CEOs “cashed out” prior to economic crisis

[DogPoundPup]

By Tom Eley
28 November 2008

Balzac’s maxim that “behind every great fortune lies a great crime” may yet prove a fitting epitaph for American capitalism. A recent survey by the Wall Street Journal reveals that CEOs at major US financial and real estate firms converted tens of millions of dollars of overvalued stock into cash prior to the eruption of the current financial crisis, even as many of their corporations approached the precipice.

The Journal analyzed the fortunes of CEOs from 2003 to 2007 based on executive compensation and stock sale data. Fifteen of these CEOs took home more than $100 million in cash during this period. At the high end was Charles Schwab, who made over $816 million from his self-named accounting firm, almost all of it from stock sales.

Of the 120 publicly traded firms the Journal analyzed, CEOs cashed out a total of more than $21 billion. However, data was gathered only from publicly traded companies, and thus does not include similar fortunes that have been made by “hedge fund chiefs, Wall Street traders, and executives who sold their companies outright.” Nor did it include data related to exit packages, the multimillion-dollar “golden parachutes” awarded to retiring or fired executives.

The Journal’s findings underscore the parasitism and criminality of the US financial elite. Defenders have long justified extravagant CEO pay by claiming that these were the talented “risk-takers” who generated enormous wealth for investors. But the Journal’s data shows that there is no correlation between compensation and a firm’s success. On the contrary, many CEOs rewarded themselves just as their corporations approached ruin.

These included Richard Fuld, the CEO of Lehman Brothers, who transformed his firm’s stock into well over $100 million in cash. When added to his salary and bonuses, Fuld pocketed nearly $185 million in the five years before 2008, even as he guided his 150-year-old investment bank to ruin. James Cayne of Bear Stearns did nearly as well at his investment bank, collecting over $163.2 million, the vast majority of which was garnered from selling stock that would soon be scarcely worth the paper upon which it was printed.

Read more @ http://www.wsws.org/articles/2008/nov2008/ceos-n28.shtml

[FirstLight]

1. Not like I am surprised, BUT...

You should send this to the Obama Transition team.

I would love to see the NEW administration say,

"uh, we want some of that money the previous administration gave you...and , well, we're going to just garnish your WAGES for the next 5 years, until it is paid off!!!"


That's whatt happens to anyone else who has screwed the system, you get garnished ...

[Hawkowl]

2. $700 billion more

And we keep giving these criminals more money. If Obama doesn't put a stop to it and start bailing out mortgages and not the wall street criminals, he won't have enough money to pay to have the whitehouse repainted. This is what Bush and the Republicans are trying to do. They will make Obama fail by having him inherit a bankrupt government and then blame him.

[mirrera]

5. Bingo. They did it in Poland and Also South Africa.

Here you get to govern, but the economists in the back room took all the money. Good luck...

[Joe Chi Minh]

3. A great find! Thanks

[oceanman]

4. Cashed out?

Have no idea what the law says about this, but isn't this a form of insider trading? Do the same laws that got Martha Stewart sent to prison also apply to corporate officers? They have a fiduciary responsibility to 'increase shareholder wealth'. Does their cashing out and baling on their corporations, letting the stockholders hang in the wind, not amount to the same thing? Just asking because I don't know. If so, burn'em.

[Dangerously Amused]

6. My question also. Thanks, I hope somebody here knows the answer.

[proud patriot]

7. grr

:grr:

[AdHocSolver]

8. This kind of theft was made possible by deregulation started under Reagan and continuing today.

It even occurred under Bill Clinton when he signed off on repeal of the Glass-Steagall Act. The Glass-Steagall Act was part of FDR's New Deal which was designed to prevent the kind of activities that led to the melt down we saw in the financial markets. Robert Rubin pushed through repeal of Glass-Steagall and was rewarded with a directorship at CitiGroup for his efforts.

We can also blame the Fed especially on Alan Greenspan's watch, who was an enabler by manipulating Fed policies. His "we made a mistake" claims are pure b*llsh*t, as he knew exactly what he was doing.

The massive theft under Paulson, under the guise of an economic bailout, is another brazen fraud.

The New Deal laws regulating the financial businesses MUST be reinstated with effective enforcement capabilities. This country also has to revisit antitrust laws. Any business that becomes "too big to fail" is already too big to be allowed to exist. Instead of merging corporations, we should be breaking them up. Monopoly power prevents competition and enables all sorts of economic abuses.

Government regulators are, or at least should be, to the economy what a referee is to a ball game. Regulators are needed to make sure that the game is played fairly and honestly, and to impose penalties for noncompliance with the rules.

The only reason that corporations fight regulation is to make it "legal" for them to get away with crooked schemes.

[DCKit]

9. Insider trading.

If Martha Stewart can do jail time for a regulatory infraction committed by her broker, then the company insiders who profited just before their stocks went into the toilet can be held accountable - the definition of insider trading.

[Iwillnevergiveup]

10. Bill Gates is obscenely wealthy, too

but has given away billions. Have any of these guys done ANY philanthropy?

[judasdisney]

11. But CEOs "provide jobs" -- why do you hate America? Are you a terrorist?

Greedy unions killed America -- it must be true, because I don't hear any major Democrats disputing that forcefully.

Except Howard Dean, Kucinich, Feingold & Sanders -- and everyone sees Rahm & the DLC attacking those four traitors, so they're fringe.

Why else would Pelosi, Reid & Schumer prevent substantive and punitive hearings on CEO mischief?