Whatâs Wrong Today:
Corporatocracy is not
as much word as it is a mind set. We work for the best corporations, (actually
we say that we are “with” our firms) and we get salary, stock,
bonuses and insulation. What Insulation
you ask?
Directorsâ and Officersâ insurance. We
are protected from paying a personal price for all but our most egregious acts.
We need all this protection because there is much second-guessing about the efforts
we make to maximize shareholder value.
We have many enemies
and all are out to get us. A lot of them turn out to be our shareholders. Also,
there are those idiot regulators looking over our shoulders with their
Sarbanes-Oxley, Gramm-Leach-Briley, Dodd-Frank, not to mention those pesky EPA
regulations.
In order to keep us financially
whole if we fall into the clutches of these lawyers, we get Directors’ and
Officers’ insurance coverage and other indemnifications detailed in our
contracts by our companies for both our acts and failures to act. This covers all
of the legal and other costs of defense if we come under the microscope of the
civil, regulatory, or in some cases, criminal processes.
So What’s Wrong?
CEOâs and other âCâ level executives at the big firms can do most
anything they want, assuming they are senior enough, almost without penalty.
Penalties levied on
corporate miscreants, and the legal bills they rack up defending themselves, almost
never come out of their own pockets, since insurance policies and company
reserves wind up paying the bills.
This means that the shareholders wind up paying.
Letâs also lose the pretense that Boards of Directors are somehow in
control of their CEOâs. Large company boards are a collection of buddies, stooges,
retired generals, senile executives now put out to pasture, designated females
and minority members. They walk through monthly power lunches, attend board
committee meetings, then pocket stock and options in the chump change category and
in most cases, rubber stamp executive actions. They make a living by providing similar
service on multiple Boards, which makes them completely beholden to CEO favor.
Board management is more oxymoronic than responsible journalism.
When you think about it, our entire social fabric survives (barely) on
pretense covered up by magical thinking:
Recently, I watched CNBCâs circus of savants drool
over a pastured out former celebrity CEO whose credential seems to be having
presided over the collapse of one of our most well known industrial firms. She
delivered the predictable snipe at âuncertainty over government regulationâ as
an all purpose excuse for corporate non performance.
You
simply cannot make this shit up and produce anything more ridiculous or
grotesque than reality: Epic Corporate Fail followed by a career as a CNBC
guest âanalystâ.
And what if you run a
company so far into the ground that the federal government has to take it over?
Not to worry: the taxpayers may even pay your legal bills. Consider Fannie Mae
and Freddie Mac:
Since the two
companies collapsed into conservatorship in 2008, taxpayers have advanced about
$73 million to pay the legal bills of former executives who are fighting fraud
suits and investigations dating back to 2005.
No surprise, really.
A heads-we-win, tails-the-taxpayers(or shareholders)-lose model has a lot going for it, IF you
are one of the chosen executives at the top of these institutions.
A Radical Idea:
The “Do the Crime and do the Time” applies to low level
criminals or middle management, but it does not apply to F500 Execs or Wall
Street’s top guys, or to bank fraud. Evidently,
in 2005 through 2007, Citibank just took the risk, defrauded billions and
estimated the fine would be minimal, which it was.
People at or near the top at Citibank decided to take the risk and
the country be damned. Shouldnât these Fraudsters go to jail?
Wouldnât it be edifying if the sentences for bank fraud were aligned
with the federal sentencing standard that applies when you are caught with marijuana?
As I understand it, there is a yardstick related to the value of marijuana you
are holding: Five years mandatory in federal prison for 100 plants worth
$100,000 or ten years in federal prison for 1000 plants worth $1 Million.
So, if Citibank stole $1 billion, it would mean 10,000 years in jail
for one or hopefully, more executives.
We need to stop this nonsense of immunity from prosecution of Wall
Street.
As Congress continues to underfund the budgets of the SEC, CFTC, and
the Dodd Frank law, trying to assure that there will not be enough
investigators to go after the bad guys, it is apparent we have a systemic
problem, namely Congress and specifically the Republicans.
Bob Dylan was right:
“Steal a dollar and they’ll call you a
criminal, steal a million and they’ll make you a king.”
