Iím tired of hearing about CEOís who meet with our political leaders to promote, and show their support for, the Stimulus Bill. Most have not impressed me. Many have almost no grasp of economics and, frankly, seem ill equipped for running a business of any size. From what I can tell, their overtures are no more than clumsily veiled attempts to increase their share of the stimulus money. They are begging.
To me, begging is worse than all the other sins we have seen in recent months. For example, I can understand John Thain, former Merrill Lynch CEO, spending $1.12 million to remodel his office. For a guy making $83 million a year, he probably didnít think it was a big deal. Furthermore, I thought he was pretty shrewd when he paid out the $3.6 billion bonuses in December instead of January. He kept the government from reducing or eliminating them as part of the Bank of America bailout.
I didnít even have a problem with the automobile industry CEOís flying to Washington D.C. in their private jets. Whatís wrong with CEOís of multibillion-dollar companies having private jets? Begging for money when they got there was a different story.
And who could blame AIG executives for their hedonistic California retreat less than a week after their $85 billion bailout? Iíd want to celebrate too. Just think of how happy they must have been when it was upped to $150 billion. But at least they didnít beg for the money. Their bailout was pushed on them by the Bush Administration (Henry Paulson), the Federal Reserve and the SEC.
Unlike other sins, begging means that you are stupid or weak or both. I can forgive greed, arrogance, corruption, bribery, nepotism and even debauchery. These things are inextricable components of capitalism and capitalism contains natural mechanisms for punishing such traits, at least in the long run. But if you are stupid or weak, you shouldnít be allowed to do business. And without government meddling, you will be swiftly punished.
Now, with the Stimulus Bill, we are seeing a more insidious form of begging by CEOís. Short of public revolt, they know the Stimulus Bill is a done deal. And they have learned from the bad publicity that blatant begging engendered. So instead of simply holding out their hands, they offer their expertise in proposing new ways of spending the money - under the pretense of helping the economy recover.
Many of these CEOs, however, arenít even good at running their own companies, let alone the economy. For example, Jeffrey Immelt was recently appointed to Obamaís Economic Recovery Advisory Board. To get an idea of why Obama picked him, letís take a look at what Immelt did for G.E. He became CEO in September of 2001 when G.E.ís stock price was about $40/share. By September 2007, it was down to about $30/share. Today it is selling for about $12/share. In case you are thinking that it was the economy, not Jeff, that dragged G.E. down, note the Dow Jones is down about 20% since Immelt took over. GE is down over 71%. I guess there must be another reason for the appointment Ė that Immelt fits in with all the other clowns.
Steve Balmer, the CEO of Microsoft, is another example. Yesterday, in a letter he sent to every member of Congress, Balmer urged that the stimulus bill be quickly passed "to begin to put our country back on the path toward long-term economic growth." He expressed his hope that ďthe bill will help create and save jobs, improve education, encourage research and development, and extend broadband coverage.Ē I can understand the hope for spending on R&D and extended broadband coverage, but Iím a little puzzled by the jobs part of the plea. Earlier, Balmer filed a proposal to Obama's transition team to reform the foreign skilled-worker visa program. That is, Balmer wanted more foreign skilled workers. Ė this just days before the company announced layoffs of 5,000 American workers.
Apart from all the great software that we all love, letís take a similar look at what Balmer has done for Microsoft. He became CEO in January of 2000 when Microsoft stock price was about $56/share. By January 2007, it was down to about $31/share. Today itís selling for about $19/share. The Dow Jones is down about 30% since Balmer took over. Microsoft is down almost 67%. Well, at least heís competitive with Immelt.
I donít know if the Stimulus will work. I have my suspicions. Government stimulus spending has never worked before (in any economy). In contrast, the economy has recovered from other recessions without government help. So I donít understand why, given the choice between an approach that has never worked and one that has, anyone would pick the former. It canít be change we can believe in, if itís not even change. Okay, itís more than suspicions; Iím pretty sure it wonít work.
In any case, what I do know is that begging is bad for the economy, bad for companies and bad for character. I worry more that despicable CEOís will come to dominate our corporate culture and that the stimulus packages will promote stupidity and weakness.
Instead of wave after wave of spineless CEOís shamelessly lining up at the government trough, I would have preferred that most would condemn the behavior and denounce the supplicants. Iím confident that the majority of CEOís are true competitors leading solid companies. They would view the acceptance of stimulus money as a symbol of failure.
In my view, Barack Obama is listening to the wrong CEOís. Would you take advice from such beggars and failures? That would be tantamount to asking Barney Frank and Christopher Dodd for advice on how to run Fannie Mae/Freddie Mac. If I were Obama, Iíd be trying to recruit CEOís who donít need the Stimulus money. For example, Iíd be on the phone regularly with Alan Mulally, CEO of Ford Motor Company. True, he flew to Washington D.C. on his private jet along with Rick Wagoner, the CEO of G.M., and Robert Nardelli, the CEO of Chrysler. But he did so to support the industry. When asked if Ford wanted bail-out money, unlike the other two CEOís (Wagoner who got $9.4 billion and Nardelli who got $4 billion; both with more on the way), Mulally said no. Ford is recovering on its own.
So here we are, ready to enact a stimulus plan, when all others have failed, formulated, or at least strongly influenced, by CEOís such as Jeffery Immelt and Steve Balmer, failures at their own companies. It doesnít look good. But despite my doubts, in the end, I hope it works. And as soon as I get my stimulus money, Iím buying a Ford.