Benedict XVI came out from behind the long, and for many, saintly shadow of John Paul II this week when he arrived in the United States. His visit instilled a sense of curiosity in millions and a deep outpouring of respect from his American flock. He gave the most contrite apology yet for the terrible sins of wayward clergy in the sexual abuse scandal that has been so costly to the reputation of the Roman Catholic Church and to the lives of those directly affected. It was the act of one who understands that being a leader often means dealing with uncomfortable issues and bringing healing to where it is needed.
His homilies and speeches on human rights, respect for the individual and the challenge of global warming transcend any single religion or nation. They are the common cause of decent men and women everywhere. Yet no other leader can speak with such a direct connection to so many people around the world. He is, in that respect, a universal leader. There are not many of those today.
The celebration of his arrival on the south lawn of the White House this week, with the incomparable soprano, Kathleen Battle, whose voice, accompanied by a golden harp, would move angels to tears, was a uniquely touching spectacle. And for all the criticism President George W. Bush has received for the mistakes and folly of his administration, though much of it is deserved, he was as gracious and considerate as one could ever expect from an American head of state.
Benedict’s attendance at New York’s Park East Synagogue on the start of the Jewish Sabbath before Passover shows this Pope, like his predecessor, to be a figure that respects other faiths and counsels tolerance for all. Many Muslims have also expressed admiration for the message the Pope has brought. These are encouraging steps in the journey toward hope and understanding on a road that is often shaken by violence and hatred.
It is a reminder that, even in a time when billionaire hedge fund managers and search engine kings command so much adulation and wars and economic disparity cause so much division in society, we all have a need to look up to someone who embodies a sense of moral authority and epitomizes the teachings of timeless virtues, such as faith, charity, forgiveness, care for the lesser among us and, especially, peace on earth.
History may well view Pope Benedict XVI’s visit this week as a turning point. John Paul II fills a special place in the Church and in the hearts of millions, some of whom did not even share his religion. But he would be the first to say that each Pope must serve in his time and find his own voice to do so. Benedict found his voice in America.
It is one that should be happily received around the world.
The Dream Still Lives
Forty years ago today, the world lost a transformative -and for generations then and to come- inspiring figure. Although Dr. Martin Luther King, Jr., was killed on that April evening in Memphis long ago, his dream could not be. It is the birthright of every man and woman, regardless of the color of their skin or the religion they follow, to be treated with fairness, dignity and respect. And it is the obligation of each generation to ensure that principle is never forgotten. This was the teaching of a man who believed in change, but also in peace. Coincidentally, his teachings came at a time of another distant war that divided America, Vietnam, and during a period of economic unease and growing income disparity which Dr. King eloquently opposed.
A milestone of a very different kind was also observed recently: the 75th anniversary of the Reichstag’s passage on March 23, 1933 of the infamous Enabling Act, which set the stage for Hitler’s absolute grip on power. What is often overlooked is that he came to his autocratic perch through democratic means in free elections held months before.
For Germany, Hitler was a turning point toward a dark and evil future that would consume much of the world. For America, and for lands beyond not even born when he was alive, Dr. King served as a turning point toward a brighter path where men and women would be measured by the “content of their character.” One leader was driven by hatred and intolerance. The other was called by a devotion to peace and the cause of bringing people together so that we may all fulfill our God given potential.
What a difference leaders can make in the destinies of people and nations. The best of them summon hopes in us that we could never dream by ourselves. The best teach us that we can be greater than we ever thought and give us the courage to venture into the winds of injustice or strive to make a better home. And when they leave us, after the tears and memories have finally faded, they leave us still with the dream. And we go into the light of day to change the world, one generation after another, one dreamer at a time.
He was, more than anyone, responsible for bringing Bear Stearns to its demise. Already fabulously compensated over many years, he has now been made even wealthier by the American taxpayer.
On a cold April night in 1912, as the ill-fated Titanic was preparing for its unscheduled journey to the bottom of the Atlantic, White Star managing director J. Bruce Ismay pushed himself ahead of the throngs of horrified women and children and stepped into a crowded lifeboat. Though he escaped death on that calamitous occasion, he never overcame the clutches of odium history held him in and became a reviled figure whose spirit lives in infamy. For us, the name Ismay has become synonymous with the class of leader who puts himself first in times of crisis and leaves others to fend for themselves in the cruel seas of betrayal and folly. We have seen many CEOs, like those at Enron, Nortel and Hollinger, do that in recent years.
Our thoughts turned to the Ismay metaphor when we read that James Cayne had liquidated his remaining holdings in Bear Stearns. He netted some $61 million on the sale of 5.7 million shares. Much of the stock was obtained over the years through generous options that allowed him to purchase shares well below their earlier highs. The move sends a clear signal to the market, and to Bear Stearns employees, that Mr. Cayne will not be leading any effort to get a better deal for the company or to save it as a stand-alone entity. An unceremonious end to the 85-year-old institution now seems unavoidable. It was the final act of a leader who was more distinguished in recent months by absence and folly than crisis management and vision. We chronicled his antics earlier on these pages.
