Corporate America

From CNNMoney.com:

New York Attorney General Andrew Cuomo said Monday that the $10 million bonus reportedly being considered for Merrill Lynch’s chief executive John Thain is “nothing less than shocking.”

In a strongly worded letter sent to members of Merrill’s board of directors, Cuomo points out that the brokerage reported losses for every quarter this year, and has lost more than $11 billion in 2008.

He added that Bank of America’s takeover of Merrill, which was formally approved by shareholders Friday, “seems to have been the only thing that saved Merrill from collapse.”

“Clearly, the performance of Merrill’s top executives throughout Merrill’s abysmal year in no way justifies significant bonuses for its top executives, including the CEO,” Cuomo said in the letter.

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It takes some really big balls to want a bonus after overseeing the collapse of a financial services giant during your brief tenure as its leader.

From this morning’s Wall Street Journal:

Ford Motor Co. plans to tell Congress it is retooling itself to build small fuel-efficient cars and break from the past strategy of focusing mainly on large pick up trucks and sport-utility vehicles, and will cut the compensation package of Chief Executive Alan Mulally, as part of its bid to win support for a federal bail out of the Big Three auto makers, a person familiar with the matter said.

… It is unclear how Mr. Mulally’s pay package will be reduced, this person said. Ideas under consideration included eliminating Mr. Mulally’s salary until the company returns to profitability, or replacing his salary with more stock options, this person said. The CEO has earned close to $50 million in total compensation since taking the helm of Ford in 2006.

Executive compensation emerged as an issue when the Big Three CEOs asked Congress for financial help in November. In response to a question last week about taking a $1 salary in return for federal aid, Mr. Mulally said: “I think I’m OK where I am.” Chrysler’s Robert Nardelli said he would accept that condition, while GM’s Rick Wagoner demurred.

Mr. Mulally’s response unnerved Mr. Ford and some other members of the company’s board, according to people familiar with the matter. A cut to Mr. Mulally’s pay is “inevitable,” said another person familiar with the matter.

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It’s certainly time for CEO compensation to more closely reflect the health of the company they are leading. I like the idea of replacing the CEO’s salary with more stock options. If the company does poorly, so does his compensation package. And golden parachutes should be eliminated altogether.

Barack Obama was interviewed by Barbara Walters for a special that’s airing tonight on ABC. TPM had advance excerpts from that interview:

BARBARA WALTERS: How did you feel when you read about the three heads of the auto companies taking private planes to Washington?

BARACK OBAMA: Well, I thought maybe they’re a little tone deaf to what’s happening in America right now. And this has been a chronic problem, not just for the auto industry, I mean, we’re sort of focused on them. But I think it’s been a problem for the captains of industry, generally.

When people are pulling down hundred-million-dollar bonuses on Wall Street, and taking enormous risks with other people’s money, that indicates a sense that you don’t have any perspective on what’s happening to ordinary Americans. When the auto makers are getting paid far more than their counterparts at Toyota, or at Honda, and yet, they’re losing money a lot faster than Japanese auto makers are, that tells me that they’re not seeing what’s going on out there, and one of the things I hope my presidency helps to usher in is a, a return to an ethic of responsibility.

That if you’re placed in a position of power, then you’ve got responsibilities to your workers. You’ve got a responsibility to your community. Your share holders. That if — there’s got to be a point where you say, ‘You know what, I have enough, and now I’m in this position of responsibility, let me make sure that I’m doing right by people, and, and acting in a way that is responsible.’ And that’s true, by the way, for members of Congress, that’s true for the president, that’s true for Cabinet members, that’s true for parents.

I want all of us to start thinking a little bit more, not just about what’s good for me, but let’s start thinking about what’s good for our children, what’s good for our country. The more we do that, the better off we’re going to be.

WALTERS: Should bank executives — it’s almost Christmas time — forgo their bonuses?

OBAMA: I think they should. That’s an example of taking responsibility. I think that if you are already worth tens of millions of dollars, and you are having to lay off workers, the least you can do is say, “I’m willing to make some sacrifice as well, because I recognize that there are people who are a lot less well off, who are going through some pretty tough times.”

Absolutely!

President-elect Barack Obama thinks bank executives should forgo their bonuses this year to show they are taking responsibility amid difficult economic times.

… Obama said bank executives should make sacrifices because so many other people are struggling as the U.S. economy slips further. Some financial firms, including Goldman Sachs, the Swiss bank UBS and the British bank Barclays, have said they are not handing out annual bonuses to top executives, and Obama encouraged more to follow.

“I think that if you are already worth tens of millions of dollars, and you are having to lay off workers,” Obama said, “the least you can do is say, ‘I’m willing to make some sacrifice as well, because I recognize that there are people who are a lot less well off, who are going through some pretty tough times.’”

