Floating to the Top

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I don’t feel I’ve said enough about professional American corporate executives in the past, partly because it’s impossible to say enough about this generally despicable class of empty suits. Once upon a time, most large companies were run by the men who founded them, and those men were almost always the controlling shareholders. Their interests were aligned with those of the other shareholders.

Few, if any, of today’s execs in big corporations have major share positions (and if they do, it’s strictly because they were granted cheap options), and few, if any, have actual technical expertise with the products their companies produce. Take Rick Wagoner, the ex-CEO of GM. This suit basically has zero interest in cars; he’s expert mainly in the infighting and bootlicking it takes to climb a corporate ladder. He’s a political hack, like all the managers that preceded him for the last 40 years. And he’s typical of top management in most large public companies.

Why is this? It’s worthy of at least a long essay. My guess is that nobody has an interest in seeing things done well the way a founder does, and the further you get from the source, the more diluted things become. As a company that’s become rich gets older, it naturally, like an animal in the wild, picks up more parasites. The bigger the corporation, and the further from the production lines the management, the more important backslapping and backstabbing becomes, as opposed to any kind of technical competence. So the worst people, not the best, rise to the top like scum.

The current system of corporate governance, guarded by the SEC, cements them at the top. Management, not shareholders, appoints the board of directors – who in turn, instead of acting as watchdogs for shareholders, become lapdogs for management. Management shouldn’t even have a seat on the boards of public companies, much less the chairmanship, which is usually the case these days.

With current laws, it’s almost impossible for shareholders to dethrone management – even if they grant themselves huge salaries, giant options, and insane bonuses. That’s because shareholders would have to mount proxy battles at a huge expense, while management defends itself with the shareholders’ treasury. Have you ever noticed on a proxy that you as a shareholder can only vote “For” or “Abstain” for a director nominated by management, while it’s impossible for shareholders to put forward a new slate?

Some of this is likely attributable to the simple fact that most shareholders don’t directly own shares anymore. Rather, their investments are held through pension funds and mutual funds, which rarely get involved in trying to correct management; if they don’t like it, they just sell the shares and management goes on its merry way.

Even so, my basic contention stands – that the people who rise to the top in large corporations are exactly the same types that rise in government. As a case in point, I offer Edward Liddy, the CEO of AIG, the ex-director of Goldman appointed by his crony Hank Paulson to run the company last year. He impresses me as a particularly duplicitous and smarmy bastard, trying to hide misfeasance and malfeasance behind a glib smile and honey-coated words.

Get a load of this: “The marketplace is a pretty crummy place to be right now. When the world catches pneumonia, we get it too.” As if it was the fault of the market that management turned an insurer into a hedge fund. He went on to say AIG was being “consumed by the same issues that are driving house prices down and 401K statements down and Warren Buffett’s investment portfolio down.”

Only a sociopath on the ragged edge of insanity would try to disguise the fact that the giant, bankrupt company is still sucking down hundreds of billions of taxpayer bailout money by comparing himself to Warren Buffett. It’s almost as if he was trying to model himself on one of Rand’s antiheroes in “Atlas Shrugged” or “The Fountainhead.” But society has become so corrupt, I haven’t seen any outrage about his words in the media. No surprise there.

By the time this period of history comes to an end, the whole financial, economic, and political landscape will have changed. I just hope it won’t look like it’s been painted by Hieronymus Bosch.

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