Capital Marx

Back in the day, I'm talking 1960s not the dark ages, a lot of professional ball players had to have off-season jobs in order to make a living. They just couldn't make ends-meet with what they earned playing baseball, hockey, football or basketball. When the season ended they painted houses, worked construction and a few even sold life insurance. If the team won a championship it was highly unlikely the player could take the rest of the year off and bask in their celebrity status.

Detroit Tiger Hall of Famer Al Kaline, during his peak years, turned down a contract for six numbers because he didn't think he was worth it. Today some ball players get paid that much in a week and couldn't carry Kaline's dirty socks.

Which brings me to today's rant and the compensation of some corporate CEOs and the lack of value they bring to shareholders. These are the leaders that only know how to increase their corporate bottom line by firing employees, slashing benefits and selling off divisions. For this the top-level execs are compensated extravagantly and totally out of whack with reality.

Neill Minow, co-founder of The Corporate Library, an independent research firm, met with Treasury Secretary Geithner this past summer to discuss this exact subject of executive compensation.

She talked to Geithner about what the management at Citigroup was planning, earlier this year, to increase compensation to certain employees by 50% because of government mandated reduced bonuses. This was sort of a mulligan for loyal execs. Citi, which was close to first in line for TARP, and now a wholly owned government subsidiary, is not the only company not caring about shareholder value. Minow proclaimed that what Citi planned on doing was, '...doing more to destroy capitalism than Marx.'

A.I.G., another bailout poster child paid out $165 million to employees in the financial services division, the same folk who helped bring us the 2008-2009 recession. How does anyone justify this, asks Minow.

Many of us remember the lack of responsibility and run-away destruction at K-Mart that destroyed the retirement of thousands of employees and left shareholders with nothing. Not only was the leadership incompetent the same was true of the Board of Directors that did nothing to stop the corporation's eventual bankruptcy.

Minow has made significant leadership changes at American Express, Kodak, Waste Management and confronted Sears to implement improvements in their company's stock plan.
Manow cannot do this work alone. As investors it is our responsibility to ensure that we invest in companies that are responsible in all phases of their business and if we buy mutual funds to make sure that fund management is pro-active in demanding CEO and Board of Director accountability.

Failing that as consumers we vote with our pocketbooks and that certainly is something all businesses understand.