Platinum Parachutes

I don't often comment on economic issues, because to be perfectly honest, the
economy is a different world for me. I can understand that things are either bad or good, but the subtleties of the mechanisms escape me. However, I can smell the shit in the corner, and with the economy taking over as the number one issue among voters, it's worth comment. This is just one aspect:

Bush is not the first to reward failure. It's been going on in corporate America for quite some time. John Aravosis at AmericaBlog has some comments on one of the latest examples -- CEO Angelo Mozilo of Countrywide Financial, up to its neck in the subprime fiasco, which has just been bought out by Bank of America. From LA Times:

Steven Castello, a maintenance worker in Salinas, Calif., says he believes in accountability.

After running up thousands of dollars in debt on nine credit cards, he didn't file bankruptcy. He didn't try to dodge his obligations. Instead, Castello, 57, went to a credit counseling service and, patiently, painfully, paid his bills.

"This was my foolish mistake," he told me. "I had to take responsibility."

Compare Castello's situation with that of Angelo Mozilo, the well-tanned chief exec of mortgage lender Countrywide Financial Corp.

After driving his company to the brink of bankruptcy (or so the rumor mill had it last week), Mozilo now stands to make as much as $115 million in severance-related compensation if an acquisition of Countrywide by Bank of America goes through, which it almost certainly will.

I suppose the difference is that Mr. Castello was screwing up his own finances. Mozilo was screwing up other people's. The consequences are a little different, obviously:

So what sort of consequences will Mozilo face for his managerial failure?

Aside from nearly $88 million in cash, he'll have to make do with not one but two pensions, accelerated payment of stock options, free rides on the company jet and his country club bills being paid until 2011.

Man, that has to sting.

"This is another clear example of pay for failure," said Fred Whittlesey, principal consultant with Compensation Venture Group in Seattle. "How many more examples of this will we have to see before this gets fixed?"

This seems to be the reigning paradigm in corporate America: reward failure, and reward it big. It's no surprise that our corporate president is following the same pattern. After all, every business he was ever involved with went belly up. Now he's working on the country as a whole. It's the same pattern:

One problem is that big companies' boards are frequently dominated by senior execs from other companies, who have little interest in drawing the line on runaway pay.

And who is the administration dominated by? People who have no interest in accountability because they're the ones who should be accountable.

I knew I should have become a CEO of some company -- I'd be just as bad at it as the ones who are raking in millions. Then I could run for president.

Footnote: This is not an isolated incident. Merrill Lynch is in deep doo-doo, and Aravosis reports that former CEO Stanley ONeal walked away with $161 million as his share of the debacle.