Fortunately executives of ‘rescued’ outfits realise how important it is for them to reassure the rest of us by showing us that life goes on and we should continue to lead it (as best we can in our newly straitened circumstances) as usual.
Thus for instance the Washington Post reports.
Less than a week after the federal government offered an $85 billion bailout to insurance giant AIG, the company held a week-long retreat for its executives at the luxury St. Regis Resort in Monarch Beach, Calif., running up a tab of $440,000, Rep. Henry Waxman (D-Calif.) said today at the the opening of a House committee hearing about the near-failure of the insurance giant.
Showing a photograph of the resort, Waxman said the executives spent $200,000 for rooms, $150,000 for meals and $23,000 for the spa. . . .
The House committee, which took on executive compensation at bankrupt Wall Street firm Lehman Brothers yesterday, has received “tens of thousands” of pages of documents from AIG, Waxman said.
Those documents show that as the company’s risky investments began to implode, the company altered its generous executive pay plan to pay out regardless of such losses. . . .
But the board agreed to ignore the losses from the financial products division and gave Sullivan a cash bonus of over $5 million. The board also approved a new compensation contract for Sullivan that gave him a golden parachute of $15 million, Waxman said.
Joseph Cassano, the executive in charge of the company’s troubled financial products division, received more than $280 million over the last eight years, Waxman said. Even after he was terminated in February as his investments turned sour, the company allowed him to keep up to $34 million in unvested bonuses and put him on a $1 million-a-month retainer. He continues to receive $1 million a month, Waxman said.
When a former AIG auditor, Joseph St. Denis, expressed concerns, Cassano told him “I have deliberately excluded you from the valuation … because I was concerned that you would pollute the process,” according to Waxman.
St. Denis resigned in protest.
Modern corporate governance compares unfavourably with feudal China. It really is a sick joke. Vote them out cry the RWDBs. The idea of one vote per share is a mirage of democracy. The fixed cost of my being up to date on executive compensation and voting against is large, and the likelihood of having any effect is zero. Whereas the fixed cost of a large institutional investor is very low, and they are happy to see executives rip off the companies they have shares in. Why? Because all these major players know each other well from the sauna at the Melbourne Club.
The US government are now in a position to stop such rorts at AIG at least since they pretty much own it. But you will not find much is done while the GOP are at the helm. The whole idea of elite dark suits skimming off the cr
Huh, I thought I posted this but I must have flipped out at the ludicrosity of Chris Lloyd’s claim re the GOP.
First I think the problem is not so much investor apathy as the lack of investor voting rights in the US. There are a few and more and more examples in Australia of investors rejecting executive largesse (Telstra and OZ Minerals, Becton and Transurban almost).
Many Aussie instos are in effect mandated to vote in line with eg the Australian shareholders’ association (or some other body)’s recommendations. Where the responsible doesn’t want to, he has to prepare a memo to his boss explaining why he is voting differently.
On the more serious bit of preposterous assumption, how can you possibly think the GOP is any worse than the Dems in this regard? If anything they are better – one can easily name anti-wall-streeters like, hey, McCain! Also people like Coburn, for example, and any number of Representatives and Senators from ‘fly-over’ States. Equally the Dems are more than well-represented with ne-plus-ultra-pro-wall-streeters, like Barney Frank and Charles Schumer and Ted Kennedy and indeed all those Representatives from the East and West coasts.
The Dems are about as much in hock to hedge fund managers these days as they are trial lawyers and unions. Not saying that the Republicans are necessarily better (although I think they might be a half-a-nose ahead thanks to a possibly unrepresentative group of conservatives), but it is absurd to paint this as the problem of one party.
Even more so as recent evidence highlights more starkly than ever how not hell nor high water, and certainly nothing so trivial as partisan differences, can come between our politicians and our money.
Btw, short natural experiment for you – who has the majority of both Houses these days? Where is the legislation combating executive largesse? What did I miss?
AIUI Patrick, it was largely Democrats that insisted “legislation combating executive largesse” be part of the TARP bill. However I do agree that there’s not much evidence that Dems have been any better than Repubs in recent history.
A party is like a huge iceberg, the visible part of which is the senior leadership: In the case of the GOP the President and his cronies. You can always select a few senators from either side to prove almost any counterfactual assertion, but these are actually the exceptions that prove the rule.
Look at GWBs original bailout package. Let me give B$700 of your money to my finance and banking mates. We dont tell you who was given what, nobody gets sacked, and you do not get any ownership because nationalisation is always bad. Dem controlled congress wasnt going to accept that. And yes there were plenty of Republicans who wouldnt as well. But it was their glorious leadership that came up with the scheme.
I stand by my statement that little will be done to sack and humiliate the financial cowboys while the GPO have the presidency. Notice though that I did not claim that the Dems will necessarily do anything either. But the public mood is changing quickly. Anything may be possible.