Where is the outrage? Words aren’t able to describe the nonsense that is going on at some of the largest financial institutions in the world. Late last month, according to this article on Bloomberg News. The fine men and women on the board of directors of Citigroup, after digesting a more-than-$18 billion write-down and in between giving orders to lay off 4,200 people, and, oh, yeah, curbing year-end bonuses to top executives, decided to pay the company’s recently anointed Chief Executive Officer $26.7 million in company stock.
That’s right: While janitors and tellers were getting pink slips in the wake of the record loss, the CEO, as well as other too-important-to-lose people at the company, were awarded tens of millions of dollars in company stock and other incentives, diluting the value of each one of the 5 billion shares outstanding.
The whole episode has made me sick to my stomach and really has me wondering if Greed, in the words of Gekko, is really so good. No matter how you slice it, dice it or just plain look at it, this is absolute lunacy. It is absolute craziness. There needs to be some outrage. Where is the outrage?
Every day the world sits and waits for another financial institution to post a record loss. Many are worried that the global economy is about to collapse and yet Citi’s solution to its problems is to dole out stock the way I give out Halloween candy. Come on, people, get mad as hell, and tell them you won’t take it anymore.
Those of you who know me know that I’m as big a free market capitalist as they come, both literally and figuratively, and my comments may have many of you thinking that that I have gone over to the dark side. I assure you that I have not; there is no socialist tendency over here. What there is over here is a demand for people to be compensated on the basis of their actions. I firmly believe that if someone makes a lot of money for a company, they should earn a piece of that revenue as direct compensation. That is truly the American way. Pay people to perform and you boost productivity. That is what is going to put American back to work. Dolling out stock to people before they have had time to find the men’s room is not, and investors should not stand for it.
Shortly the annual survey of hedge fund manager compensation will come out and there will be countless inches of both ink and bytes dedicated to this story. The world at large will go nuts, as it does every year, reading what some managers make. At least with hedge fund managers, though, you know that they sink or swim based on how much money they’ve made for their investors. If the fund does nothing, the manager gets nothing.
That is the way the world should work.
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