Has CEO Bashing Gone Too Far?
By any measure, 2008 was a record year for CEO bashing. I mean, there was so much fraud, greed and dysfunctional executive behavior even I can't believe it.
Let's see, we had oil companies making record profits off sky-high gas prices; the demise of Fannie Mae and Freddie Mac and the collapse of the housing bubble; century-old investment banks going under and the bailouts of AIG and Citigroup; the heads of the big three automakers begging congress for a handout; the crash of the equity markets; and to top it all off, Bernard Madoff's alleged $50 billion investment fraud.
This time, people aren't just outraged over lucrative executive pay and exit packages. They're genuinely distraught over the loss of their nest eggs, homes, and jobs.
Having said that, I'm wondering if all the CEO bashing hasn't gone too far. I mean, if all the discourse is going to amount to anything, shouldn't we ponder a few relatively complex questions:
Are we denigrating an entire profession because of the acts of a few greedy, incompetent, narcissistic sociopaths?
Doesn't politics and government regulation play a big role in all of this?
Is it somehow our fault for behaving irrationally and helping to create bubbles in the first place?
Before you weigh in, consider these excerpts:
CEO exit packages are out of control
The best example of how ridiculous this can get is the story of Michael Ovitz, the Hollywood super-agent hired by Michael Eisner to be Disney's president in 1995. Ovitz's tenure with the company was a disaster. He was fired after 14 months, and for that he got a check for $39 million and immediate vesting of 3 million shares of stock - a value of $101 million at the time. Total payout: $140 million.What motivates rich, powerful CEOs to commit corporate fraud?
It's enough to make you sick.
What do Bernie Ebbers, Walter Forbes, Martin Grass, Dennis Kozlowski, Sanjay Kumar, Ken Lay, Joe Nacchio, John Rigas, Jeff Skilling, and Sam Waksal all have in common? They were all CEOs of prominent public companies, convicted of big-time corporate fraud and sentenced to lengthy prison terms.Do the ends ever justify the means?
They were all also fabulously wealthy when they committed their crimes. Nevertheless, they risked their careers, families, reputation, wealth, power, everything. And for what? What motivates rich, high-powered CEOs to unnecessarily risk it all against all logic and ethical principals?
Perhaps there's something deeper going on here, something in their circuitry that's hard-wired for exceptional success followed by devastating disaster. Or is it just probability? Maybe x percent of highly successful, super-wealthy CEOs of prominent public companies will turn out to be dysfunctional crooks.
Consider the past decade of industry scandal and fraud: Trillions of dollars of investment capital down the tubes in the dot-com bust; rampant conflict of interest between Wall Street's top investment bankers and telecom research analysts; stock-option backdating scandals; and a mountain of accounting and trading fraud.You know who wrote those posts and lots more? I did, for CNET's Train Wreck: Steve Tobak's Views on Dysfunctional Corporate Behavior. Why the nostalgia? So you know that I'm by no means a CEO advocate. And no, my views haven't changed since then.
Just ask convicted executives from Adelphia, Cendant, Comverse, Computer Associates, Dynegy, Enron, Enterasys, Homestore, Imclone, Impath, Monster, Network Associates, Prudential Securities, Qwest, Refco, Tyco, and WorldCom, what made them think they could get away with it?
Their answers may be disguised a hundred different ways, but they will always boil down to a delusional belief that what they did was somehow justified.
Here's my problem. Like it or not, the profession of chief executive officer is the pinnacle of American capitalist society. Last time I checked there were roughly ten thousand public and more than a million private companies in the U.S. What percentage of all those CEOs do you think are responsible for all that's gone wrong lately and are therefore deserving of all the bashing?
You know what I think? Unlike actors, athletes, doctors, lawyers, and others who make gobs of money, CEOs are uniquely responsible for the pain of millions. The buck stops there. Accountability? They're accountable, all right. We know where they live. And when they commit crimes, they should pay.
But I'm guessing the percentage of dysfunctional and criminal CEOs is no different from other professions. It's just that they can do a whole lot more damage when they screw up. To me, that doesn't justify vilifying an otherwise noble profession.
Just for a moment, forget the hugely-compensated CEOs of Morgan Stanley, Exxon Mobil, GM, and the like, and think about the million plus CEOs of public and private companies, big and small. Sure, they make good money, but most are also entrepreneurs that take big risks. For them, their work is their lives, and they're a big part of what makes this nation great, if indeed it still is.
I'm not saying we should hoist CEOs up on pedestals just because they're CEOs. I think we've already done that, which is probably why they've fallen so far. I just think we should try to achieve a little perspective on all this. It's hard to do with all the bashing going on.