Recently in Corporate Scandals Category

It is just shocking that we cannot trust the pharmaceutical companies. (Not.) Ezra Klein has the details.

It sure is interesting how the CEO class makes sure it has a safety net, while working to destroy the middle classes. CNBC's Mary Thompson reports:

Other CEOs walked away much richer men (yes they were all men). Unofficially, they may have been fired, but the official word from many of their former employers was they "retired."

For these CEOs, "retirement" means they get a lot more than a gold watch, they get to keep the money they've socked away in retirement and executive savings plans, and in many cases, the stock options the boards gave them for performances in years past.

As a result, according to an analysis of SEC filings by the compensation consultant James F. Reda & Associates, the remaining 13 former CEOs left with golden parachutes ranging from the $858,000 given to Jet Blue's former CEO and co-founder David Neelman, to the $165,000,000 Bob Nardelli walked away with when he left Home Depot. The numbers jump significantly when you add in the stock these men already owned in the companies they used to run, with Neelman leaving with $118,000,000, and Nardelli $209,000,000.

Meanwhile, of course, benefits for middle class workers continue to be cut, or out-of-pocket costs rise. Perhaps we should not be surprised by this when the senior management of these companies is getting hundreds of millions of dollars in stock benefits that are conveniently there when the CEO "retires."

(Hat tip: Americablog)

David Sirota makes an excellent point about why Northwest Airline mechanics are right to fight for their economic rights:

The New York Times reports that executives at Northwest Airlines are trying to squeeze the pay of its employees, claiming the company is in severe financial straits. That might be believable, until you read down a few paragraphs to a key section, which those same executives have no explanation for.

With workers now striking the Times notes:

"In the last several months, the airline had spent more than $100 million to hire and train 1,500 substitutes, many of them licensed mechanics who had worked at other airlines. The airline had also hired and trained 1,100 substitute flight attendants, in case their union stages a sympathy strike."

Here's the simple question (that the media, of course, hasn't asked): If the company is supposedly in such severe financial straits that worker pay cuts are required, how do these executives have $100 million of company money to throw around for anti-union activities?

"Execs aren't sharing the pain. When Chrysler wrung mid-contract cutbacks from the UAW in 1981, the company was strapped. Chrysler canceled its dividend, top execs took a 10% pay cut, and then-Chairman Lee A. Iacocca worked for a dollar that year. Today, both GM and Ford still pay a dividend, and GM CEO G. Richard Wagoner Jr. got a $2.5 million bonus for 2004 -- on top of his $2.2 million in salary. Both companies also have huge cash hoards -- $20 billion at GM and $23 billion at Ford."

If the company is having problems -- and as Sirota admits, there is no doubt that some of these companies face real difficulties -- then everyone needs to share in the pain. That includes senior executives and shareholders.

Merck executives are providing another example of the majestic "free market" at work in the wake of their Vioxx debacle. As Jim Hightower explains:

Takeover threats make top executives very nervous, for the company doing the taking usually ousts the old team and puts in its own. Hence, Merck's sudden rush to provide executive parachutes. If another company takes over Merck—or even buys as little as 20 percent of its shares in an effort to take it over— the 230 top dogs become eligible to bail out with a special payment of three times their annual salaries, plus their expected bonuses, as well as stock payments. For example, CEO Raymond Gilmartin, who helped engineer this sweet deal, would get about $57 million to soften his landing.

Yes, this does amount to top executives rewarding themselves for their own failures ... and taking care of themselves without regard to the fate of others.

The people who made the bad decisions cushion their fall thanks to millions. The workers? Na da.

That's some invisible hand.

Kevin Drum makes a great point about run-away executive compensation packages:

CEOs aren't paid astronomical salaries because of market forces. They're paid astronomical salaries because they can get away with it. That's all.

In our new Gilded Age, good times continue to roll for some despite the sluggish economy. The Washington Post's Ben White reports about the continuing large increases in executive compensation:

Among the 1,019 public companies studied, the median bonus for chief executives in their posts in both 2001 and 2002 increased about 9 percent, to $451,000. Long-term incentive payouts, meanwhile, nearly doubled, from a median value of around $500,000 in 2001 to over $900,000 in 2002, according to the study, conducted by the Corporate Library, an independent research group, for release today.

Total cash compensation in 2002, including salary, bonus and other direct payments, rose nearly 17 percent, to a median of about $1.2 million, in 2002. The median figure represents the point at which there are an equal number of chief executives above and below.

