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Politics : View from the Center and Left -- Ignore unavailable to you. Want to Upgrade?

To: Sam who wrote (102439)	1/29/2009 7:11:46 PM
From: Sam	Respond to of 542218

This can't happen too soon for me: the end of the Cult of the CEO. It's about time. If it indeed happens. Team Obama could set a tone to model and encourage this. Lewis, Thain, CEO Cult Torched in Crisis Bonfire: Commentary by David Pauly Jan. 29 (Bloomberg) -- The John Thain vs. Kenneth Lewis public dust-up may signal the death of a species. The once-powerful chief executive officer cult went into decline in recent years when members of the class were imprisoned for defrauding investors (Jeffrey Skilling of Enron Corp.) and stealing company funds (Dennis Kozlowski of Tyco International Ltd.). The financial crisis gripping the U.S. and the world has taken the prestige of CEOs to new lows. Huge write-offs for mortgage securities and credit default swaps meant the end for bosses at Merrill Lynch & Co., Citigroup Inc., American International Group Inc., Fannie Mae, Freddie Mac and Washington Mutual Inc. Now we have the spectacle of Lewis, the CEO of Bank of America Corp., firing Thain, who headed Merrill Lynch before selling it to Lewis at year-end. Neither executive comes out of the fray looking particularly good. Lewis dismissed Thain this month, after a three-week stint as head of global banking and securities for Bank of America. Thain’s sins were many. He asked for a 2008 bonus despite Merrill’s massive loses, and then backed off. Merrill lost another $15 billion in the fourth quarter. Then he granted bonuses to other employees of the stock broker before the sale closed. There was also the matter of his $1.2 million redo of Thain’s office at Merrill as the credit crisis unfolded. Who Knew? While Lewis can argue that he wasn’t fully apprised of Merrill’s deteriorating condition, his shareholders might think he wasn’t diligent enough. The Lewis story is that the government insisted he go through with the takeover in any case -- dumping more U.S. billions into the combined giants. If so, why didn’t Lewis inform Bank of America shareholders of the worsening situation before closing the deal? The record suggests Lewis is a compulsive collector of financial institutions. Before Merrill, he took over FleetBoston Financial Corp., credit-card company MBNA Corp., LaSalle National in Chicago, U.S. Trust Corp. and Countrywide Financial Corp. Bank of America shares have plummeted to $7.39 from a high of $55.08 in November 2006. His purchase of Merrill -- after previously denigrating Wall Street -- may be the takeover that takes him down. Investors, analysts and journalists all contributed to the cult of the CEO. They assumed a big ego, a touch of greed and a bit of arrogance were prerequisites for the job. Then came the excesses. Egos require royal trappings: corporate jets, company-paid tickets to New York Knicks games, $87,000 rugs. Fond Farewells A culture of pay-beyond-performance led to huge exit packages for CEOs who failed. E. Stanley O’Neal took away $162 million from Merrill Lynch in 2007 even though he was denied severance pay and a bonus for that year. Arrogant CEOs answered to nobody. After an analyst questioned Enron’s disclosure at a meeting, Skilling referred to him in an aside as something unprintable. On Wall Street, arrogance turned into ignorance. CEOs either didn’t understand subprime mortgage securities or didn’t fathom how big the risks were. Investors now will look for different qualifications in chief executives. Humility and transparency perhaps. CEOs will be held to a higher standard with less pay -- especially on Wall Street where the old bonus system is dead. Good corporate government will replace personal aggrandizement. Amen. (David Pauly is a columnist for Bloomberg. Opinions expressed are his.) Editors: James Greiff, Steven Gittelson To contact the writer of this column: David Pauly in Fort Myers, Florida dpauly@bloomberg.net Last Updated: January 29, 2009 00:01 EST