Obama’s definitely on the right track.

Ken Silverstein looks at who’s earned one of W’s recent pardons:

President George W. Bush has not thus far granted many pardons, but he has been generous in coming to the aid of one particular constituency group: S&L executives and others who swindled thrifts in the mid-1980’s. A few of these guys, coincidentally no doubt, hale from Texas.

… So Bush is handing out pardons to a group of people who helped produce the last financial system meltdown just as a new crop are under investigation.

Seems like par for the course.

One more thing wrong with the way this bailout is being executed…

AIG, Citibank and a number of other federally bailed-out financial institutions have no plans to cancel hundreds of millions of dollars in sports team sponsorships, even as they take billions in taxpayer support, ABC News has found.

In boom times, the sponsorships were seen as a way to advertise the firms’ “brands” and appeal to potential customers. Even today, at least one bank told ABC News that a naming deal was increasing its revenue. But critics, including a member of Congress, say the decision to continue them now is hard to defend.

Struggling Citibank just sealed a multi-billion-dollar emergency “backstop” deal with the U.S. government. The financial behemoth, suffering with billions in bad mortgage-related assets on its books, recently shed 53,000 workers and saw its stock price lose over half its value. Yet it’s in a 20-year contract to pay the New York Mets $400 million to name the team’s new stadium “Citi Field.”

“This type of spending is indefensible and unacceptable to Citigroup’s new partner and largest investor: the American taxpayer,” said Rep. Elijah Cummings, D-Md., in a statement Monday.

Citi isn’t alone: Imploding insurance giant AIG is paying the British soccer team Manchester United $125 million for the privilege of having its logo appear on Man U’s uniforms. That, despite the fact the firm is standing largely thanks to a $150 billion lifeline from the U.S. Treasury.

“A friend of mine joked they should put ‘US Treasury’ on the front of their uniforms,” said Steve Ellis of Taxpayers for Common Sense, a Washington, D.C.-based nonpartisan watchdog group which is outraged by the expenditures.

Mike at Okiedoke has a bailout proposal that I can really get behind:

If we leave it to Congress, CEO’s and lobbyists, we will just get evermore bits of amended gobblity-goop that results in endless taxpayer debt to bolster bad business practices.

So here’s my one-size-fits-all, nationwide socialist, U.S. corporate bailout proposal:

1. Remove government subsidies, tax breaks and loopholes for business.
2. Institute basic national single-payer health insurance for workers and families.

The country is going deeper in debt anyway, so wouldn’t it be better to use it to help U.S. companies and give health care to Americans, than just give it to the same people who created the mess?
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Yes we can!

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Josh Marshall reports on the latest bailout outrage story:

We’re focusing today on Mack “MackDaddy” Whittle, longtime CEO of South Financial Group, who pushed up his retirement last month so he could cash out with a $18 million Golden Parachute just before sending his bank hat in hand to the Feds to get $347 million in choice Grade A Prime bailout money.

The debate over whether or not to bail out the Big Three is creating a divide between the North and the South:

Should taxpayers in Alabama be required to bail out automakers whose plants are concentrated in Northern states like Michigan and Ohio?

… Sen. Jeff Sessions, R- Ala., told reporters Wednesday, “I can not imagine a real justification for a worker in Alabama who does not have any health insurance at his company to be taxed to maintain a Cadillac health care plan for somebody in Detroit.”

Seems like a fair question, I suppose. But one might ask a similar question when it comes to federal aid to disaster-prone areas in the South:  Should homeowners in the North be taxed to rebuild homes in the South that are in areas known to suffer from periodic major natural disasters, like hurricanes, tornadoes or massive flooding?

As someone who leaves in a disaster-prone area of the country that’s received federal aid in the past after major natural disasters, I certainly appreciate the assistance of the federal government to areas devastated and unable to cope with the huge financial toll of such a disaster. I certainly think we as a country have some duty to assist our fellow Americans who may be facing a monumental financial disaster resulting from the impending major collapse of one or more major manufacturing companies that have historically been a bedrock of the U.S. economy.

Do I think there should be a bailout of the Big Three? Not in the manner in which they want it — with few strings attached and without a major restructuring of their companies. I don’t know what the best answer is. I’m more inclined to favor a bailout package that protects the workers and let’s the companies face the consequences of their extremely poor management over the last couple of decades.

In any case, this debate has created some interesting arguments, bedfellows and dividing lines. But, rather than diligently working on some sort of solution, Congress once again defers it to another day, leaving the problem for the next Congress and the next administration to deal with. Hopefully it won’t be too late in this fragile economic climate to come up with some sort of fix before it creates an even greater problem in the larger economy.