In a story headlined “Executive Privilege,” the Chicago Trib tries to smack around CEOs who plunder their companies and falls far short of hitting the target:
Here are examples of some excesses that found their way on to the company books: Conrad Black
Former Hollinger International CEO and wife, Barbara Amiel Black
$388,000 on a corporate jet for a vacation in Bora Bora
$2,400 on handbags
Former CEO of Tyco International
$15,000 on a poodleshaped umbrella stand
$6,000 on a shower curtain
$2,200 on a goldplated wastebasket
Former chairman, Adelphia Communications Corp.
$40,000 on a family masseuse
Why would Conrad Black, CEO of Hollinger International Inc., bill $2,400 in handbags to his newspaper publishing firm and have the company pick up the tab for his personal servants?
It’s easy enough to understand why a financially strapped bookkeeper or a frustrated executive passed over for the top job might steal from his company.
But it’s far more difficult to fathom why the pampered person at the top would plunder an enterprise that was paying him millions of dollars a year in cash and stock.
At the very least, spending corporate money on personal expenses risks an Internal Revenue Service audit. In the worst case, such behavior could cost a CEO his seven-figure job and land him in prison.
The simple answer is that some CEOs lose their sense of reality and feel entitled to whatever they can get away with, psychiatrists and corporate governance experts say.
Instead of thinking about what is fair or right, some chief executives look around to see what their peers at the top of the heap are getting in cash, stock options and perks, such as corporate jets and club dues. They want that–and more.
The standards are different, of course, for owners of private firms. They can take home every penny of profit and be justified in doing so. But it’s a far different matter when heads of publicly traded companies treat their firms as private piggy banks.
Even in cases in which the CEO is the majority owner, he or she has an obligation to act in the best interests of his co-owners, the individual investors who expect a return on their equity.
The story does not even once mention the other class of people who have a right to be appalled by such behavior: the employees of Adelphia, Enron, Hollinger, Tyco. Thousands and thousands of people whose hard work enriched people like Black and Lay and Kozlowski. Thousands and thousands of people who took home a tiny fraction of what Black and Lay and Kozlowski earned even before they started stealing.
It’s a discussion we don’t ever seem to have. What are the responsiblities of an employer to his or her employees? In an economy where two and three jobs aren’t enough to pay a mortgage on a small house, does anybody need to be paid a salary that allows them a $15,000 poodle umbrella stand? Is an employer required to notice that his employees are suffering and cannot afford to live lives of modest means on what he pays them, and therefore increase their salaries?
How can fairness to both employers and employees be achieved? Do we tie CEO pay to a certain percentage of what his lowest-paid employee earns? Even incentive pay I don’t like unless employees get it as well: the company does well so the CEO deserves the reward? All of it? How much?
There’s a certain shrug-and-take-it mentality when it comes to private companies. But the fact remains that apart from government figures, the people with the most power in our society are employers. They hold our lives in their hands, and nobody seems to talk about how tight they squeeze, and how wrong it is to get the point where you think, as Black and Lay and Kozlowski obviously did, that your good fortune has nothing to do with the hard work of others.