Changing Values: "At least I'm not one of those deadbeat CEO's"

The CEO's of major corporations are among the most financially successful people in our society. They are also people who exercise a great deal of control over the lives of others. While few people dreamt of growing up to be CEOs of major corporations as children, the power and wealth inherent in the job have made it a prestigious one. The same is true, to some extent, of business leaders in general. It certainly makes sense that people who have reached the pinnacle of their profession, and in so doing become responsible for overseeing others, should be respected for that achievement, and virtually everyone would like to make the kind of money that CEOs do, but the respect and admiration afforded to business leaders in our society goes far beyond these considerations. Business leaders have been seen as embodying the American Dream, that a person can start with nothing and through their own hard work and ingenuity achieve great success. They have also been seen as the caretakers of our country, particularly by those on the right, who have long argued that giving business leaders free reign, and lower taxes, will lead to greater prosperity for all.

Business leaders have been held in such high-esteem by our society that they have often been considered qualified and credible candidates for public office based only on their business experience. Ross Perot and Steve Forbes both ran for President, and received significant support, having no serious background in politics or public interest work. Mitt Romney was elected Governor of Massachusetts based on his business experience, and made it the centerpiece of his presidential campaign. Michael Bloomberg was elected Mayor of New York City based on his business success. These are only a few examples. For the most part, it does not matter whether a business leader's career really embodied the American Dream. Both Forbes and Romney, for example, were born into money. While an argument can be made that private managerial, or executive, experience is important to a prospective mayor, governor, or president, it is a weak one. In a sense, the job of a CEO is the polar opposite of the job of a governor or president. CEOs must do everything in their power to increase the profitability of the companies they run, any benefits to employees or customers resulting from their decisions are essentially side-effects. A political leader, in contrast, is responsible for balancing the needs of everyone in their constituency. While the ability to give instructions and run an organization may be important, anyone who can run a political campaign demonstrates that they have these skills.

The place of business leaders in our society, or at least how they are covered by the media, appears to have changed in recent months. Whether or not this will be a fleeting change that disappears along with the outrage over the recent wall street excesses, or something more lasting, remains to be seen. It is clear that the catalyst for the change was the financial bailouts, and subsequent revelations regarding the frivolous spending of those running the bailed out companies. The media, and many political leaders, have mocked and criticized the excesses of AIG's corporate retreats, the automaker CEOs private jets, and more recently, Merrill Lynch CEO John Thaine's $1,200,000.00 office renovation, and Citigroup's plan to purchase a $50,000,000.00 corporate jet. Yesterday, President Obama called recent Wall Street bonuses "shameful," while Vice President Biden said of those receiving them “I’d like to throw these guys in the brig.”

These sorts of perks have rightly outraged taxpayers who feel they are footing the bill for them. These sorts of expenditures were just as outrageous, however, before the bailouts, when they received no attention whatsoever. Remember, CEOs are legally obligated to act in the best interests of their shareholders, which essentially means they must maximize profits. Why were expenditures of the sort mentioned above viewed as appropriate business decisions aimed at maximizing profits before the bailouts, but not after? The answer, I believe, is that for the moment our society no longer looks on business leaders with the reverence it once did. The luxuries CEOs and other business leaders have become accustomed to receiving from their companies were always justified as necessary to attract and keep the best leaders. In a recent column, Maureen Dowd conveys the absurdity of this justification, in light of the recent financial collapse, as follows:

In an interview with Maria Bartiromo on CNBC, Thain used the specious, contemptible reasoning that other executives use to rationalize why they’re keeping their bonuses as profits are plunging.

“If you don’t pay your best people, you will destroy your franchise” and they’ll go elsewhere, he said.

Hello? They destroyed the franchise. Let’s call their bluff. Let’s see what a great job market it is for the geniuses of capitalism who lost $15 billion in three months. . .

This seemingly common sense perspective reflects a significant shift in how our culture views business leaders. The assertion that the largesse of corporations toward their executives was justified by the need to compete for the best people, and that these people were worth what they made, is inconsistent with the prevalence of golden parachute provisions in the contracts of these "best" people. While it is argued that these provisions protect business executives who are terminated due to circumstances unrelated to their effectiveness, such as mergers, an executive with a record of achievement should have little trouble finding another job after such a termination, and could certainly afford to take some time to find one. Golden parachute provisions would be unimaginable in most professions, and many people who are confident in their abilities would find the suggestion that they need such a provision demeaning. Thus, the fact that these provisions are not unheard of suggests that the executives who receive them view themselves, and are viewed by society, as having superior inherent value, unrelated to their competence.

The change in how society views business leaders may be a significant silver lining of the recent financial turmoil. The idolization of people who have devoted their lives to accumulating personal wealth and power has been harmful in many ways, the most obvious of which is the current financial crisis. While the change may prove temporary, there is some reason to think it will not. The change was certainly catalyzed by the current financial problems, but the failed presidency of George W. Bush, the "CEO President", was probably a contributing factor, as was the Bernie Madoff debacle. The election of President Obama can be viewed as both a possible consequence of the changing view of business leaders and a potential reason for its continuance. Obama not only has no significant business experience, but actually turned his back on a lucrative career in corporate law in order to take a low paying job as a community organizer, and regularly speaks of the importance of public service.

