During this period of economic uncertainty there is much misinformation flowing through our newspapers and over our airwaves. Tragically our political leadership is running for cover and diverting the source of responsibility away from themselves to Chief Executive Officers in a pure game of transference.
In Mark Levin’s important new book LIBERTY AND TYRANNY he correctly outlines the abhorrent practice of bringing innocent business leaders before kangaroo Congressional hearings to shift the responsibility from their dysfunctional government oversight committees. Clearly all business leadership is not guilty of creating our current economic problems, but our political elite want us to forget that they caused many of today’s problems with our banks, automobile industry, oil companies, and investment houses.
It is the Commander’s opinion based upon his significant experience that some Chief Executive Officer’s are responsible for inappropriate actions, and some are grossly overpaid, but that does not include all CEO’s. By seeking the truthful source of responsibility we must look first at government oversight responsibility, then at government established laws forced upon corporations, thirdly at CEO’s responsibilities, and most importantly we should consider the over-riding fiduciary responsibility that exists in the duties of the Boards of Directors of all companies.
I can speak about this subject because I have been privileged to serve on numerous Boards of Directors or Boards of Trustees over the years. During those years I have served on some great board and some boards that were dominated by overly dictatorial CEOs or individuals who owned such a dominant portion of the company stock that the board was just window dressing.
Unfortunately corporate Boards are frequently compromised by inflated director fees and stock perks that sway judgment. I have observed first-hand as a stockholder where a Board agreed to excessive salary payments to the CEO and COO and granted loans to the officers to purchase company stock that were later forgiven, even when the company’s financial position was poor. Time and time again the stockholder’s interests are not served by the actions of compromised Board members.
Perfect examples are the historical facts being now leaking out relative to fees paid to Board members at AIG, Freddie Mac, and Fannie Mae while their financial positions were failing. Many of those companies’ problems were forced upon them by Congressional pressures, laws, and even Board appointments were influenced by the lawmakers themselves, such as President Clinton’s appointment of Rahm Emanuel to the Freddie Mac Board where he was compensated over $320,000 for 14 months of work.
Lastly, I had a wonderful experience serving on the Board of a local bank in Duluth, MN that was owned by a wealthy businessman. The federal bank regulators called upon the owner to have a more representative board without a majority of his family members, so I and several others were asked to join the newly organized Board. My tenure was a great personal experience, and I enjoyed my participation which included membership on the Loan Committee.
The bank was constantly pressured by bank regulators to increase its minority lending, despite the fact that the community had an extremely limited minority population. As a matter of fact, Duluth had only one African American family at that time which was led by a police officer. Additionally, the only other minority population resided on a nearby Indian Reservation. Neither that black family, nor any Indians ever applied to that particular bank for loans, but the regulator said we must increase our minority loans or we would be found in violation of federal rules.
Our bank ran ads encouraging people to apply for loans in the regional newspapers and on the local television/radio stations, but the regulators were not satisfied. The federal government was totally blind to the fact that there were virtually no minority individuals that could be considered realistically eligible to meet prudent loan requirements. Essentially, the government wanted the bank to loan money to individuals that we both knew would require the bank to lose money, because the individuals could not pay the money back. At the time I did not recognize the fact that our government was practicing forced income redistribution and entitlement way back in the 1980’s.
I am proud to report that that one small bank held firm to good business practices, and the regulators never came back. The facts are that government policy was exactly what led to the financial chaos we face today. Members of Boards of Directors should be held accountable for their failure to perform their fiduciary responsibilities. Some CEO’s should have been fired by their Boards, and many stockholders should have voted some members of those Boards out of their fat-cat, overpaid positions.
I know I said it before, but the old game of TRANSFERENCE is still running full steam ahead. When are we going to have real accountability and responsibility in our government? When is our Justice Department going to perform honest thorough investigations? And isn’t it time for the Securities and Exchange Commission (SEC) to fulfill its obligations? I pray it is not too late for the citizenry to get a full accounting, and not a political cover up.