Published CommPro.biz 2014.02.20

A Bribe Is A Bribe Is A Bribe

A recent (2/09) New York Times story detailed the hiring of a young woman at the behest of a family friend. A job was created for her at JP Morgan Chase. Her family friend just happens to hold a powerful position in a Chinese agency that oversees insurers. The bank was looking to snag business deals with a number of the insurers that her benefactor holds sway over. There is nothing unusual about arrangements of this nature. What makes this one stand out is, that the “ask” was in the ear of Jamie Dimon, top dog at Chase. The young woman was not only in the room, she was serving as the official’s translator.

First off, the young woman was an outstanding candidate; Chase was lucky to get her. And Dimon was careful to distance himself from the hire. However, Chase did get a bunch of deals right quick from companies under the regulator’s gaze. It seems clear that in addition to getting a first rate employee, Chase made a ton of money from her family friend’s ”contacts”. Because a government official is at the center of this arrangement, a case might be made that hiring the young woman at his behest constitutes a bribe. That’s a big “No-No” under United States law.

This is not an isolated case. Chase has a history of jobs for deals as do most all of the monster banks; Goldman Sachs, Citi, and all the usual suspects. Legally they are likely inside the safe zone; ethically they are not even close. While Dimon was careful to give himself cover on this hire, it doesn’t change the underlying truth. These deals –especially in light of their frequency– indicate that they are part of the culture of these banks. The culture of any organization reflects the ethical and moral compass of its leader; in this case Jamie Dimon.

These monster banks slithering around making backroom deals to gain the favor of business or government officials are ethically pathetic. A good business leader knows to back away from any deal that is not a good deal for everyone involved. Cash under the table or hiring somebody’s kid, either way it’s a bad deal for the buyer and the seller. It’s an admission by the seller that what they’re selling isn’t worth the price, and/or it means the buyer didn’t get the best deal for their bucks.

These banks are too-big-to-fail and way too-big-to-manage. They’ve created a greed driven culture that does anything to keep the bucks rolling. They’ve trampled the real bankers in our community banks, using ill gotten profits gained by gambling with their depositors’ funds; all insured by the FDIC (that’s us). The solution is to break these monsters up before they trigger another crash. We did it in the 1930s  and set up rules that kept us safe for the better part of a century. Lesson learned? It’s time to repeat; break up the too-big-to-fail banks before they fail again. How hard is that to understand?

"Am I wrong?"--"Am I Nuts?"

"What do you think?"--"Do you agree?"

How Much Is Enough

Apparently it’s all in how you look at it. According to a Governance Metrics International (GMI) study, on average CEO pay levels jumped 28% in 2010. And it gets worse. At the top, CEOs of “S&P 500” companies saw their income jump 94.2%. CEOs of “S&P Midcap” companies did even better; they got an average 123.5% boost in 2010.

At about the same time the GMI study was released, an article posted on CFO.com whined, “Ghost of Enron Wreaks New Havoc on Exec Pay.”  Written by an “Executive Compensation” Attorney, the piece goes on for several paragraphs about how certain tax dodges that were changed post-Enron are now resulting in those at the top of the pile being forced to pay more taxes. Poor babies!

The growing gap between the rich and the poor in America raises the ethical question, how much is enough? There is not a speck of evidence that these outrageous executive compensation levels create great leaders; quite the contrary in fact. Nearly a decade ago best selling author and business consultant, Jim Collins, addressed that subject in a USA Today OP-ED. His company found, “In a five-year study, after 112 separate analyses looking for a strong link between executive compensation and corporate results, we found no pattern whatsoever. If you have the right people, they will do everything in their power to make the company great.”

Take away? It’s the people, not the paycheck. Should executives be well compensated? Of course. But this out-of-control “Carpet Land” battle to take home the most bucks is insane. In way too many cases it is taking the focus away from leading the company and turning it to leading the pay scale.

A few decades ago CEOs earned about 40 times as much as the lowest paid employee in the company they headed; today 1000 times is not uncommon. So how did executive pay rocket out of control? Greed. Ego driven greed enabled by corporate directors who allowed it to happen; directors too often chosen by the CEO. These CEOs then conned them into hiring Compensation Consultants who –knowing which side their bread is buttered on– make sure they convince these compliant directors that they must boost executive compensation. And so a destructive cycle drives the bucks up, up and away.

Hopefully the stockholders will shake off this compensation culture, boot the consultants and others that drive this destructive practice and reign in executive compensation. After all, a stable society is built on a content middle class, an endangered species these days.

These top-dogs will still be able to afford the luxury goods that are flying off the shelves across America today, while those down the food chain worry about the basics. And maybe if the greedy don’t have quite so much extra cash lying around, they will stop speculating in oil and driving up the price of gasoline. That would be nice and it might just simmer down the growing discontent with life in these United States. How much is enough? Enough is Enough!