The “Free Market” Takes Its Pound Of Flesh, But Never From The Failed CEO
Photo Credit: Shutterstock.com/Lisa F. Young
Stay up to date with the latest headlines via email.
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 dead. Twice, 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.