Corporate Jets and Executive Compensation May Not Be All Bad -- A Media House Cleaning

In the media, our job is to identify people and issues worthy of your attention, and crystallize the complex so the average Joe "gets it." Sometimes though, the media sets up an idea which, instead of clarifying for the court of public opinion, becomes the rope used by an angry lynch mob.

Did we get it right when we identified that millions in bailout bucks were being used to pay the very people who created the mess on Wall Street? In part.

Compensation on Wall Street is complex. People make big bonuses for delivering business. Some people, to make those bonuses, resorted to bending the rules. Some, like Bernie Madoff, used the complexity of the game to hide ponzi schemes.

Of course many did not. Some people even worked in departments where the higher-ups were engaged in bad business practices, but they, themselves, did not really do much more than what they were supposed to do.

If you work at a taco joint, and the owner buys tainted meat, and the manager knowingly served it up, you do not arrest the employees who cooked it, bagged it, or sold it.

We would not come in and either take away the taco stuffer's salary, or tax it at 90% either.

Corporate jets serve a purpose, beyond shuttling fat-cats' families to Vail. If putting person(s) on the ground to gain a twelve-hour edge over the guys flying commercial carriers means landing a deal conceivably worth billions, the use of the airplane, fuel, and the other associated costs are in the best interests of the company.

Make executives log trips, account for business versus personal miles, and tighten up loopholes that allow for junkets and other travel that might be questionable for those companies on the Federal bailout dole.

Unfortunately that sounds too reasonable, and moderate. In the world of the six second sound bite, TV viewers don't tune in for "Lawmakers urge curbs on executive excess." They tune in for "Capitol Hill Demands Full Refunds of Executive Compensation."

The choice of some of the crummy icons of the Wall Street debacle is not entirely of the media's doing. The airplanes, for example were the work of Congressman Brad Sherman, D-California, who pressed the issue with the executives of the Big Three auto makers.

There are a lot of these softballs that the media does not whip into big stories. Yet, in this case, the executives, flying to Congress on private jets to testify on why they needed billions in bailouts, seemed like an iconographic home run, an easy way to sell corporate tone deafness.

The problem with angering Average Joe over such icons though, is that it may stop an airplane order or two, but in some ways it helps those who are trying to AVOID fixing the bigger issues that have ground the economy to a dead halt.

One reason that Mr. Obama continues to irk the media, who accuse him of campaigning rather than governing, is because he has to continually reach around the media noise where these over-simplifications of the news occur, to get information to the people more directly.

If he is campaigning, it is largely because we in the press are not doing our job in getting the whole story out there. He is forcing us to address the complexities of the crises in front of us rather than pot boil them down to a few old-fashioned made-for-TV lynching tools.

It is resonating because an increasing amount of the electorate is reading more critically, and reading more varied opinion via the Internet, or choosing more wonky TV fare like "The Rachael Maddow Show."

We would like to see people be held accountable, not jet aircraft or the folks in companies who were doing as they were instructed and did not work at a corporate policy level.

If you work for a company that told you that you would get a $2 million bonus if you brought in $100 million worth of business and booked it in ways that were both legal and ethical, you would be mighty pissed off too if you found your deal ensnared in activities over which you had zero control.

When Mr. Geitner says that these issues are complicated, and the Fix News crowd boos and throws tomatoes, maybe we should be paying more attention to the nuance that he is offering up to us.

The media liked Mr. Greenspan because he could simplify and spin. Look where that got us.

Mr. Geitner, and the higher-gloss Mr. Obama, unlike the Bushies, are making the media work for a living. The issues are complex, as are the solutions to the crises that we face.

Simplification is good. Over-simplification underestimates the American public. We're not all as stupid as Fox News and Gannett's USA Today would like to believe that we are. Even if Average Joe is not a wonk, into the details, surely we can tell the story in a way that presents the facts to them more completely, and generates some real accountability, instead of the smoke-and-mirrors scandals of this airplane or that deal. That's the stuff of a thirty-year era of the Republican spin machine.

Mr. Obama has called for change, and that should also come from our withered fourth estate as well.

Maybe it would be better, instead of railing over corporate jets and the general salaries, for the business Woodwards to get out there and find the specific people responsible for steering the country's financial system into the tank.

Oh wait, 90% of the financial talking heads are equally responsible for this mess.

Let us not forget, while we're railing about the evils of corporate jets, that Maria Bartiromo was a guest of Todd Thompson of Citigroup for many uses of their corporate jet.

People in glass airplanes...

Before we in the media call for anyone's ouster, perhaps we should clean house, and get our own acts together.

My shiny two.

Comments

[STATESMAN1]

I find media stories very exciting. Can you please elaborate on your statement regarding Maria Bartiromo as a guest of Todd Thompson of Citigroup for many uses of their corporate jet.

Like what were the many uses?

Got any photos?

That's news I can use!

[Brian Ross - Huffpost Blogger]

Statesman:

http://www.msnbc.msn.com/id/16830375/

[Tena]

I love this post - thank you. I think this states very clearly what the big problem is.

