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March 18, 2009


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Not mad, David, just terribly saddened at the sorry pass this country has come to:
(1) The idiots at the AIGs, Fannie Maes, Freddie Macs, CitiCorps, etc., who got consumed by greed and destroyed their companies and the economy. And all of us investors who expected and demanded unrealistic returns. We were ripe for the picking of the Madoffs of this world.
(2) Our elected representatives who remove restrictions on bonuses to bailed out companies and then express great outrage that the bonuses are being paid (i.e. Reid, Dodd, Frank, etc.). They're going to have a hard time blaming that one on Bush.
(3) The Bush Administration and the Republican Congress who spent money like drunken sailors, preached reduced government while they expanded it at a dizzying pace and then couldn't even figure out how to respond to a hurricane while we watched people die on television.
(3) Political Action Committees of all stripes who fueled the process that gave us the political corruption we have now.
(4) The news media, flushing themselves and us down the First Amendment toilet because they've never figured out the internet and decided the 2008 election was the perfect time to play lemmings (and no, I didn't like McCain either).

Regarding the "anger" we're all supposed to feel--I agree, Glynn, I'm closer to sadness too--here's a pretty good column by the wonderfully sardonic Gail Collins:


Boots correspondent and speechwriter-to-finance-CEOs Henry Ehrlich has an astute piece about why executives get paid what they do.

He begins by quoting John Kenneth Galbraith: "The salary of the chief executive of a large corporation is not a market award for achievement. It is frequently in the nature of a warm personal gesture by the individual to himself."

And gets better from there.


Lenin feared most the creation of a stable middle class, saying that it would remove one of the most important causes of revolution -- dissatisfaction with being poor.

The gulf between executive and average pay has widened, but in and of itself is not a problem economically as long as economies are expanding -- the pie getting larger. Expecting someone to voluntarily take less in pay and perks is as irrational for you and I as it is for executives.

The AIG case is different because of the current 80% ownership by taxpayers -- as the largest shareholder we have a reasonable expectation that expenditures will reflect the dismal financial situation of AIG, and that includes bonuses.

I usually have no issues with executive pay at all -- people who lead companies completely self-identify with their firms and most sacrifice totally themselves to their jobs and companies. The outrage belongs more properly on actors and sports figures, if we want to get techy about it.

Unfortunately, the outliers on executive pay get all the notice -- Dick Grasso's $600 million, hedge fund leaders, investment bank heads, etc. are exceptions rather than rules. It would be interesting to see the executive pay distribution by industry type to see if the oft quoted 425% differential between exec pay and average pay holds up. I surmise it wouldn't, especially if gains on stock holdings were removed in favor of wages and bonuses.

All of this does, however, have a touch of the French Revolution in its margins...

"people who lead companies completely self-identify with their firms and most sacrifice totally themselves to their jobs and companies."

So we're paying these guys $40 million to be insane and miserable, and to run our organizations accordingly?

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