The Federal bailouts that began with the Savings and Loans during the George HW Bush Administration, touched down with the airlines after 9/11, threw 85 billion to AIG, then shoveled 700 billion to save our vaunted Financial Institutions, have now come to a three-way pile up on American automakers. When the country’s leading capitalists are landing in Washington on a weekly basis asking for cash to keep their industries afloat, something’s wrong. The United States and capitalism are supposedly merit-based institutions, or at least they used to be. The Hangover asks: Why is abject failure being rewarded?
Understandably, these financial institutions and industries need to stay viable or millions of Americans will be out of work or out of their homes. That can’t happen. But bailout dollars shouldn’t be handed over so that a sinking-into-the-muck status quo can be maintained. When the AIG executives got their money, they spent nearly half a million dollars at a Califroina spa playing golf, stuffing their faces, and getting massages. Will those running the auto industry and financial institutions prove to be so different?
President Elect Obama stated:
“We have to have an auto industry that understands they can’t keep on doing things the same way. If this management team that is currently in place doesn’t understand the urgency of the situation, and is not willing to make the tough choices and adapt to these new circumstances, then they shoud go.”
But Obama has it backwards. You don’t give the reward first and then demand the behavior. Like spoiled children, our greatest capitalists need strict boundaries and discipline. The Hangover proposes two simple “conditions” for companies who want “bailout” money. If they’re willing to comply, they get their dollars.
- A company that accepts bailout money must completely revamp its upper management team (new CEO, new CFO, and a turnover of the majority of its Board of Directors). They are the ones who brought that particular entity to the ground. They don’t need another opportunity to screw up. If you owned a business and your manager was losing your money in a swift and steady stream, would you keep him or her around? Didn’t think so.
- The CEO of a bailed out company can earn no more than 40 times that of the average worker. Excessive executive pay has skewed companies’ bottom lines as well as screwed workers and shareholders. Even Fortune has stated that “executive compensation has become highway robbery.” The Tampa Sentintel reported that in 1980, the average CEO earned $10 for every $1 earned by the average US worker. In 2006, the not-so-average-anymore CEO earned 430 times that same worker’s one dollar. Instead of funneling executive pay into private jets, spa weekends, and bottles of ’78 Lafite-Rothschild, make the companies reinvest in themselves. And if those executives want to raise their own pay, all they have to do is take care of those beneath them.
Of course, some may say that these proposed conditions smack of socialsim. But it’s exactly what the industries are asking for. Give the capitalists what they want.