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With the new law's namesake, Lilly Ledbetter, at his side, President Obama signed his first piece of legislation on Thursday, Jan 29, 2009 in the East Room of the White House-- to combat pay discrimination.
Greed Incorporated: On Thursday, President Barack Obama said it was irresponsible and shameful for Wall Street bankers to be paid huge bonuses at a time when the American public is dealing with economic hardship.
"When I saw an article today that indicates that Wall Street bankers had given themselves $20 billion worth of bonuses, the same amount of bonuses as they gave themselves in 2004, at a time when most of these institutions are teetering on collapse and they are asking for taxpayers to help sustain them, and when taxpayers find themselves in the difficult position that if they don't provide help then the entire system could come down on top of our heads, that is the height of irresponsibility,"President Obama told reporters.
"It is shameful."
Obama said he and new Treasury Secretary Timothy Geithner will have direct conversations with corporate leaders to make the point.
The President said there is a time for corporate leaders to make profits and get paid bonuses but now is "not that time."
"You're never going to get any support for the continued tough decisions we have to make if this kind of behavior continues,"he said.
On an instruction to Citigroup to cancel an order for a $50 million executive jet, Obama said:"Secretary Geithner already had to pull back one institution that had gone forward with a multi-million dollar jet plane purchase at the same time as they're receiving TARP money. We shouldn't have to do that because they should know better. And we will continue to send that message loud and clear."
Last week, the ousting of Merrill Lynch's chief, John Thain, highlighted the air of unreality, which continues to prevail on Wall Street, which is currently essentially a custodian of the federal government.
DespiteMerrill Lynch incurring a loss in the fourth quarter of $15 billion, Thain wanted a $10 million bonus.
Thain, a hired hand, made several hundred million dollars while working at Goldman Sachs.
When Stan O'Neal was fired as CEO of Merrill Lynch in late 2007 and given a golden boot worth $162 million, Thain, then CEO of the New York Stock Exchange, got a signing on bonus of $15 million. His annual earnings at Merrill were expected to be at least $50 million per year and he could have been paid as much as $120 million a year, based on the company's stock price.
Thain's chauffeur at the embattled Merrill, was paid $230,000 annually.
The sense of entitlement, while benefitting from a boom, has few limits.
The classic case of the hired hand who ends up with a spectacular bonanza is Richard Grasso, who was ousted in September 2003, as Chairman of the New York Stock Exchange, following revelations that he had accrued $139.5 million in deferred salary and retirement benefits. The compensation committee members who had nodded through the extravagantly generous package, were wealthy representatives of New York's biggest investment banks.
Thain got Grasso's job.
Earlier this month, it was reported that Aer Lingus’ CEO Dermot Mannion had been granted what Ryanair's Michael O'Leary termed: "an indefensible and unprecedented" €2.8 million lifeboat ‘Failure Bonus’, if Aer Lingus had a change of ownership. The Aer Lingus Chairman Colm Barrington is reported to have said, the arrangement was "perfectly normal."
It's very simple. Use the excess of corporate America as the excuse.
The Mirriam-Webster dictionary describes a piñata, as a decorated vessel (as a pottery jar) filled with candies, fruits, and gifts and hung from the ceiling to be broken with sticks by blindfolded persons as part of especially Latin-American festivities.
In September 2005, James M. Kilts complained to the Boston Chamber of Commerce that he had become "Boston's piñata." He argued that he had earned his handsome pay by creating billions in shareholder value since arriving at Gillette in February 2001. The Proctor & Gamble deal "will be the greatest merger in consumer products history," he said. "We make no apologies."
The companies promised him a package valued at $165 million, including stock options and severance. On top of this, P&G said it would give him stock and options worth $23 million in return for serving as its vice-chairman for one year and agreeing not to join a rival before 2009. Excluding $6.5 million he stood to earn during his year as vice-chairman, Kilts was in line to trouser an astounding $188 million.
