Saturday, 28 February 2009

Second thoughts

Some second thoughts on the Goodwin pension thang.

If I was of a mind to try and defend it in an FT-styley, I'd refer to Chuck Prince who left Citigroup with "vested stock holdings valued at USD$94 million and the roughly $53.1 million salary he received over the four years in the position. He also received a pension of $1.74 million and another one million stock options. He is still a consultant with Citigroup." (lifted from wikipedia) or even Stanley O'Neal, formerly of Merrill Lynch, and his "golden parachute compensation package that included Merrill stock and options valued at $161.5 million at the time".

So by the standards of these other dismal failures Fred doesn't appear to have been unduly rewarded. In fact, he's been treated quite badly all in all. See! I said I was doing it in an FT style.

Nah, the real reason I was wondering about this more was because the talking head stuff about it on the BBC gave me the willies; its a bit like after Princess Diana died and a good chunk of the British population went bonkers for a while. For me that poses the danger of errant stupidity taking over and ultimately discrediting what could otherwise be an important point - its wrong that for executives the financial difference between their performance being good, bad, indifferent or spectacularly atrocious is largely a matter of degree.

This isn't a moral argument, although it could easily be considered in terms of morality/greed, social inequality, economic justice and all that kinda stuff. Rather it's the fact it appears to have encouraged execessive risk-taking at institutions, we've learned, too vital to the economy to be allowed to fail.

There's also the broader set of assumptions the Goodwin pension reflects, as also illustrated by the following Wall Street Journal quote (Feb 28th) about the 3rd Citigroup bailout - "Wall Street also is worried about "whether the company will be run in the interest of private shareholders or for the public good," said John McDonald, a banking analyst at Sanford Bernstein & Co. "It's a valid question what the priorities will look like."

The reality is thats not a valid question, its a stupid question and it's disturbing that its actually being voiced in print by someone who, judging by his job title, potentially has the important responsibility of advising on pension funds. For one thing government i.e. the public, is a key shareholder so why distinguish between public and private interests? For another the US government has been strenuously avoiding nationalising Citigroup, which legally restricts any imposition of public goods even though the whole damn shebang should arguably have been nationalised months ago. And finally, given the Northern Rock example, the schmuck doesn't appear to be even considering what private Citigroup shareholdings would be worth without government intervention while giving the impression only the interests of private capital providers merits attention.

See theres this complete lack of awareness, ignorance even amongst people who don't in many cases it appears realise they're no longer the masters of the universe. Despite this, thanks to all thats happened and individuals like Madoff, Thain and now Goodwin, the impression being created is of greedy, grasping, preening little men scurrying about grabbing as many taxpayer fivers as they can jam in their own pockets.

For me patient, public, informed, forensic and transparent enquiries are the means of taking advantage of the opportunities this has created to achieve permanent change. Unfortunately, the potential alternative now emerging is of a soundbite screaming lynch mob riding the passing wave of public opinion. Well thats how the FT would describe it given they've already used a comparison with witch trials in an attempt at spoofing the attacks on Sir Fred to the point where they are undermined.

But, I'm not sure something meaningful would serve our political masters well right now given their priority appears to be establishing a distraction. Oh well.

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