For all of the time since 1993 and up until just the past few months, Mr. Cayne was CEO of Bear Stearns. He has been its chairman continuously since 2001. In the past five years alone, he received more than $155 million in salary, bonuses and other compensation. He was, more than anyone, responsible for the colossal misjudgments of the company and for taking the steps that brought it to its demise. And when the alarms were sounding this past summer and earlier this month, he was nowhere to be found. The New York Times reports that he played little role in talks with JPMorgan Chase about how the companies will integrate their operations.
Given what we have seen in the past, we are not surprised that he was the first to bail out big time. Many, particularly those on Wall Street, will point to how much he has lost on the $10 bid for Bear Stearns stock. Mr. Cayne’s rich compensation over the past several years, when he was overseeing the mistakes that created this catastrophe, will no doubt console him somewhat. Many others at the company, who did not play a decisive role in the bad decisions, will not be so fortunate.
The American people helped make Mr. Cayne, who was fabulously compensated, even wealthier. The Fed-orchestrated bailout ensured that his shares would be bought at $10 –instead of nothing. He was happy to step into the lifeboat taxpayers provided him as the company sinks to the bottom and the casualties are still being tallied. Mr. Cayne’s closing performance at Bear Stearns, as with his previous inexplicable lapses, bring discredit to the term leader. They are our choice for the Outrage of the Week.
Only Dick Cheney could make Spiro Agnew look better.
“So?”
Never have fewer letters signified the arrogance of power and disconnection from reality more vividly than this reply from U.S. Vice President Dick Cheney. He was responding last week to the statement from ABC News’s Martha Raddatz that two-thirds of Americans believe the war in Iraq is not worth it, according to recent polls.
It is a war that has cost hundreds of billions of dollars, destroyed the lives of countless Iraqis, inflamed an already unstable region, sent America’s reputation to a new low around the world, and, most importantly, cost the lives of 4,000 American heroes and left tens of thousands badly injured. Mr. Cheney’s role as an architect of the war is well established. What he has managed to conceal to date is his utter disdain for the American people. This was exposed fully last week in that single-syllable response to a legitimate public concern. This one word from his own lips sums up the man better than entire books will do in the future.
There have been storied figures in American history who have occupied the office of vice president, beginning with John Adams. One can also remember characters from another unpopular war involving a different administration. But not even Richard Nixon’s corrupt vice president, Spiro T. Agnew, displayed such contempt for public opinion as his present day successor.
It takes quite a talent to make Spiro Agnew look better. He may be one of 46 vice presidents to have held the office, but as to the discredit and destruction he has wrought, Richard B. Cheney is in a class by himself.
Never in modern business has so much been given to so few for such colossally failed results.
In just five years, these three CEOs made more than $460 million while leading their companies into the greatest losses in their history. One of them, Charles O. Prince of Citigroup, even got a bonus of $10 million, despite presiding over more than $20 billion in losses and write-downs. Stanley O’Neal left with $161 million after Merrill Lynch chalked up its largest losses ever. And Countrywide Financial‘s Angelo Mozilo, one of the highest compensated CEOs in America, has pocketed more than $400 million since 1999. The company has lost four times that amount over the past six months. Never in modern business has so much been given to so few for such colossally failed results.
To the average working person, who rarely receives a bonus even for doing an exemplary job, much less a bad one, this performance must have seemed like something of an out-of-body experience. Pay and accomplishment seldom have seemed more disconnected.
But to the past and current CEOs who testified before the House Committee on Oversight and Government Reform this week, there is no disconnect at all. The universe, for them, unfolded exactly as it should. It was about as we expected.
They, and the heads of the board compensation committees which approved these deals, all offered the usual bromides: The amounts were fully approved; the money was earned; the market is king; high pay is needed to attract and keep the best talent. How it is that CEOs who preside over record losses represent the best talent was never quite explained. One claimed only to want to help homeowners live out the American dream. Another cited his grandfather being born a slave. A third trumpeted his company’s ethics and corporate governance reforms. Mr. Mozilo ventured that the subprime meltdown had a notable culprit: “There was a lot of fraud there.” he told lawmakers. Many will agree, but they might not be thinking about the garden variety mortgage applicants to which Mr. Mozilo was referring. What role more lofty figures had in pushing out subprime loans, and who benefited from the resulting torrent of fees and record bonuses, will be something regulators and legislators should be looking at more closely.
