In Indianaaaaaa! The Leader came back for the fifth time in the last year today, and said...well, nothing. Said Elkhart County had to reinvent itself. Like Detroit, like South Bend, like Michigan City, like the great swath of the rust belt here in the mid-west that has been waiting for the return of Studabaker, U.S. Steel, Bendix, Wheelebrator Fry, and the Edsel for all I know. He's still trying to fix all the wrong things, just as Mike said. And The Leader said it all from the floor of a bankrupt RV manufacturer at which location will soon be an electric motor factory. Sometime ago The Leader proclaimed that we needed electric cars and green fuel and a 37 mpg standard for all that moves on American Roads. RV's really can't do that; I wonder what the audience was thinking practically all of whom depended on that industry 'cept for those who have been doing a little Meth on the side. It was a monumental waste of time. Plane is real pretty tho--or so I am told.
On of the next big fights it seems is going to be over executive pay especially pay in the financial area. This is going to be really interesting as many of the packages, especially for the highest paid guys and gals, are spelled out in fairly tight contractual form and now the question of the sanctity of contract may well meat a real test.. I mentioned the head of Phibro, a sub of Citigroup a couple of days ago who is apparently owed something in the nature of 100 VERY LARGE for his success at trading commodities--read oil--last year. It is an outrageous amount of money but apparently only a small percentage of what he made for the corporation. Frankly, I think it is nuts for a public corporation to put itself in the position of having to pay out that much but having done so, can one really justify its non-payment to a guy with whom the corporation entered into an agreement freely and where the guy performed in precisely the manner to earn his pay? Aside from the shock stemming from the big number, this is a tough question. Of course, Citigroup being owed by the taxpayers complicates the issue. One guy getting this amount of taxpayer money? Then again, if he is making a bundle for the taxpayers, why not? Then again, could he do it without the cache of Citigroup and the U.S. Treasury? How much is that worth? Knotty questions all. We shall be watching.
I think this conundrum serves to highlight one of--and in my mind--the most important issues about which we have had a great deal of discussion. Could these numbers have ever existed if the corporations and managers involved been playing with their own money or without the imputed knowledge that at some point at sometime if all went down the gurgle tube, Uncle would be there with a life-line? I think not. It is not adequate to suggest as a leading article in the WSJ did today that the situation is somewhat different when the biggest shareholder is the taxpayer; that is clearly evident. But the de jurie ownership and support provided to a Citigroup or a Bank of America by the taxpayer is NO DIFFERENT that for J.P. Morgan or Goldman Sachs on a risk assessment if we have a reprise of 2008. And we will sports fans, we will unless we change the rules.
Speaking of B of A, our buddy Ken and his boys--new though they be--did it again. Out they went and hired Sally Krawcheck, late loser of a pissing match over at Citi to run global wealth and management...that's Merrill Lynch...and out the door went Dan Sontag who was Merrill down to his toes for the last 30 years. Ms. Krawcheck no doubt still remembers that when you called the dealers at Citi the phone was answered, "Solomon" even 10 years after the merger. She never got that to change. Bye, bye synergy and bye, bye the best of Merrill that B of A bought. When your most important assets can walk out the door at the end of every day, you better be damn sure what you do in attempting to merge cultures. There is dumb and there is DUMB. You pick it.
Do you think the compensation committee of the Board had ex-ante awareness of the Phibro contract? It seems as if there is gross negligance by Boards of Directors to allow deals solely aligned to business unit performance - either that or directorates are truely captured by management, useful fictions. And if the later, what is to be done? How does one have a board that is simultaneiously independent from management but also with sufficient incentives to control corporate behavior?
ReplyDelete