"It is obscene what he is getting paid," said retired Gillette Vice-Chairman Joseph E. Mullaney.
Kilts received his Gillette payout just five years after pocketing benefits worth $70 million in connection with selling Nabisco Holdings to Philip Morris (now renamed Altria Group).
Kilts like other CEOs had a provision in his contract providing for golden parachutes: special payments if control of the company suddenly changed hands. Corporate boards defended the arrangements as necessary to prevent executives from resisting reasonable deals to protect their turf and paychecks.
Like the Louis XIV dictum - L’État c’est Moi - Kilts, a hired hand, took full credit for creating billions in shareholder value. Who cares what the general market rise has been in recent years, it's all a case of "me, me, me."
No doubt he spoke to his staff about group culture, loyalty and what a great resource they all are. The trouble is that his snout was so deep in the trough that he was blinded to the impact on others.
Workers are told that they have to work harder to keep their jobs and when the likes of Kilts cuts staff, where does he tell unions to go when they seek compensation?
A Fortune magazine report said that at a meeting with all division chiefs on Kilts' very first day at Gillette , he asked for a show of hands: "How many of you think our costs are too high?" Everyone in the room immediately raised his hand. Then he asked, "How many of you think costs are too high in your department?" Not a single arm went up. According to Kilts, it is a common response among managers of companies in trouble: Everyone knows there's a problem, it's just that nobody thinks it's his problem.
The camel seldom sees his own hump!
BusinessWeek reported in 2005 that Georgia-Pacific Corp.'s CEO, A.D. "Pete" Correll, was in line to receive a $92 million package when the company's sale to Koch Industries was completed, according to an estimate by executive-pay consultant Delves Group.
A reader comments online:
Only in America. I work for Georgia Pacific: this year no raise, next year 2%, the following year no raise, and then the next year 2%. I have 30 years of service. Our CEO and his buddies at the top get filthy rich on us. Times are tough so we have to keep our labor rates down. Well, $92 million ought to do that. What a disgrace and what a bunch of two-face (sic) people at the top. A.D. Correll's motto to us workers was you have the right to grow if you earn it. Now we know what he really meant. This is a big insult to all of the working class in America.
Michael D. Capellas received a $39 million package for selling MCI to Verizon Communications, just three years after he collected a $14 million package for selling Compaq Computer to Hewlett-Packard. The Capellas MCI payout "reflects his success in engineering the largest corporate turnaround in history and fulfilling his fiduciary duty of maximizing stakeholder value," a company spokesman said.
A reader comments online:
This trend is disgusting. As a former employee of MCI, I was on the wrong side of Capellas' makeup job. Laid off after 18.5 years of excellent reviews, had just received a raise and 4.3 performance rating, 5 being the highest. That was only 3 months before I was let go, and 3 days before Labor Day, to boot. His claim of being ethical doesn't deserve space in the Enquirer. MCI settled the 401k class action lawsuit for measly 17 million when the employees lost a combined 800+ million dollars. How could he or MCI be considered ethical?
We live in an age when the cult of the leader is ever-present. From sporting heroes to fictional leaders in blockbusting films to business chiefs, all such leaders have characteristics in common: they are risk takers; they create a vision that others want to follow; they keep going where others would stop; they are decisive. I could go on.
Yet as consultant Dr Michael Hammer has argued at length, most corporate leaders are nothing like this. They are stewards not change agents, administrators not leaders. The culture of too many businesses is too often the opposite of what they portray.
Most CEO's prefer deal-making and mergers to boost short-term share price to the hard grind of managing their companies. There is no shortage of able people eager to do the job.
Michael Douglas as Gordon Gekko in Wall Street (1987)
Address to Teldar Paper Stockholders: "The point is, ladies and gentleman, is that greed -- for lack of a better word -- is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms -- greed for life, for money, for love, knowledge -- has marked the upward surge of mankind. And greed -- you mark my words -- will not only save Teldar Paper, but that other malfunctioning corporation called the USA."