Last year's tax cut legislation was a barely-cloaked present to the same financiers who crashed the world economy in 2008.
In March 2010 former Goldman Sachs CEO, US Senator, and Governor of New Jersey Jon Corzine was appointed Chairman and Chief Executive Officer of MF Global, a mid-tier investment bank. Corzine had big plans to turn it into the next Goldman Sachs. Nineteen months later, MF Global was bankrupt.
The MF Global Bankruptcy is bad news for MF Global’s employees, account holders, and creditors. Is it bad news for Jon Corzine? Well, according to the International Herald-Tribune Mr. Corzine is “expected to receive a severance payment of nearly $12.1 million” (November 1, 2011, page 15). That’s over $30,000 for every business day Mr. Corzine spent at MF Global. And Mr. Corzine supposedly only worked there “part-time.”
[pullquote]$30,000 a day for part-time work isn’t bad.[/pullquote]
We don’t know (yet) what other perqs and payments Mr. Corzine may have received from MF Global, but $30,000 a day for part-time work isn’t bad, even if you’re successful. Earning $30,000 a day for bankrupting your company . . . that’s plain impressive. Bankrupting your company when you only work there part-time . . . priceless.
Sadly for Mr. Corzine, it’s looking more and more like he may never see a cent of his severance pay. Regulators are now investigating MF Global for accounting improprieties. There’s a small matter of $600 million that’s gone missing.
Investment banks make money by playing two sides of a fixed game. On one side of the game, they hold money for their clients and make trades on their behalf. They don’t make any real money doing this, but they collect tons of information about what their clients are doing. Call it “market intelligence.”
[pullquote]Investment banks make money by playing two sides of a fixed game.[/pullquote]
On the other side of the game, they make trades using their own money. The most successful investment banks (including especially the most successful of them all) use the “market intelligence” gained from managing clients’ accounts to consistently out-guess the market. It’s unethical, unfair, and fundamentally corrupt — but it’s legal. Most days it’s a license to print money.
The investment banks are, however, required by law to keep their money separate from their clients’ money. Investment banks can peek at your pot, but they can’t use it to make their own bets. No matter how much money the investment bank loses, it shouldn’t affect your accounts.
No one knows yet whether or not MF Global dipped into its clients’ funds to support its own trading, but major news outlets are reporting that the FBI, SEC, and CFTC are investigating the possibility of this kind of behavior. In the meantime, Mr. Corzine’s severance package is probably on hold. For now it’s wait-and-see.
The bigger story, though, is all too familiar. CEOs make massive salaries whether their companies succeed or fail. They ring-fence their severance packages so that when a company goes bankrupt, they keep their retirement. When a company goes under, everyone pays — except the CEO. Instead, the CEO gets paid.
This has to stop. America needs more shareholder democracy and oversight of corporate management. American needs more discipline for boards of directors who don’t properly watch over their companies. Most of all, America needs to stop paying CEOs like gods. Give them an honest day’s pay for an honest day’s work.
[pullquote]America needs to stop paying CEOs like gods.[/pullquote]
No one’s honest day’s work is worth $30,000 a day, part-time.
Outrageous CEO pay is tearing apart American society. Only a few people are CEOs, but CEOs set the tone for pay — and expectations — for top professionals in all fields. Today, CEOs make off with millions whether or not their companies succeed. Other top professionals (and their politician friends) increasingly demand the same un-accountability. It’s time we restored some sanity to the boardroom . . . and to our country.