Thursday January 29, 2009 President Barack Obama and Timothy Geithner, the U. S. Treasury Secretary held a press conference in Washington D. C. One of the presidents’ comments was that it was irresponsible for the Wall Street bankers to give themselves bonuses while taking handouts from the government.

 

I agree whole heartedly. The only problem is he didn’t go far enough. When small businesses which are the majority of the companies in the United States, begin to run out of money and credit lines to run their businesses, they have to first tighten their belts. This includes layoffs, salary cuts, benefit cuts and the instructions from the boss telling the employees that are left not to spend a damn penny without his or her permission.

 

The management of the large publicly traded firms conveniently forget that they don’t own the businesses they run, they only work there. The top management in all companies are paid ridiculously high salaries. None of the top executives are worth what they are paid. NONE! They work for the stock holders. The stock holders should get the benefit of the good years when profits are high. That doesn’t happen. The management receives the benefit. There are very few companies that ever increase their dividend; they only cut it during slow periods. When a management team runs a company into the ground, then up and leaves the company, why are they paid millions in severance? It isn’t sound business and doesn’t make any sense at all.

 

When a company has to be told it shouldn’t take delivery on a fifty million dollar aircraft by the government that is bailing it out of financial difficulties, heads should roll. A complete new management team should be brought in and the old one summarily fired. No severance packages, no perks lasting far into the future or any of that wasteful spending that hurts the stock holders.

 

 

The board of directors is to blame for these shameful practices. They, in way too many cases, rubber stamp the wishes of the management team without a second thought to the effect on the stock holders whose money is at stake. They agree to outrageously high salaries for management, stock options, golden parachutes, and perks that cost untold millions of dollars that rightfully belong to the stock holders. They do all of this with complete immunity, never listening to a stock holder complaint about the above mentioned practices.

 

President Obama campaigned for change. Corporate governance will be a great place to begin. We have a new president and a new legislative body in Washington D.C. It is time for the politicians to make changes in the way American businesses are run. It is painfully obvious that the corporations are not going to do it themselves. They have the opportunity to do this now, before every person that purchases shares in a company are completely broke and asking for a handout.