--The Good Lord must love the common folk; he made so many of them.--Abraham Lincoln
My grandfather had nothing but contempt for capitalism and the politicians who supported it. It was no better than monarchies or any other form of despotism, by which he meant any system which placed a lucky few at the top and which suppressed the mass of common folk, either by force of arms or by conspiracy.
But he was a man of another century, actually another two centuries, born before 1900, having got on the ship to America about the time of WWI.
I thought he just didn't understand America, that he brought resentments from the old country here, and kept seeing the same injustices everywhere.
But now I'm not so sure. He may, with his old eyes, have seen more clearly than I could with my young eyes.
Commenting in the New York Times, John J. Donohue, professor of law and economics at Stanford, sees the case of Leo Aopthekar, fired after a few disastrous months as CEO of Hewlett Packard, who then walked away with $13 million dollars in "termination" benefits, as an emblematic case of how people at the top of the economic pyramid rape the system, especially when they fail. And we all pay a downstream price, just as surely as when the dam collapses.
Capitalism, as most understand it, is about taking risks and being rewarded when you succeed and being punished, sometimes ruined, when you fail. But the boards of directors of publicly owned companies have conspired with the CEO's they hire to pervert that system into a you-can't-lose system.
Witness the recent financial meltdown, where everyone--anyone who owned a house--got hurt but the fat cats at the top made money.
It is all perfectly legal, because our laws are written by legislators who are in the pockets of the rapists of this system. The legislators, as my grandfather was fond of saying, are the best congress money can buy.
So at the front end, Mr. Apotheker gets more than $4 million dollars as a relocation allowance when he takes his new job--that must have been quite a large moving van--and, at the back end, when it becomes clear the guy is a terrible CEO, he gets a cash payment of twice his base pay and his earned "target" bonus, and his unused vacation pay.
Although he was fired by the board, he was not fired, legally "For cause," but just for failing to perform. (Go figure.)
Did nobody ask why he had been fired from his previous job, before they hired him? Did anyone listen to his answer with even a shred of discretion?
When asked why board of directors would agree to such a breath taking deal, they always talk about the cost of talent, (as if they know it when they see it) the need for a unique combination of skill sets, the difficulty of luring away a person who is clearly at the top of the game from one team to your own. They start floating names like Reggie Jackson or Babe Ruth, athletes who once acquired brought their new teams longterm strings of championships, leaving their former teams in shambles, as if that were really an appropriate analogy.
But that's all a lie. Nobody knows who will be a successful CEO. It's not like you can time his fastball. Every CEO ought to be hired on probation and he ought to share the risk as much as the company and its board. If the board members stood to lose money if he failed, they'd be asking a lot more questions.
I don't know, but I'd bet CEO's of very large concerns, whether it's GM or HP or even the USA usually are not able to carry the entire team or to make that much difference.
So why would a board of directors vote for such an unconscionable pay package?
Well, look at the members of a board of directors. Usually, these are people who have other jobs, like professorships at a university, or head of a bank, but they can triple their own incomes if they get on a few lucrative boards, and they get paid for being on these boards even as they draw salaries from their day jobs. Once on the boards, they may not have much real work to do, and nobody gives them exams, or report cards; they just take their cut.
A good friend of mine was named to the board of directors of a medical device company and at the first meeting he listened to the financial report of the million dollar loss for the previous quarter and that was added to three prior quarters of losses. The next item on the agenda was to vote to increase the stipends of each of the board members by $100,000.
"But how can we do that, given the first report we heard today. The company is losing money?"
There were knowing smiles around the conference table, "Oh, you don't understand yet. You'll catch on," the board members told him indulgently.
He resigned later that month.
The company struggled on for several more years and was finally acquired by some other company whose board of directors likely had no idea what they were approving, but they were getting their own checks.
At a Washington, DC party I found myself talking to a lawyer in an expensive looking shirt with a white collar and cuffs and blue body and a tie which probably cost more than my suit. He had gone to Harvard College and Yale Law and he worked for Hogan and Hartson, a blue stocking Washington firm, and we got on to the recent resignation cum firing of Larry Summers as president of Harvard. This lawyer said the magic words, "Well, he had such a unique mix of talents and skills, a really brilliant guy, so he was a great catch for Harvard, but sometimes the chemistry just isn't there, the fit just doesn't happen."
And I said, "I could be president of Harvard. So could you, or anyone in this room, including that guy over there holding the food tray, or the guy behind the bar. All you have to do as president of Harvard is to keep your mouth shut and read the speeches some grad student writes for you at commencement. It's one of the easiest jobs in the world."
He was shocked, just shocked.
But then he thought about it and said, "You may have just said something profound. Larry's problem was he just always had to prove he was the smartest guy in the room."
Fact is, the top job in many companies and institutions is easy money.
Not true for the guy who has to run a department of surgery, who has to come up through the crucible of fire that is surgical training where he learns what good is, where he has to solve problems or wash out. The head of the department of surgery at a university may make more than the president, and he ought to. The head basketball coach at Duke makes more than the president of the university, but then he can echo Babe Ruth, "Well, I had a better year."
It all comes back to those pie charts showing how small a portion of our populations owns such a huge slice of the pie of the wealth of the nation. That happens through all those board rooms and CEO payment packages and it is bringing down our nation. This country has always done best when the wealth was more evenly distributed, when everyone had a stake in the outcome, when we all pulled on the oars together rather than trying to paddle our own boats separately.
We won WWII because we could out produce Germany and Japan in making warplanes. Our workers won the war in the factories as surely as our troops on the ground and our sailors at sea.
Yes, there were talented men at the top, like Albert Einstein and Fermi and Oppenheimer, who made a difference by advocating for and building an atomic bomb, but their talents did not have to be bought with multimillion dollar salaries.
If Moneyball has taught us anything, it's that we really do not know how to evaluate talent or genius--we can try something different and see how it performs. But that's not what is happening in this country today.
Omar Little, of the wire of course had the best take on who controls the world and who ought to and on the difference between them. He has just testified (falsely) in the murder trial of a street thug and the defendant's lawyer says, "You are amoral. You've admitted it. You make your living by the gun, by stealing from drug dealers on the corner, at gun point. Why should we believe you. Why should this jury believe a word you say? You are a manipulator and you have no conscience."
Omar is unruffled, "Just like you," he says.
"What?" the lawyer expostulates.
"I do what I do with the shotgun. You got your briefcase. Same game. Different looks."
The lawyer looks, astonished, to the judge, who simply shrugs as if to say, "You started this counselor. He simply answered your question."
It's an answer we should all take to heart. The Apothekers of the world may not think of themselves as thieves but they are all part of that thieving game.
No comments:
Post a Comment