CEO’s and Car Czar’s…

15 12 2008
All this rhetoric on the car companies, it’s almost become mass hysteria, or some kind of mob mentality. And nobody seems to be looking out for the little guy here. The guy that put in his life’s work, expecting a fair return for it all.

What exactly IS the car companies fault anyway? Haven’t they been giving us exactly what we asked for? Supply and demand, we asked, they delivered. Nobody forced those big SUV’s on us. Nobody made anybody buy a Hummer, or a big four door extended cab 4WD F-250 with a big motor. We wanted one. We wanted the comfort of a Crown Vic and the power of a big V8. That’s not the car companies fault.

Most of the problems that the car companies face are systemic and originated long before any of the current “3 CEO’s” ever took over those companies. In fact, at least two of them I understand to be fairly new on the job and HAVE made some changes necessary to the companies long term survival. However, and who ever, those changes couldn’t be made fast enough to keep up with the economic situation nor the gasoline shortage and accompanying huge price increase. The troubles that the American automobile manufactures face come from a massive pension system that lacks solvency, Union contracts that limit necessary moves the company’s need to make to expand or retract or change with the times, and a multitude of regulations and standards and ever-changing ‘political’ requirements that have to be met. Those don’t come cheaply. And toss in those skyrocketing oil prices we had… well, it doesn’t take a genius.

People, especially congressmen, attacking them for using corporate jets is somewhat Don Quixotesq. Those people, if you figure what they make in salary and turn that into an hourly rate, flying a corporate aircraft makes a lot more sense. Like the old saying, time is money, and if they are that important so as to earn that much money would it be wise to have them standing around an airport waiting for an Airliner which may or may not be on schedule, a schedule that may or may not be convenient, or direct. Sure, maybe they could have all pooled the trip, but were their agendas all the same? Their schedules concurrent? Maybe so. Maybe not.

If You fly a lot you’ve probably had your frustrations with it. Certainly you can appreciate the convenience of being able to move at your on pace and schedule. I have both a friend and also a future son-in-law that are both corporate pilots (so maybe I have a bit of bias here). My friend tells me often about plans and destinations that constantly change with the needs of the company he works for. Sometimes a there and back trip ends up going to four or five different plants and dealerships (heavy equipment, not car). Last minute changes to destinations or schedules is common. Flying on airlines can’t accommodate that.

Somebody asked on the radio why those “little” cars they see in Europe aren’t available here in the states. After all, some are even American brands. That’s true. The answer is that those cars are built for the European market and designed for the European standard and many of them aren’t allowed by our government to be sold here because even though they ARE American brands, they don’t meet American standards. The same reason you don’t see many of the foreign brands imported here. The answer is government, not the car companies.

Again, as far as corporate CEO’s are concerned, or bailouts for that matter, Thomas Sowell had some real good comments on that:

“In the midst of a major national financial crisis, what was one of the first things Congress zeroed in on? The pay of Chief Executive Officers of financial institutions.

If all those CEOs agreed to work for nothing, that would not be enough to lower the bailout money by one percent. Anyone who was really serious would start with the 99 percent and let the one percent come later, if at all.”

“But however insignificant the pay of CEOs is economically, it is big stuff politically. Whatever the shortcomings of the Democrats, they are consistent in their message, and class envy is a great part of that message.”

“What really sets some people off is the fact that a CEO who has mismanaged some corporation into losing billions of dollars is rewarded with a severance package worth millions.

Think about it. If the CEO’s decisions are costing the company billions, it is a bargain to get him out the door immediately for millions, rather than having his departure delayed by either internal struggles or battles in the courts.

It is the same principle if you are married to someone who is impossible to live with. The divorce may cost far more than the marriage– and still be worth every cent of it.”

“Politically imposed limits on the pay of CEOs is one of the most penny-wise and pound-foolish things that can be done. The difference between a top-notch CEO and a second-rate CEO can be billions of dollars on the bottom line.

That is what drives up the pay of CEOs. If you want someone who will be top-notch in running organizations as huge and complex as Fannie Mae or Freddie Mac, there is no point offering $5 million a year if similar enterprises elsewhere are paying $20 million for people with the kind of ability required.

Who is going to take a $15 million pay cut to go run these enterprises, in addition to having to put up with politicians?”

“The money that can be saved by limiting CEO pay is chump change compared to the money that can be lost because you cannot attract top-notch talent.

Congress itself is a classic example of what can happen when penny-wise policies restrict the caliber of people who can be attracted.

No top-level doctor, lawyer, economist, engineer or CEO can become a member of Congress without taking a big pay cut, perhaps costing that person’s family millions of dollars over a lifetime.”

“…if you paid every member of Congress a million dollars a year, it would cost less than the cost of even a small government boondoggle, much less a whole agency.

It is not that the turkeys in Congress today deserve a raise. They don’t even deserve their current pay. But that is the very reason for attracting different people. Cheap politicians are actually very expensive and the same principle applies to CEOs.” 

 

And probably the best of all –

“Government bailouts are like potato chips: You can’t stop with just one.” – Thomas Sowell
Change certainly needs to come. But it needs to come with reasoned approaches and well thought out plans, not quick rabble roused demands for immediate actions that are of little real consequence or effect. Rushing to a solution can do no more than be a band-aid approach, and if these problems are to be actually solved its gonna take a bit more than politically popular calls to arms and actions.

Perhaps those CEO’s really do need to go. Maybe they should be listened to and give time to come up with solutions. And maybe our government needs to back off these companies and give them the ability to solve there own problems before creating even more burdensome regulation and controls. The free market is best when allowed to operate freely. Almost every one of these problems that we face today stem from government interference in the first place. What’s the government track record on running enterprises anyway? How do we judge that? The Post Office… Social Security adm…

Before we draw lines in the sand on stuff like bail-outs and such, we need to examine the very real consequences to whatever we do. Who would do the suffering, who would come out ahead? Are we cutting our nose off to spite our face? There are literally hundreds of questions to be address before we say yea or nay about how to spend our collective money. Throwing out rhetoric about golden parachutes and corporate aircraft may make good press, but does it do anything other than distract from the actual concern and taint the issue? We can’t afford to rush to judgment. We need to know where the blame really lies before we can figure out how to fix it, or by who.

 

-Al

 

Articles by Thomas Sowell can be found at Townhall,

www.Townhall.com/columnists/ThomasSowell

 

 

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