Robert Samuelson is unimpressed with the recent announcement that an10 major investment banks have agreed to pay $1.4 billion for misleading investors. He writes:

It may be a fitting end to a year of corporate scandal, but anyone who thinks the settlement will make investing much safer or more honest is probably someone who thought -- only a few years ago -- that the Internet was the greatest invention since the steam engine.

Tort reform is a favorite Republican campaign issue. But before you jump on the GOP's bandwagon on this issue, make sure you understand some of the behind-the-scenes agenda. Jim VandeHei reports:

Republicans also want to provide new protections to asbestos manufacturers -- including a subsidiary of Halliburton Co., which Vice President Cheney used to head -- and to HMOs as part of bigger legislative packages, party officials say. Carleton Carl of the Association of Trial Lawyers of America said Republicans can't muster the 60 votes needed to break a Senate filibuster unless they continue to insert the provisions in bills dealing with homeland security.

Yet in a sign that some trial lawyers see an unstoppable train coming, some plaintiffs suing Halliburton and other companies in asbestos-related cases started talking about out-of-court settlements right after the GOP sweep last month, according to the Wall Street Journal.

First, protecting the Vice President from a horrible business decision is seen by the GOP as a Congressional priority. How nice. Second, homeland security measures sure are convenient vehicles for scoring points with corporate donors.

Our government leaders can insert tort reform language into bills at the last minute, but cannot come up with a terrorist alert system that provides usable information for citizens.

Priorities, you know.

Senate Banking Committee Chairman Paul Sarbanes (D-Md.) has now decided that Securities and Exchange Commission Chairman Harvey Pitt must go. Unlike many of his colleagues, Sarbanes had not previously called for Pitt's resignation.

Now, as Sebastian Mallaby explains, Sarbanes feels he must go public with his dissatisfaction. The last straw was Pitt's capitulation to accounting lobbyists on the appointment of the chairperson of the new audit oversight board.

As Mallaby writes:

The rap against Pitt used to be that he opposed serious audit reform, even though Enron, WorldCom, Adelphia and other scandals made the case for reform obvious. But now the rap has gotten worse. As well as holding damaging but honest views, Pitt's sincerity must be doubted. If Pitt won't take Sarbanes's advice, President Bush needs to replace him.

The Washington Post suggests that President Bush might want to get serious about auditing reform by seeing that a reformer gets named to head the new audit oversight board.

President Bush, who signed the reform law in July saying that "the era of low standards and false profits is over," should pick up the phone and urge those Republican commissioners to back Mr. Biggs's candidacy. Otherwise he will be siding with the vested interests that aim to prolong the sickness in our system of capital allocation. Does he really want this country to emulate Japan?

The San Jose Mercury News never really believed President Bush was serious about dealing with corporate corruption. So, the paper does think it is suprising that:

...Bush now is trying to chip away at that law. He's using the oldest trick in the politician's book: cutting from the budget money needed to enforce the law.

Paul Krugman notes that the Bush Administration has already given the business lobby a huge early Christmas gift. The White House has decided not to fund the Securities and Exchange Commission at the level promised with the passage of the corporate reform bill in July. Krugman concludes:

The bottom line is that you shouldn't worry about those TV images of men in suits doing the perp walk. That was for public consumption; now that the public is focused on other things, it's back to business — insider business — as usual.

The New York Times editorial board seeks action to fix a looming corporate pension accounting scandal.

The White House bill signing ceremony is easy. As President Bush proves, however, the real sign of commitment comes when the Office of Management and Budget decides how much funding it wants for some initiative.

Remember how serious the president was about bringing corporate crooks to justice and cleaning up the financial system? Well, the Bush Administration now wants to scale back funding for the Security and Exchange Commission's corporate oversight and policing efforts.

Even embattled SEC Chairman Harvey Pitt admits that the new funding request will, as reporter Stephen Labaton writes, "not allow [the SEC] to undertake important initiatives."

Of course, this story is running on a Saturday. The White House hopes the American people are not paying attention.

The Philadelphia Inquirer believes that Congress and President Bush should ensure that the corporate reform effort actually leads to reform.

Naming a tough oversight board and restoring investor protections are major pieces of unfinished business in the corporate ethics scandal.

Or to put it in terms corporate big-wigs can relate to: It's like that golf swing. Stance and aim count, but follow-through is everything.