In his movie “The History of the World: Part I” Mel Brooks chooses to play the role of Louis XIV and does so in a magnificently over the top manner. Throughout his scene where he plays the lecherous ruler, he would frequently look at the camera and utter “It’s good to be the King.” After reading the series of excellent posts on the lack of corporate ethics by my eloquent blog friend, Barney, who offers his “Views from the Hill” at http://www.mountainperspective.wordpress.com, I chose this title to illustrate some of the true stories I have witnessed or read about where the CEO of a company truly acted in a regal manner, not too dissimilar from Mel Brook’s French King. Through my consulting and work in corporations I have encountered many fine leaders of organizations. Yet, I have also seen some of the greediest people you will ever want to meet. It is for people like these that we need regulations. Where information is not public knowledge, I will not use any names, but all of these stories are true.
Let me begin with CEO #1 the $20 million man, a phrase I coined from the TV show, but if inflated to today’s dollars, we would likely need another decimal. This CEO would never use his own money, when he could tap company money so easily. For example, the company paid for his daughter’s wedding because he invited a few customers. And, when a colleague of mine was explaining a new benefit for employees he felt should be offered, the CEO stopped him and asked “what’s in it for me?” The CEO had every perquisite and if he read about a new one, he wanted it added to his list. He had to get a second chauffeur as his wife used the first company one too much for shopping.
Then there is the case of CEO #2 who was too cheap to buy his own light bulbs. I chose this example, as it was more meaningful than all of his other excesses, not too unlike the traits of CEO #1. Like CEO #1, CEO #2 had every perquisite imaginable, but he had the more interesting expense reports which required scrutiny.
CEO #3 seemed to have a little gambling problem. By the time it was discovered, he had embezzled $38 million from the company Treasury to pay off his debts. The funds he needed grew so large, that it finally showed up in an audit and he was caught.
There are new rules under the Dodd-Frank bill which governs executive compensation for publicly traded firms. That is the one and same Dodd-Frank that the some of our GOP friends would like gutted due to the limits it places on banks. You might find of interest the first two CEOs above were bank CEOs. Yet, there is also some legislation for non-profit organizations which evolved in response to the “kingdom” that was maintained by the national head of the United Way in the 1990’s. These requirements were under the Taxpayer Bill of Rights signed by Bill Clinton and were designed to make sure that donated money did not unduly go the key officers of the organization.
I mention this as greed is not restricted to for profit entities. One of my favorite lines every uttered was by Reverend Jim Bakker (CEO #4) of The Praise The Lord (PTL) Club who went to jail for misusing money from his donors. He said in an interview with Ted Koppel, “The Lord wanted me to have nice things” as reference was made to his solid gold faucets. A local DJ used to reference the PTL Club as the “Pass The Loot” Club before Mr.Bakker’s demise. Yet, other religious leaders wanted nice things as well.
CEO #5 was a minister of a large church. He told a colleague of mine who was designing a compensation package for him in response to my colleague’s question as to whether he should include all employees of the church in the assignment. The minister responded, “Your duty is to look after the shepherd; the Lord will look after the flock.”
CEO #6 is our good friend Reverend Franklin Graham. Graham was none too happy when it hit the papers he was taking a very nice salary from the Billy Graham Evangelical organization in addition to the very nice salary he was getting from Samaritan’s Purse. The funders were not too happy with him either. To his credit, he quickly took action to remedy this dreadful oversight.
CEO #7 works for a regional Alcohol Beverage Control (ABC) Board in North Carolina. There are far too many ABC Boards in NC, which is a huge waste of dollars. Yet, this CEO down in Wilmington was not only overpaid, but had his wife and son on the payroll. Plus, he had a Supplemental Executive Retirement Plan (SERP) to retain and reward him. My question is why would he ever leave?
My final CEO #8, Gloria Pace King, gained national notoriety for her excessive compensation and benefits as CEO of the United Way of the Central Carolinas. Her compensation was high, but that was not the biggest problem. What got her cross ways with the community was her advocacy for a lucrative SERP that hit the accounting books in a major way. Plus, when she traveled she traveled well, while her subordinates who went along on the trips stayed in cheaper hotels. What is most disappointing is the community’s trust was broken. After she was let go, the United Way funding dropped from $41 million to about $15 million the next year. Who suffered? The people in need did, as the agencies had to do more with less.
I have only singled out eight CEOs from a list which includes names that you may have heard, but cannot remember from where. I would encourage you to Google the names – Dennis Kozlowski (Tyco), Richard Scrushy (Healthsouth), The Rigas Family (Adelphia), Kenneth Lay (Enron) and Wallace Malone (retired from Wachovia after his bank was purchased). I threw Malone into the mix, not because he did anything illegal, but because of his $119 million severance package due to the sale of the bank he ran. The other stories will make you ill.
There are many fine CEOs out there successfully running their companies or navigating them through this poor economy. If CEO pay is aligned with performance and the organization and shareholders do well, the CEO is deserving of good pay. Unfortunately, there are CEOs who are more narcissistic than we would like for them to be. I included the religious examples, as of all people, we need our faith leaders to be even more above board. When they are not, it seems to hurt worse as we believe they are answering a higher calling.
I have often said we need our leaders to be better than we are. We are asking them to be stewards with our money, jobs, faith and future. Their job is demanding, so it is OK for them to make a nice income. With that said, we do need accountability as we do not want or need them to live like kings or queens either. We need regulations like the two I mention above and more to keep things fair for all. Business leaders do not want regulations. Yet, very clearly from the above, but even more so from my friend Barney’s writings, we desperately need them.
So, when you hear people say regulations are holding business investment back ask them to think through that statement. Especially when businesses have breached our trust like our banker friends, regulations are needed. Always remember what history has revealed – the “haves” tend to take advantage of the “have-nots.” Rational capitalism is good; unfettered capitalism can be ugly. The regulations let us keep a handle on things whether they govern compensation or to keep people from polluting our environment or our bodies. The “haves” can still make money, they just cannot become regal. And, they need to play by the rules.