Yesterday the government decided Citigroup was too big to fail. I woke at four this morning thinking about this. Too big to fail. I guess that means once a company reaches a certain size, regardless of mismanagement, lack of leadership, lack of innovation, poor strategic judgment, or of any of the countless ills possible, it is entitled to a perpetual life.
I understand it would be scary, devastating to thousands of employees and their families and have countless consequences that we cannot predict if Citigroup were to go under.
What I am struggling with is what this really means. Does that mean that we not only have government entitlements, but we also have corporate entitlements? Do the taxpayers pay for both?
What is the scale at which one arrives at “too big to fail?” Who defines this?
How are the CEO’s of “too big to fail” companies held accountable?
The former CEO, Charles Prince received a 12.9 raise in 2007, just last year, to bring his total compensation to $25 million. Click here for the Market Watch 2007 story
Ok, in fairness, Prince lost his job. And most of us would be fine with losing our jobs if our final paycheck was $25 million.
A few people are now talking about forgoing bonuses for top executives as a condition for the government assistance. Which means the government now controls CEO pay in “too big to fail” companies? Read the Reuters story here
I am not saying I have the answers. I do have lots of questions.
New times, new territory. I would love to hear your comments.
May prosperity be yours,
Mackey McNeill, CPA/PFS IAR
President and CEO
Mackey Advisors
www.CultivatingProsperity.com
859-331-7755
Mackey@CultivatingProsperity.com
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2 comments:
Mackey -I was reading about Citibank yesterday and had the same questions that you had. These situations seem like they put us all between a rock and a hard place. Like when a filming crew in the wild starts to save the animals rather than just filming them. But, how to watch them flounder? Very disturbing and thought-provoking.
Very interesting that you mention Citicorp in your blog today. One of my fellow students in my MBA Essentials class at the Met Center last night has been employed by Citicorp for 15 years. She is worried about her position. We need to stay calm and focused as our country will rebound!!
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