In the classic tale of corporate greed, Wall Street, the ruthless corporate raider Gordon Gekko’s young protégé, Bud Fox, asks how much money is too much. “How many yachts can you water ski behind?” asks Fox. Gekko calmly replies, “It’s all about bucks, kid. Everything else is conversation.”The subject of exorbitant executive compensation was an uncomfortable issue long before the current credit and housing crises wrested the majority of economic headlines. From the outcry over former New York Stock Exchange chair Dick Grasso’s $140 million contract, to the inexplicable $100 million severance package given to former Walt Disney Co. president Michael Ovitz, it’s almost unfathomable to most Americans how someone can justify such figures, regardless of a company’s performance.
While packages like the NYSE’s Grasso’s may elicit sporadic oohs and ahhs in a good economy, the current financial crises have placed a floodlight on the topic — amidst a spiraling number of foreclosures and anemic jobs data.
Case in point: a hearing conducted last month by the House Committee on Oversight and Investigations, which grilled a trio of top-level financial executives on the income they earned as a result of subprime mortgages. The committee turned its spotlight on E. Stanley O’Neal, former chair and chief executive at Merrill Lynch; Charles O. Prince III, former chief executive and chair at Citigroup; and the perpetually tanned founder and CEO of mortgage lender Countrywide Financial, Angelo Mozilo.
O’Neal and Prince were both shown the door last year in exits tied to the collapse of the subprime market, but they hardly left empty-handed — O’Neal with a $131 million package and Prince with one valued at $68 million, despite their companies having lost billions in market value on their watch. Mozilo’s company, which has often been held up as the poster child for what went wrong in the subprime market, is in the process of being acquired by Bank of America. Since 1999, Mozilo has earned more than $400 million. He defended that compensation by pointing out that Countrywide’s stock price appreciated over 23,000 percent from 1982 to 2007.
The trio were questioned by lawmakers, many of whom wanted to know how they garnered such lavish packages in the midst of this credit and housing implosion. Committee Chair Henry Waxman, D-Calif., charged that the three lived by a different set of rules, as opposed to the precarious financial situation facing millions of Americans.
Like many hearings on Capitol Hill, I’m not sure this one accomplished much, except to again highlight what most people already know — that the very rich are different from you and me.
Reforming executive compensation is not going to come as a result of testimony in front of C-Span, but rather from the grassroots efforts of average citizens and advocates, many of whom are shareholders in companies such as those mentioned above.
Only then, as Gordon Gekko might have said, can a conversation about the bucks really begin.
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