I generally enjoy running in the snow. And it was hard to beat this morning at 5 a.m. Two to three inches of fresh snow, no wind and the stars and moon resembling the inside of the Buhl Planetarium in Pittsburgh. Used to go there every year around this time to look at an exhibit called the “winter sky.” Probably should have been thinking about that instead of the perception and reality of corporate management, except I read George Will’s column, “In Detroit, Failure’s a Done Deal,” in The Washington Post before heading outside this morning.
Here’s the lead:
“Nothing,” said a General Motors spokesman last week, “has changed relative to the GM board’s support for the GM management team during this historically difficult economic period for the U.S. auto industry.” Nothing? Not even the evaporation of almost all shareholder value?
Oh, well. I’m sure the members of GM’s board are sitting around these days thinking, “My, bad.” And that’s one of the problems. For corporate management, there is no accountability. Board members are hand-picked by management — and they don’t take those jobs with the expectation that there is going to be any heavy lifting. And the large shareholders — mutual fund companies, etc. — never vote to oust management, no matter how pathetic. So it goes. That’s reality.
Now perception. Would it really make any difference if the CEOs of the Big Three — Rick Wagoner at GM, Alan Mulally at Ford and Robert Nardelli at Chrysler — were forced to resign as part of a bailout deal? Nah. Probably not. Wagoner is a GM lifer; Mulally is an outsider with a track record of success at Boeing; Nardelli came from Home Depot where he basically ran that company into the ground. Bigger problems at the Detroit automakers than the three stooges. (And I guess Ron Gettelfinger, the UAW chief, should get into the mix somewhere as well.)
And the reality is that even Lee Iacocca wouldn’t have saved Chrysler from going belly up 30 some years ago without the help of Uncle Sam.
But since GM appears to be the first batter up in terms of a bailout, if Wagoner were to drive away, it might at least change the perception that Detroit is either unwilling or unable to change. And it might buy GM some time — otherwise without a bailout, bankruptcy. And at that point, thousands of employees and retirees are going to be looking at cuts in wages, pensions and benefits. In bankruptcy, as I understand it, the retiree guarantees, meager as they are, are gone — and the union contracts are kaput.
On the same day that the management at Citigroup announced it would cut an additional 50,000 jobs or so, the seven top execs at Goldman Sachs said they would voluntarily give up millions in bonuses this year. OK. At least it’s a start. And good on the perception front if nothing else.
And Vikram S. Pandit, ending his first year as Citigroup’s head sled, said the bank was going to continue to trim expenses. Well, not all of them — at least not yet. According to The New York Times article:
Mr. Pandit, however, has not decided on whether to share the pain by turning down an annual bonus. “Citi’s board of directors will make the decisions about the structure and level of compensation after the end of the year,” the bank said in a statement.
Now that’s reality.