Several years ago I was picked for jury duty in a civil suit that focused on a private plane crash at a small airport outside Chicago. The private plane was owned by one public company and “leased” by another public company, so between the airport, two companies and the plaintiff, there were more lawyers in that courtroom than jurors. One of the families of the two pilots who flew the plane was suing the companies and airport. We sat through five weeks of testimony and some 40 witnesses. As tragic as the loss of life was in that accident, one jarring aspect for me was this: the plane was flown by two pilots and had a flight attendant on board. The number of executives aboard the flight? One. And it wasn’t even the chairman. And where was the plane headed? Los Angeles. What bothered me when we heard about the prepping of the plane for flight, etc. was the expense of flying one executive to L.A. in a corporate jet, when flying commercial, even first class, would have been a fraction of the cost, and of course the exec probably still would be alive.
I thought about this when hearing the outrage the three U.S. auto companies faced from the public and Congress when they went hat-in-hand to Washington D.C. for a bailout in each of their private jets. This lack of accountability, elitist disregard and executive self-entitlement appears to be why the economy is in the mess it’s in today. And it may mean the current system just isn’t working
Corporate executives, who just don’t get it and apparently accept no responsibility for their part in this debacle, are largely to blame for the global financial meltdown. Call it the “Jeff Skilling-I’m not to blame” effect. Many of these folks still want bonuses and payouts despite companies going under and thousands being laid off. I thought “performance” was part of the bonus calculation. Even Robert Rubin, who I had huge respect for, somehow didn’t see the Citibank disaster coming. And the question is, how? How did these people with Ivy League degrees and MBAs from the best business schools and pedigrees that included some of the top firms on Wall Street let this economic disaster happen? Well, greed is an easy answer, but it’s certainly more complicated than that.
The reckoning is here, and largely because of the lack of accountability at almost every level, the pendulum may swing too hard the other way. New regulations that may be more onerous than others previously fought against will be put in place. Count on it. Any why not? After all, if the likes of Bear Stearns and even Goldman Sachs can’t police themselves in the “free market,” then the corrective action to their mistakes will trickle down.
As we discuss in our economic outlook, “2009 Interest rate outlook: Less than zero?” by Senior Associate Editor Chris McMahon, there’s a lot of explaining to do and changes to make. It’s good that a new administration is coming in with at least a semblance of a game plan, but as much hope as I have for Barack Obama, he has inherited a mess — one that just building roads won’t fix. That’s a start at getting people working again, but tough actions will need to be taken against those in charge.
What’s needed is accountability, and executive suites from Wall Street to Main Street better beware. Previous performance will be indicative of future results.