grimmeissen
Administrator
Join Date: 1/14/2004
Posts: 1217
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Posted: 3/5/2008 9:06:03 AM
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In my writings I am often very hard on government intervention in matters of the markets and I advocate a conservative approach to finances. It pains me to hear people like John Edwards and Ralph Nader advocating massive business regulation and aggressive legal tactics against American companies. However, unlike mainstream conservatives, this does not force me to turn my back to the corruption and greed that fills our corporate boardrooms.
Washington Mutual Inc's board of directors have approved a plan that protects the company's executives against missing their bonus targets from the impact of the subprime loan mess. The plan creates new calculations that are to be used in determining bonus payouts. These new calculations exclude expenses related to resizing, restructuring, foreclosed real estate, and loan loss provisions. Essentially, the calculations ignore every part of the business that could possibly be generating losses--and for Washington Mutual that is a lot of losses.
After WaMu's stock fell 70% in 2007, destroying shareholder value as the bank hemorrhaged subprime-related losses, this board of directors decided that it was time to give their CEO 3.2 million stock options. As if it couldn't get any more ridiculous, their reasoning behind the award was to provide a "strong incentive to restore shareholder value." The guy who was in charge when investors lost 70 percent of their "shareholder value" is being provided bonuses and incentives to bring it back!
So-called "conservatives" and free market advocates turn their backs on this corporate greed and corruption that runs rampant in our business environment. This is one of the many reasons why I distance myself from the modern definition of conservatism and base my ideals around the original meaning of the movement.
Before you think that I have switched sides and become a socialist advocate of government intervention and business regulation, take a look at why I believe this problem exists and what can be done about it.
The problem we have is that what we call conservatives are actually corporatists. They are only free market advocates in a sense that they want business profits to grow in a limitless manner, with no intervention by the government. However, they are not true laissez-faire economists because they also do not want the market itself to step in and intervene in their limitless corporate profits. Those same conservatives who advocate free markets are the same people calling for government intervention to bail out banks, companies, and investors who created the subprime loan fiasco and made a mess that they can't get out of. They are calling for "stimulus" packages for irresponsible borrowers, and they are begging the Federal Reserve to lower interest rates and to take the bad paper off the hands of the large banking companies. They are against government intervention when it gets in the way of profits, but they support government intervention when it protects them from their losses.
The corporate problems we deal with today are not a result of there not being enough regulation. In fact, it is a result of too much interaction by the same people we think are leading the charge for open markets. As the government steps in to bail out the bad sections of the economy, they assure that those sections will continue to exist and thrive. If a true free market approach was being sought by our "conservative" leaders, we would allow those banks who mismanaged themselves to eat the losses just as any person would if they made bad investment decisions. If the corporations truly had to suffer from their greed and mismanagement, they wouldn't be able to afford to pay massive bonuses to the executives who drove them into the dumpster.
Unfortunately, the American conservative leadership has failed miserably. They do not actually support the ideals they claim to uphold. Sadly, what we will get as an answer to this corruption is a strong movement from the left to regulate and intervene in business. It's a completely flawed approach, but what can you expect in a political environment where only two schools of thought exist. If one fails, the other obviously has the answer... right?
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grimmeissen
Administrator
Join Date: 1/14/2004
Posts: 1217
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Posted: 3/5/2008 8:09:12 PM
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It looks like Jim Cramer shares my anger about the Washington Mutual bonus packages. On tonight's episode he dedicated an entire segment to ripping into it, putting the entire board of WaMu on his Wall of Shame. The following is from the recap on his web site, TheStreet.com.
Quote: Cramer expressed outrage at Washington Mutual's Chairman and CEO Kerry Killinger and 100 other executives who were given attractive compensation targets by the company's board of directors.
According to the Wall Street Journal, the board voted to shield the compensation targets from some costs from mortgage losses and foreclosures when bonuses are calculated later this year. Cramer was disgusted with the action because it comes at a time when the company teeters on the brink of insolvency.
Cramer called the board's actions "shameful" and added the entire board to his "Wall of Shame."
"How can you people live with yourselves," he asked, while noting that the proposed bonuses for Killinger will range between 365% and 548% of the CEO's base salary for the year.
Cramer urged Washington Mutual shareholders to hold the company's board accountable for their actions.
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