Legalized Scandal
I know this is a strange title, so hear me out before you rule this notion out. For just a moment ask yourself this question, could there be such a thing as a legalized scandal? Scandal is something we have become all too familiar with during the 21st century and with this recession many more are surely to emerge. But everything I have referenced has all been illegal.
But what about the executives that are the cause of this crisis? Should they be held legally accountable for this economic Pearl Harbor? Because of their greed and avarice many have had to endure destitution, while executives collect multi-million dollar payouts and bonuses.
A few days ago I watched an interview with Warren Buffett on CNBC, as he was giving his thoughts on the current state of the economy. He talked about how he believed the recession started with the housing market, and that no one saw this coming – including his-self. I find that a little hard to believe. Surely I’m not questioning the ‘Oracle of Omaha’ or his ethics. However, the banks involved in the lending knew this was coming. We are talking about sub-prime mortgages across the US, over course this bubble was going to bust the way it did. Yes, people who agreed to a mortgage they could not afford need to be held liable, but it is banks that bear the burden of this calamity. It is there job to do their due diligence on the borrower and determine whether or not they should issue the loan.
So as we built up to this recession, executives were receiving huge payouts in the form of bonuses, stock options and cash payments etc. In the fiscal year ending 2007 there was more than $171B was paid out in bonuses among the top financial firms while they only posted a combined profit of $71B. Now the government needs to bailout multiple financial institutions in an attempt to keep the economy afloat.
All of this is a result of CEOs finding loopholes in the system to make more and more money, while receiving sizeable tax breaks. So why are we not holding the very same executives responsible? To simply fire a CEO is of no consequence whatsoever. Asking the chief executive to step down so he or she can receive a $50 million severance with continued use of the corporate jet and drivers is one hell of a way to say we don’t appreciate what you’ve done to our economy or this company.
Technically, what they did is not illegal, so I don’t believe spending time behind bars would be the right message. However, to have them pay back salary, bonuses and other incentives they received for something they did not earn would send a strong message. A message that says when you don’t put stakeholders first – you will pay. I guarantee that this will change the decision-making processs of each executive as they look for the next quick buck.
