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Thursday, January 11, 2018

Executive Compensation (Part II): Paying Failure

In late September 2011, Léo Apotheker was fired after 11 months as CEO at Hewlett-Packard. As a reward, he walked with $13.2 million in cash and stock, in addition to a sign-on package worth about $10 million, according to the New York Times. A month earlier, Robert P. Kelly received severance worth $17.2 in cash and stock when he was fired as CEO of Bank of New York Mellon. Even his clashing with board members and senior managers did not obstruct his nice severance package. A few days later, Carol Bartz was let go as CEO of Yahoo with nearly $10 million in spite of the company’s poor performance. Back in April 2011, John Chidsey, the CEO of Burger King, had departed with a severance package worth almost $20 million in the fact that McDonalds had been outcompeting Burger King. Baxter Phillips, the CEO of Massey Energy, got a package worth over $34 million in spite of “presiding over a company barraged with accusations of reckless conduct and with legal claims stemming from one of the deadliest mining disasters in memory,” according to the New York Times. Unfortunately, the list goes on and on. Is this a system of pay-for-failure? Moreover, do chief executives, who seem to outward appearances to be almost exclusively motivated by what they can get in additional compensation, have too much leverage over boards, and thus over even the owners as well? If so, is corporate governance itself severely broken? I answer in the affirmative.

Eric Dash, “The Lucrative Fall from Grace,New York Times, September 30, 2011. 

Executive Compensation (Part I): Systemic Risk

In the wake of the financial crisis, according to the Huffington Post, “a number of the nation's largest banks were excused from the government's rescue program before they had returned to a position of complete financial security -- in part because they wanted to avoid restrictions on how much their executives would get paid, according to a new report from the program's government overseer. Citigroup, Wells Fargo, PNC and Bank of America successfully lobbied to leave the federal bailout program early in 2009, even though the Federal Reserve Board and the Federal Deposit Insurance Corporation had recommended they take additional steps to shore up their assets, according to a new report from the Special Inspector General for the Troubled Relief Asset Program, a government watchdog office. Regulators, including the Treasury and the Federal Reserve Board, eventually ‘relaxed’ their criteria for letting the banks out of the program, the report says, leaving questions about whether the banks had strengthened their holdings enough to be able to withstand another systemic crisis.”[1]

The full essay is at "Executive Compensation: Systemic Risk."

1. Alexander Eichler, “BofA, Wells Fargo, Citigroup Left TARP Early to Avoid Restrictions on Executive Pay,” The Huffington Post, September 30, 2011. 

The American City: A Police State in the Making

Crime in 2017 was down the 30 largest cities in the U.S, but police levels remained robust. Specifically, less crime did not result in fewer cops on the street. “In 2016, there were slightly more officers per capita than in 1991, when violent crime peaked,” according to the FBI.[1] American cities were on a trajectory toward becoming police states. A mentality of excessive dominance, I submit, lies behind the excessive show of force.

The full essay is at "The American City: A Police State"

1. Jose Del Real, “Crime Is Falling, But Police Levels Remain Robust,” The New York Times, January 8, 2018.

A Megachurch Pastor and Sexual Assault: A Compromised Christian Leader

“A Memphis megachurch pastor received standing ovation during a church service on Sunday after he admitted that he had engaged in a ‘sexual incident’ with a high school student 20 years ago in Texas.”[1] That the woman had made the man’s prior misdeeds public just days before throws into doubt whether the pastor deserved the ovation by his loyal flock. Prompted by the firing of Matt Lauer, the anchor of NBC’s “Today” show, the woman emailed the pastor more than a month before his public acknowledgement at his church; he had not responded to the woman’s email to apologize. Letting his flock in on the secret hardly added much value to the man’s character, for damage-control is not laudatory. The standing ovation connoted not only praise on the man and a revalidation of the pastor’s continuance as a religious leader. That a Christian leader could be validated as such, rather than invalidated and thus shown the door, throws into question the integrity of religious leadership itself.

1. Matthew Haag, “Megachurch Pastor Admits to Illicit ‘Sexual Incident’,” The New York Times, January 10, 2018.

The full essay is at "A Megachurch Pastor as a Christian Leader."