Out With The Old
Posted: January 2009
As most of the world awaits the inauguration of President-elect Obama and the long heralded departure of our current Executioner-in-Chief, some in the business and finance press seem preoccupied with a different set of departures, that of corporate CEO types. According to one report, 46 CEO’s from the Fortune 400 have or are imminently prepared to depart their positions atop the mountain. Somehow, this is seen as a bad thing or, as put by a recently retired General Motors (NYSE:GM) director as a “…catastrophic loss of distinguished experience…”.
Given that this director watched over GM while Rick Waggoner rode that horse from $60 a share to under $5 –before the 2008 meltdown, no less- and apparently saw this as “leadership”, it’s not hard to see why that opinion of American business experience can be generalized across the arid expanse of boardrooms nationally. From other, more rational, viewpoints, a large scale departure from executive suites is less lamented and possibly applauded.
Not that Unicorn feels most CEO’s should be held responsible for share prices ravaged by a contagion conceived, nurtured, hatched and unleashed from mad scientist laboratories along Wall Street. There are, in fact, many corporate leaders whose keen stewardship has allowed their firms to find a way through the murk and mire left behind by our bankers’ tsunami and kept their organizations upright despite every evil concoction brewed. They’ve watched helplessly while institutional investors, hedge fund ponzis and parasitical private equity sold proverbially (and possibly in actual practice) the baby out with the bath water while maintaining high standards of conduct.
Many CEO’s, CFO’s and UFO’s (because surely some if not many corporate bosses today are from and perhaps still on some other planet than we) in American business today are or soon will be riding the dead horse of debt as their brilliant corporate financial plans go into default. Far too many of these highly paid initials saw wave after wave of debt rollovers as the right way to conduct business despite every indication to the contrary. An average teen could (and should) have seen the fiscal insanity brewed for what it was and stayed far distant. An average slug capable of sliming its way across America’s corporate scene could smell the emerging, catastrophic contraction looming over us like steam and smoke from Mt. Pinatubo and would have sensibly oozed its way under any convenient log or rock.
Corporate America did neither, feeding instead on toxic asset backed paper, building up poisonously staggering debt loads disguised as “leverage” and deluding their shareholders, directors, employees, wives, children and pet parakeet that this was “smart” business.
It wasn’t smart. It wasn’t even comprehensible.
Yet some, like our GM director friend (fiend?), rue these jockeys being tossed from the saddle of their blindered racehorses. We suggest, humbly of course, that these erstwhile debt mongers should not only be tossed from the saddle but trampled, pummeled and dragooned before being put out to a pasture filled with coarse thistle and cow pies. The massive destruction of wealth, both declines in share prices already witnessed and in the incredible interest rates extorted to rollover or refinance debt coming due, is testimony enough about the quality of decision making hiding behind expensive MBA’s from the best schools.
Given our penchant for broad, sweeping and totally unrealistic options, our suggestion is very simple and direct: for every public company that has to rollover or refinance debt above 5%, which is forced into Chapter 11 because of their debt burden, or which has to cut shareholder dividends to finance their prolifigate leveraging strategies, the Chairman, CEO, CFO and Board (in its entirety) be treated to a vacation, one way, to select backwaters where malaria is still epidemic and natives are proven to be cannibals.
Our only concern, of course, is not even the cannibals would dine on their fetid flesh and the toxins they carry would make malarial death seem pleasant.
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