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The “Free Market” Takes Its Pound Of Flesh, But Never From The Failed CEO

Let’s consider the price regular workers pay when something goes bad, versus the price CEOs never pay when something goes askew.
 
 
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Photo Credit: Shutterstock.com/Lisa F. Young

 
 
 
 

I can’t let Detroit go partly because there is so much to learn from the robbery that took place in the past and is continuing to this day. Today, let’s consider for a moment the price regular workers pay when something goes bad versus the price CEOs never pay when something goes askew. It’s a telling story about the deep corruption of the system.

In one corner, we have tens of thousands of workers — regular people who just went to work every day, did their jobs for a few decades and all they want is to keep the pension they basically saved for. Saved because pensions aren’t free money — those pensions are deferred wages, money workers didn’t take home in a monthly pay check but, wisely, put off using that money until later in their lives.

The so-called “free market” — enabled by a bi-partisan love affair with so-called “free trade” (which ripped away decent jobs from Detroit and hammered down wages); profiteering in health care (because no one had the the balls or political will to destroy two of the most parasitic industries ever to leech off human beings: the drug and insurance industries); and Wall Street thieves who destroyed trillions of dollars in wealth because of the greed of a handful of Robert Rubin types —  robbed Detroit.

Workers did nothing wrong in Detroit. Nothing.

And, yet, they are now being asked to pay for the sins of a corrupt system. By handing over a huge chunk of the money they had put aside in deferred wages. And, then, they are being told when they appeal to the White House — to a president who is talking about the divide between rich and poor — for financial assistance, basically,  to drop deadTwice, actually.

Just on that alone, you can legitimately yell, “what the fuck”?

But, it’s worth taking one extra step. Draw a comparison with that story by looking at the other side of the ledger: what happens when a CEO leads a company, operating in the so-called “free market”, to disaster? Does that CEO pay for that mismanagement by losing pensions? Yes, a rhetorical question.

Consider, for example, the story of one Henry McKinnell, who I wrote about in  “The Audacity of Greed”:

To this day, McKinnell’s tenure is hard to forget, in particular if you are a Pfizer shareholder. In 2001, when McKinnell took over as CEO, Pfizer’s stock was trading at about $45 a share; when his tenure ended five years later, Pfizer’s stock was floundering at under $36 a share. On McKinnell’s watch, the value of the company declined by $137 billion.

However, McKinnell did not suffer for his reign of error at Pfizer. On the contrary; as he walked out the door at the end of 2006, having presided over a loss of 40 percent in the value of the company, McKinnell still had quite a wad of cash to stuff in his pocket: $12 million in severance pay; a bonus of $2.15 million; and a hunk of stocks that had vested, worth $5.8 million. In addition, he also received a $78 million payout for deferred compensation, along with about $18.3 million in “performance-based shares.” And as if that wasn’t enough, McKinnell will be cashing an annual pension check of $6.65 million—for the rest of his life. [emphasis added here]

Or, how about another abject failure, Robert Nardelli, who ran Home Depot into the ground. Again, from  “The Audacity of Greed”:

Robert Nardelli is another example of the curious phenomena of tying CEO pay to non-performance. Nardelli joined General Electric in 1971 as a manufacturing engineer, rising to Senior Vice President in 1995. While he ultimately lost out in the competition to succeed Jack Welch as CEO of GE, Nardelli still received a lucrative consolation prize: an extravagant offer from venture capitalist Ken Langone (who sat on the boards of both GE and Home Depot) to run Home Depot, even though Nardelli had no prior retail experience.