CEO Pay: The Steroids Era
Business Week/Courtesy of © 2008, YellowBrix, Inc.
October 20, 2008
The congressional hearing on executive compensation featured another class of superstars accused of bulking up at the expense of the average American.
It’s been quite a season for the grilling of superstars on Capitol Hill. Not long ago we witnessed the allegedly steroidal hurler Roger Clemens and the soap opera of his friendship with a big witness for the prosecution. Now we’ve had a chance to thrill to the drama of the celebrity czars of the stumbling subprime mortgage empires, financial executives E. Stanley O’Neal, Charles Prince III, and Angelo Mozilo.
Perhaps not since Nov. 8, 2005, when dark-suited CEOs of the top three oil companies swore their oaths and attempted to defend themselves against the high-octane grandstanding of accusatory congressmen, has the nation seen such an episode of class and partisan warfare, Washington-style.
Back then, it was a mere confluence of high energy prices and record industry profits—records that happen to have been broken again and again, of course. But now a veritable economic storm of factors and forces during a Presidential election year have coincided to produce one of the most precarious moments for a richly rewarded CEO to defend his company and his compensation.
And for good reason, it would appear: The trio of executives who faced grilling before the House Oversight & Government Reform Committee on Mar. 7—in a room full of bankers and financial sector lobbyists—got stratospheric paydays during the subprime mortgage boom. Yes, that very same boom that has busted out all over, leading, as it happens, to the multibillion-dollar degradation of their own formerly ultraperforming financial giants, Merrill Lynch (MER), Citigroup ©, and Countrywide Financial (CFC).
But what really makes them prime candidates for Washington-brand scapegoating and symbolism-shaping is their companies’ central role in a marketing and greed-induced fiasco that has cost thousands of borrowers their homes and sent whole economies spinning.
“A Different Set of Rules”
To be sure, congressional hearings are notorious Star Chambers that only vaguely resemble courts of law. There are no rules of evidence, and the chairman is always right. The ancient Hebrews led the first (scape) goats out into the desert and let them die; U.S. politicians haul them into a hearing room. There’s good reason why witnesses preparing for testimony hire the best lawyers and public-relations consultants money can buy. Sometimes it’s hard not to pity even the dodgiest of them against the bombastic force of a politician who only seems to be asking questions, not seeking answers.