From Dr Malbert Smith III.
Sir, You have reported recently on the global outrage at business leaders in terms of executive compensation. The overwhelming public opinion is that bonuses should play a smaller role in overall executive compensation. What I think most people find outrageous is the notion of paying out bonuses to executives within organisations that have lost money and received government bail-out dollars. Most people subscribe to the belief that bonuses should be paid only out of profits. When profits do not exist, bonuses are not paid.
The outcry on Wall Street is that without such bonuses there will be a talent drain and they will not have the requisite leadership to dig us out of the crisis. So we want the same leaders who dug the hole to dig us out of it? To think there is not enough talent within these organisations for others to replace any of these too talented folks is naive. I think it's worth the risk to lose some of these executives, and we may be surprised at how few actually leave.
Entrepreneurs in the real world (privately held companies) have never suffered from the illusion that bonuses are routine and a birthright. As an entrepreneur who has started a number of companies and has had to seek capital and loans from banks and investors, I have never had the audacity to believe that bonuses could be paid to me or my executive management team when we did not hit our profit numbers. Ironically, on one occasion one of the big banks restricted my salary (not my bonus, but my salary) when we were out of compliance with the terms of its loan. Banks have never had difficulty in limiting and restricting management pay in privately held companies that were in “trouble”. So often in life what goes around comes around and apparently these executives are offended by the application of these same principles upon them. During this period a banker from a big financial firm explained the “Golden Rule” that was being applied to me: “He who has the gold, rules.”
I, like many Americans, believe that the capitalist, free market system has been the great engine and catalyst of growth and prosperity for our country. The entrepreneurial spirit and creativity of our true business executives is best seen in the private markets, not in the entitlement culture of Wall Street. When I hear about executives complaining about their need for bonuses, I rarely see a true entrepreneur who has created a company and jobs but typically a person who has risen through the ranks of the organisation. By and large as a group, they are a bunch of folks who were born on third base and think they hit a triple.
The hubris exhibited by these elite executives is as objectionable today as it was in Ancient Greece and across all countries.
Malbert Smith III,
Durham, NC, US