On Thursday, January 29, news outlets reported that President Obama had called the bonuses that some Wall Street financial firm executives received for their 2008 performances "shameful" and the "height of irresponsibility". The bonuses totaled $18.4 billion. His concern was that those firms should not have accepted federal money when they obviously had plenty of cash for bonuses. President Obama's concern, as outlined in the hald dozen accounts I read, seemed more than justified. My initial title for this Friday's blog was "Obama's Criticism of 2008 Wall Street Bonuses Justified". Then, I dug further.
I learned that the source of Obama's criticism was a report by the New York State Comptroller. So I went to the source. Comptroller Thomas DiNapoli's report, DiNapoli: Wall Street Bonuses Fell 44% in 2008, did mention that $18.4 billion was paid in bonuses. The title of the report itself, however, suggests that its focus was on the decrease. What wasn't even mentioned in most other news articles was that this amount represented a 44% decrease as compared to the 2007 bonuses.
Does this excuse the $18.4 billion that was paid out? Depends. Was some of that money paid to executives of firms that were profitable in 2008? That detail is missing. Was some of that money paid out under obligatory, written pre-existing agreements in the executives contracts? That detail is missing. Where is the investigative reporting in the media that should have uncovered these facts?
What is shameful is if some of that money was paid out to executives by boards of directors of firms that incurred large losses, and then begged the federal government for money. In those cases, those boards clearly did not exercise their fiduciary responsibilities.
The federal money that was loaned to these firms should have had specific, legally binding wording that would have prevented use of the money to pay unwarranted bonuses. That no such wording was included is the fault of the politicians who wrote, amended, and scrutinized the legislation. There is blame aplenty to go around.
It's said that when a deal sounds too good to be true, it probably is. The same applies to headlines and reports. If it sounds as simple as black and white, it probably isn't. There is an almost infinite number of shades of gray into which the truth may fall.
Friday, January 30, 2009
Subscribe to:
Post Comments (Atom)
4 comments:
The media, including some who wish to be upfront, and complete with the business facts (CNBC for one)are still very quick to jump on generalities to hype a story. We are getting more talking heads with less research backing up what they are saying.
You raise a bunch of good points. But there have been many, many (twice for emphasis) instances in the past where CEOs, CFOs, etc., big shot company execs have received substantial bonuses due to contract language and also help from the buddies on the board of directors.
I can recall a CEO of AT&T who received a 27 million severance package and a 1.5 million dollar house after serving 9 months for the company. A prenuptial CEO contract agreement made this person very happy.
Employees and stockholders were not so fond of the deal.
Is it big governments' role to monitor this type of activity???
I thought it was the companies board of directors who were supposed to watch over company activites for the good of the stockholders.
SNAFU
Systems Normal All F*&$(#$ Up!
Did the AT&T stockholders rise up and throw the rascals out? No.
Did the AT&T stockholders insist on tighter oversight of the board of directors in the future? No.
So ultimately, whose fault is it?
I own stock and every year when its time to vote for the board of directors, I always vote NO for retention and or election. Much of the stock is owned by mutual funds in huge amounts. Some of these fund managers or there buddies either sit on the board or have friends on the board.
It's the fox in the hen house syndrome.
The board members are not required to actually own stock in the company. (This was a proposal to the by-laws that was voted on and did not make the cut).
So don't point your little boney finger at me or the stockholders as most of the little stockholders like myself have little or no control over the situation.
Believe it or not, my prior comment was (granted, reading between the lines) in support of your position.
The will of the people (like you and I) is easily thwarted by the owners of huge blocks of shares.
What chance does the 'little guy' have at these stockholder's meetings? Slim to none, and Slim just left the building!
Post a Comment