Best posts on Finlay ON Governance from Mar 2009

If this is the cost of saving a company that they claim is too big to fail, maybe the alternative should be explored. Loss for Q4 2008$61.66 billionLoss for FY 2008$99.3 billion or $37.84 a share (for shares that are trading at$0.48)Cost of three previous federal bailouts$150 billionCost of fourth bailout today$ 30 billionLoans and credits from the Federal Reserve System$34.5 billionTotal loans, investments and Fed commitments$214.5 billionIt is said this is being done because AIG is too big to fail.

One might think that in a company that lost $100 billion over the past year and required three taxpayer bailouts totaling $175 billion, its directors would have moved heaven and earth to avoid this kind of reputation-stinging disaster.  As it is, there is little evidence that anyone has even turned on the lights in the boardroom.It’s spring training once more for the AIG Dodgers, otherwise known as the board of directors of the giant insurance company.

AIG’s bonuses have become more than just a tipping point for a long simmering resentment over executive compensation.  They have become an entire gravitational force field of umbrage at the greed, arrogance and now horrifically costly stupidity on the part of these Wall Street masters of the universe, as they preferred to be called in times of a calmer CBOE volatility index.

C itigroup’s common stock dropped below $1.00 this morning. A share of one of the most storied financial institutions in America, with a Dow Index moniker that straddles the globe, now trades in pennies. We have consistently predicted more surprises and greater mishaps as a result of a governance system that has failed to function for years, if it ever did, and a board of directors that long ago lost any shred of credibility.

If the Obama administration and the entire legislative branch are powerless to say no to such outrageous grabs for bonus cash in this failed company, there can be little hope that they will be able to navigate out of the larger financial storm or restore the confidence that is essential for recovery.If there is one face that has come to symbolize the greed, excess and betrayal of the current financial era, it is Bernie Madoff, the self-admitted felon who is now in jail awaiting sentencing for his multi-billion dollar Ponzi scheme.

A Canadian court found Livent founders Garth Drabinsky and Myron Gottleib guilty (on all counts) of fraud and forgery in one of the most high profile white collar criminal cases in recent Canadian history.  We will have more on this stunning development in an upcoming posting.

Lack of daylight in boardrooms and in the way business was done on Wall Street and in the financial sector is what brought this company and the world to this perilous and costly state. Darkness and a lack of transparency are still being employed today under the guise of bringing a solution to the problem and in failing to disclose who the real beneficiaries of American taxpayer dollars are.

Secret side deals involving billions in public funds funneled to giant banks is no way to establish confidence or to advance transparency in a crisis that yearns for both.Finally, some in the U.S. Congress have begun to take note of the fact that among the $175 billion in bailouts AIG received, billions were redirected to institutions like Goldman Sachs and Société Générale SA.

Our long held view, as the New York Post noted, is that much of what comes out of the Citigroup boardroom is too slow and too late.  Something of another installment in that department occurred today when CEO Vikram Pandit issued a memo to employees in which he said Citi has been profitable for the past two months.As he outlined in the memo:I am most encouraged with the strength of our business so far in 2009.

AIG has a current board of 11 directors. Of those, seven have been on the board since at least 2006 and five have been there since 2005 or before.  Two directors have been around since the 1990s. One of them is Martin Feldstein, who has been in that position since 1987.  He is also a member of President Obama’s Economic Recovery Advisory Board.  If anyone can explain that unique convergence of events, maybe they can tell us when the Dow will be back up to 14000.