when as CEO you are paid multi-millions of dollars in annual salary. The club you belong to at that point is small and its members enjoy rarified air as they soar through the clouds in Citation jets. A CEO is expected to be the big visionary. He is expected to see the trends before the rest of us mere mortals. He reads the reports that analysts provide that show how the adverse weather in a small village in southeast Asia washes out the dirt roads that prevents the DHL driver from shipping out the orders that the $1 per day third-world labor has worked around the clock to produce; and he should come up with solutions that make it possible for the company to still get paid the $180 dollars for the shoes that cost $3.20 to manufacture. [Solutions include contributing to the campaigns of those politicians who will promise to pave the roads that lead to your plant.] That is why you are being paid $17,000,000 a year, plus a $10,000,000 bonus, plus stock options, unfettered access to the company jet, a mansion, country club membership, suites of offices and all the beluga you can eat. If the board members do not expect or demand that you find a way to still get that $180 in spite of negative circumstances then they are the one’s that America should tar and feather.  

Perhaps Boards of Directors just don’t understand the concept of a fiduciary responsibility? Perhaps they think that acting and voting on behalf of the shareholders means that they should somehow just attract “the best” and then hope that things work out? Perhaps they are so fearful of only attracting mediocre executive talent that they only worry about closing the deal with a big name that they neglect to actually look at his resume? Hopefully their actions are nothing more sinister than ineptness, but I have my doubts.  

In the NFL and other professional sports’ front offices I am amazed at how coaches possessing losing records are fired from one team and end up coaching for another. We can always hope for a “better fit.” The art of choosing corporate leadership seems no saner than the art of moving Rod Marinelli from the Detroit Lions to the Chicago Bears. It is doubly insulting to us paying for the bailouts to learn that upon recognizing mistakes Boards often compound the problems by doling out millions in severance payments to get rid of the person who led the company to a 24% drop in stock value in 18 months. Again, I could do that…and I don’t even breathe rare air. 

As the government bails out failing companies, we the people need to demand controlling interest of the Boards and make changes from the inside out. These changes should address the way the companies are run, the talent that is brought in and the pay structure of the senior executives. I don’t advocate limiting their pay to $400,000, equivalent to that of the president of the United States. After all he is a public servant. But I do advocate insisting that he (or she) actually earn the money and the perks that heretofore have been lavished upon them for no reason other than sharp negotiating skills.  

Increasingly we have seen leadership turn a profit by laying-off workers and doubling the workload of those remaining or by off-shoring work that actually creates products, which would beget more jobs. If your CEO’s vision is limited to downsizing and say, remodeling bathrooms and selecting toilets, then you should expect to see your company go down the drain (pun intended) and on the front page of the New York Times asking for the next bail out. But don’t be mad at him. Be mad at the group of people who actually enabled the bad behavior - the Board of Directors, who just got pimped.