The group of CEOs and directors who appeared before the comittee managed to slice and dice their compensaton decisions so much that they looked like they came out of a boardroom Veg-O-Matic: the pay wasn’t for this year, it was for last; it wasn’t severance, it was deferred compensation; it wasn’t a bonus for this year, it was payment for previous excellent performance. They said they actually lost a lot of money when the stock went down, just like all the other shareholders. Except most other shareholders did not head the company and make the wrong decisions. Most did not run up record losses and most did not receive tens or hundreds of millions in stock options and bonuses and salaries bigger than the state of Texas. One more thing: the process, they testified, is all fully in accord with the Business Roundtable guidelines on CEO compensation. Now that’s a really high bar. The Roundtable is made up of America’s top and best-paid CEOs. The ranking Republican on the Committee, Rep. Tom Davis (R-Va.), called the Business Roundtable guidelines the “gold standard” for corporate compensation. Is that because it makes sure the CEOs get all the gold?
Astonishing even for this group, when asked by Rep. Paul Kanjorski (D-Pa.) if there was any amount they would consider to be too much, there was silence, punctuated by self-serving proclamations of satisfaction with the way things are. All reassured the committee that they were not underpaid, however, and thus a sigh of relief was heard across the country.
America is experiencing one of the worst economic downturns since the Great Depression. The brokerage and mortgage lending industries played the central role in creating this contagion. But if high CEO pay is truly linked to performance and is good for the economy, people will want to know why it is, during a period that has seen the largest transfer of wealth from investors to the boardroom in history, the result is now one of falling stock values, shrinking economic growth, galloping home foreclosures and mounting job losses.
The hearing this week gave a rare opportunity for business leaders to admit that CEO compensation has gotten out of control and that it’s time for a new reality show in the boardroom. What began with the attendance of prominent CEOs and boardroom luminaries ended with the spectacle of men twisted like pretzels, having engaged in every type of contortion to show that these compensation arrangements were reasonable and had nothing to do with decisions to pump out more fee-generating subprime loans and structured investment vehicles. They also sent a veiled warning: any change to or reduction in the way CEOs are compensated, and capitalism as we know it may not survive. Here’s a bulletin for the boardroom: capitalism may not survive the kind of leadership that permits an ever increasing gap between CEO pay and everyone else’s, rewards failure with multi-million dollar bonuses and severance, and sees CEOs spinning off with a king’s ransom while leaving everybody else in the dust.
This was an opportunity for real leaders to admit that there are serious problems between the leadership class of capitalism and those who depend upon it for their well-being. To stand up and acknowledge the trend toward excess, to take the lead in stepping back and not being the first in the lifeboat when disaster strikes, to show some meaningful sacrifice at a time when so many are hurting instead of flashing five figure watches, five thousand dollar suits and a tan direct from the winter mansion at Palm Beach (or Palm Springs) -this would have been the kind of leadership that CEOs showed during two great wars and other times that tested America. This group showed none of that. One suspects they are, regrettably, an accurate reflection of the pool of CEOs and directors of which they are a part.
Excessive CEO pay has become synonymous with what is worst about American business: crony boards where one back scratches the other; compliant compensation committees made up of past and current CEOs; and an ethical value system enabling displays of greed and over indulgence that is not something parents generally want to impart to their children. It has been associated with every scandal from Enron and WorldCom to Nortel and Hollinger and countless failures in between. It is now a contributing factor to the recession that is unraveling the world’s credit markets and crippling economic well-being for millions.
What was obvious, too, from the testimony is that none of these CEOs and business leaders is possessed of superhuman ability. All seemed rather ordinary in the insights they offered and in the information they imparted, despite being recipients of extraordinary compensation and a corporate publicity machine that makes superman look like a slacker.
Despite the number of experienced CEOs and directors who appeared before Congress this week, one voice was distinguished by its absence: that was the voice of genuine leadership. America is entitled at a time of crisis to more than the spectacle of hugely paid, decidedly self-satisfied CEOs who feel that the system is working as it should. It needs leaders who recognize there is a need to restore public confidence in capitalism and the ethics of those who steer it. And that requires shared sacrifice and an understanding that, even in the great American boardroom, there are limits to what rational people both need and deserve.
Capitalism, like any household, should be governed by values, and not just who can get the most as quickly as they can. And so the actions of the CEOs and directors who appeared before Congress this week, and the failures of their boards that produced these results, is our choice for the Outrage of the Week.
Something has gone fantastically awry in the risk management and oversight of some of the world’s most renowned investment bankers and financial institutions. The shortcomings in their controls and governance systems that permitted multi-billion dollar losses at Citigroup, Merrill Lynch, Bear Stearns, UBS and Swiss Re, and the overall failure of top management and boards to comprehend the risks of the subprime related investment vehicles they were packaging and selling, has been a recurring theme at Finlay ON Governance in recent months. We were taken aback, as we noted last week, when new Merrill Lynch CEO John Thain told the Wall Street Journal “Merrill had a risk committee. It just didn’t function.”
But nothing has been as breathtaking as the loss of more than $7 billion by Société Générale, apparently the result of a rogue trader acting on his own. (more…)