To say that our society has embraced Obama to a far greater extent than most political leaders would be something of an understatement. He is currently viewed favorably by around seventy percent of Americans. This embrace may be harmful in some ways, particularly if it leads to complacency among progressives, and an unquestioning embrace of Obama's policies. It may also, however, positively impact the values of our society. For some time, perhaps a long time, we are likely to see a narrative in the media of career public servants like Obama and Biden chastising business leaders for their greed and short-sightedness, working to fix the damage they've done, and setting up regulations to ensure they do not run amok again. This narrative may not be entirely fair, as not all business leaders are responsible for the financial crisis, but I believe it is a very good one for us to see.

The accumulation of excessive wealth and power should not be viewed as a respectable aspiration. This does not mean that those who achieve success in business should be looked down on; competence and skill in any profession are admirable qualities, and in a Capitalist country successful businesses are necessarily the source of most jobs. It also does not mean that business leaders should be demonized for prioritizing the interests of their company's shareholders over those of its employees, customers, or country. That is not only their job, but also their legal obligation. What it does mean is that business leaders who carry over this pursuit of profits over all else from their jobs to their own lives should not be viewed as embodying the American ideal, but as simply being offensively greedy. A more realistic perspective on the place business leaders occupy in our society may also facilitate a greater recognition that arguments made by, or on behalf of, a business or industry's leaders are motivated solely by the interests of the business or industry. Thus, for example, an argument in favor of free trade, as necessary for American companies to stay competitive, made by the CEO of an auto company, should not be considered persuasive evidence that free trade will be good for the country or the economy. but only that it will be good for the auto company.

If the change in our society's values brought about by recent events proves lasting, it could mark a dramatic change in our culture. The elevation of public service and and hard work over wealth and power could inspire future generations, and today's students, to measure their success by the good they do in the world. For some, this may mean forgoing a career in business or corporate law, and working instead as a union organizer or public defender. For others, it may mean confining their zealous pursuit of wealth to their job as a business executive, forgoing bonuses when layoffs must be made, and giving away any money they make in excess of what they need to live a reasonable lifestyle. And perhaps, for those who persist in making it their life's goal to accumulate wealth at any expense, it means being viewed by society as morally equivalent to con artists, loansharks, and others who share this priority.

Too Big to Fail

Over the last few months we've been hearing this phrase quite a lot in the news media. Essentially, it is proposed that recent multi-billion dollar bailouts of various financial institutions by the United States government were necessary because these institutions were so large, and consequently so integral to our economy, that their failure would have been disastrous. I am not an economist, and have no reason to doubt the truth of this claim. In my opinion, however, if one is to accept the 'too big to fail' justification for the recent bailouts, there are certain other actions which are required by the same reasoning.

Presumably, the disastrous consequences which would result from the failure of the too big to fail companies would cause serious financial hardships for all, or virtually all, Americans, not just for those with some direct financial interest in the companies. This is the premise of another claim that we've been hearing a lot of: the current financial crises encompasses both wall street and main street. Thus, using taxpayer money to bailout enormous corporations is not an outrageous upwards redistribution of wealth, but actually a necessary step to protect all citizens from financial disaster. I find this eminently reasonable, as protecting vast numbers of ordinary people from financial ruin is certainly a laudable goal. Yesterday, Hank Paulson declared his recent bailout a success, because the credit markets are apparently improving somewhat. (see Hank Paulson Declares Victory at Salon). Presumably, this will ultimately provide relief to ordinary people.

The problem with the 'too big to fail' justification for these bailouts is that in American politics, saving ordinary people from financial ruin is not typically considered a high enough priority to justify interfering with the free market, or requiring those who are doing well financially to pay to support those who are struggling. Quite frequently, it is argued that this is ultimately in everyone's best interest, as interfering with the free market or providing people with financial safety nets takes away their motivation to work harder, and contribute more to the economy. To reconcile support for bailing out companies that are 'too big to fail' with opposition to providing struggling Americans with direct aid, it is often implied that these bailouts must be an isolated exception to a general rule, where the cost-benefit analysis so strongly, and unusually, favored the bailouts, that everyone would understand they were an aberration, and not view them as setting a precedent.

Considering the vast sums allocated for this bailout, however, the potential impact if it were used in other ways appear similarly justifiable. For example, there are approximately 35 million Americans living below the poverty line. If the 800 billion dollars were divided amongst them evenly, they could each be given nearly 23,000 dollars. That's at least twice the yearly income of any individual living below the poverty line. It seems self-evident that this amount of money could lift many, if not most, of these people out of poverty. It is enough money to buy a car, or perhaps to pay for living expenses or child care while a person goes back to school. Have the benefits of the recent corporate bailouts significantly outweighed saving tens of millions of Americans from poverty?

Objections to such an expenditure as socialistic or redistributive do not seem reconcilable with support for the recent bailouts. Ultimately, what I find most disturbing about these bailouts, and the 'too big to fail' concept, is the idea that the unacceptability of failure is something that kicks in once a corporation reaches a certain size. Why is it unacceptable to allow a company to fail when doing so would plunge many people into financial ruin, but acceptable to allow individuals to suffer the same fate for other reasons, unrelated to their own conduct. Why should those who would have suffered if AIG or Bear Sterns were allowed to die be bailed out, while those who are suffering because of the subprime mortgage crisis, or who were fired because their employer moved overseas be left to fend for themselves? It may be true that, from a national perspective, these companies were 'too big to fail', but for a family struggling to stay in their home, keeping up with their mortgage or rent payments is an undertaking that is similarly too big to fail, and if the former is true, it is only because of the latter.