Corporate Privateers Running Amuck!

Published by the Delaware County Daily Times   January 8, 2014

By JOSEPH BATORY, Times Guest Columnist

corporate corruption

USA corporations regularly emphasize that their companies are driven by “quality performance.” In theory America’s business leaders are rewarded in proportion to their accomplishments for the company or corporation. Business roundtables of prominent executives have also even suggested that schools should follow these models of “corporate excellence.”

However, the reality is that top-level business leadership has all too often involved loose ethics and profiteering at any cost. And far too many top corporate business executives have been rewarded in spite of the fact that their “performance” has been dominated by highly questionable practices and little in the way of corporate achievements.

A recent study by the Institute for Policy Studies has reviewed CEO pay in the nation’s largest companies, and more specifically, the personal and corporate histories of executives who have appeared on past “highest-paid” lists. It is not a pretty picture.

The Policy Studies report concluded that “America’s most highly paid executives over the past two decades have added remarkably little value to anything except their own personal portfolios.”

Indeed, nearly 40 percent of the CEOs who appeared on lists ranking America’s 25 highest-paid corporate leaders between 1993 and 2012 have either led companies bailed out by U.S. taxpayers or been fired for poor performance or headed up companies charged with fraud-related activities.

For example, a Pfizer executive received $198 million in pay and retirement benefits after a five-year tenure during which the pharmaceutical company’s stock price plunged 40 percent.

Additionally, a Lehman Brothers corporate boss was among the top 25 in CEO pay status for eight years running before his company failed with the largest bankruptcy in U.S. history.

Yet another business leader, whose compensation totaled $1.5 billion in 13 years as CEO of Travelers and subsequently Citigroup, was one of America’s most aggressive corporate leaders lobbying against federal regulations, the demise of which eventually led to our nation’s 2008 financial disaster.

The Policy Institute researchers studied 241 CEOs in all, each of whom had ranked for at least one year among the 25 highest-paid corporate leaders. Of those, 22 percent led companies that died or got taxpayer bailouts after the 2008 financial crash, 8 percent lost their jobs involuntarily and 8 percent led companies that ended up paying sizable fraud-related fines or settlements.

This phenomenon is nothing new. In the past decade, we have examples of CEOs at Tyco, Enron, WorldCom and J.P. Morgan and numerous others who recklessly courted business disaster and eventually found it.

A recent New York Times article offered this summary: “Company executives are paid to maximize profits, not to behave ethically. Evidence suggests that they behave as corruptly as they can …”

All of this adds up to a dismal picture of corporate America which has often rewarded unethical behavior and sometimes law-breaking among corporate leadership that has hurt both taxpayers and investors.

Unfortunately, several years have passed since President Barack Obama signed the Dodd-Frank legislation. However, the Securities and Exchange Commission has still not implemented this commonsense transparency law which would have prohibited large financial institutions from granting incentive-based compensation that “encourages inappropriate risks.”

At a time when the U.S. Congress is focusing on sharp cuts to essential public services, corporations are still able to avoid paying their fair share of taxes by deducting unlimited amounts from their IRS bills for the cost of excessive executive compensation.

A recent analysis in the American Economic Association’s Journal of Economic Perspectives describes a tremendously wealthy class in the USA which concentrates enormous resources on getting its way. These millionaires underwrite political campaigns. They spend fortunes on lobbying to keep politicians and bureaucrats “friendly” to their interests with money and perks.

Sadly, we have become a nation with too many corporate privateers running amuck on behalf of profits for the privileged with little concern for the common good of the American people.

______________________________

Joseph Batory is the author of three books and nearly 100 published op-ed pieces.

 

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