I had an argument - again - with a friend yesterday who is very liberal, as am I, but she's angry at Geithner and Summers. I finally had to tell her that the way I see it, Geithner and Summers could not do one thing that would make the left happy because the left was bound and determined to be unhappy with them. They started bitching before Geithner or Summers had even formulated a plan.

The bonuses were one king-sized distraction. Paying them will not make our situation worse. Letting AIGg under would make our situation much worse, IMO. But the media just went on a frenzied shark hunt and turned the whole thing into drama. We don't need drama to fix these problems. We need cool heads, a methodical approach and TIME for them to work.

[Brian Ross - Huffpost Blogger]

Bravo! Well said. The problem is that the news media has been devolved by Rupert Murdoch, Gannett and their cronies. We've returned to the days of William Randolph Hearst for sleaze and sensationalism. The media outlets are not used to well-educated, more moderate people running things.

[NetworkGuy]

I worked for business once that had a bonus plan based on a percentage of gross profit. It was even in my contract. I ran my department pretty efficiently and had received some good bonus money for a few years. Of course, the contract was structured such that if the business failed of profit fell through the floor, bye bye bonus. Well, we lost a major account and my job was gone in 3 months. I did not receive any bonus money during that period, nor did I expect it. We later found out the boss cashed out to the tune of millions. I'm pretty sure the current mood of the public is because they rightly perceive that if you're above a certain pay grade, you don't pay the price for your massive failure, only the people that work for you.

[Brian Ross - Huffpost Blogger]

I agree with you. There should be more protections for those who make the majority of their pay off of commissions and bonuses. There should be further limits on executive compensation. One way to do that is to push for large shareholders, like pension funds and mutual funds, to vote for shareholder approval of executive compensation. The shareholders need to be less of a corporate rubber stamp. It is a form of democracy in the SEC rules that exists in theory but is seldom practiced, other than the ouster of Disney CEO Eisner, to my recollection.

[ProgressiveVoice]

Great post, Brian! Great follow up too. Maybe it takes more people experiencing Corporate America the way I did to understand the mind set. As the sole person responsible for accounts receivables for an international recruiting firm, I was told I didn't rate a salary equal to an administrative assistant in one of our offices because I didn't "generate revenue". Well, neither did the admins! However, I did generate all invoices and collections activities, so while I may not have created revenue for the company, it was me, or my position really, that was responsible for making the revenue others created appear in our bank accounts.

I don't understand a philosophy that considers a corporation's general services departments - HR, Accounting, IT - less worthy or important, yet pays corporate executives 400 times what a worker on the factory floor makes.

[PS9]

Brian, I agree with your article.

However you (and many other in the media who have taken the same position on this issue) missed an opportunity to make a stronger point.

You draw an example of an employee working in a profitable department within AIG.

While I agree with this example it would be more meaningful if you put forth an example of a person within a profitable company who would be effected by the 90% tax. Thousands of people at JPM, Wells Fargo, Morgan Stanley, Goldman Sachs are all effected by the knee jerk Congressional reaction. Furthermore, many of these firms were ASKED to take TARP money.

[Brian Ross - Huffpost Blogger]

This is why a number of the people turned in their bonuses. In the face of a 90% tax on it, they felt like they would lose any way that it rolled out.

[bandit09]

Perhaps you have a point about corporate jets.

I question your grasp of reality when you compare corporate bandits to people working at a taco stand. When the business folds, the taco stand guy gets nothing, not even health insurance, these execs get their salary and their earnings they have accumulated during the years of raping of our economy

People are angry angry about a system where enterprises are so large and unstable that they are able to bring down our economy. People have had it with jerks who "bring in millions" but are perpetrators of a system where highest paid people make hundreds of times more money than the lowest paid people.

I see you have been a sports columnist or blogger or some such thing. Jim Calhoun justifies his salary by how much money he brings to the University of Conn. I don't care how much money he brings in, a system where a university pays millions more to its basketball coach than to its university president is wrong. I realize that my position is ignoring economic reality and there is very little that will be done about such things in the near future.

There is something that is being done about the screwed up economic model that brought us AIG. People complaining about corporate compensation will hopefully have more effect on the outcome than do people like you who are more interested in perpetuating the present system for their own self serving reasons.

[Brian Ross - Huffpost Blogger]

I think you missed the point about the Taco Stand thing. There are a lot of people who worked at AIG, Morgan Stanley, etc. who walked away with nothing, There are people who make million dollar bonuses in those companies who are NOT MANAGEMENT. Brokers, market makers, and the like do not have input into the larger corporate decisions that affect them. They make huge commissions based on the business that they generate. Many of them found themselves in the crosshairs of Congress for no reason other than that they worked at these places. If they worked across the street, no harm nor foul, and they would have had the same lack of responsiblity for policy, but their wallets would be as fat as their counterparts across the street.

I should add that many of these people gave back the money when Treasury asked for it, even though they could not have changed a thing in the way that these companies handled themselves.

[bandit09]

I did not miss the point of the taco joint guys.

AIG worker bees made huge unconsciounable commissions. I don't care how much business they brought in. Had their company been left to its own devices it would have failed and they would not have gotten anything. The US government bailed them out only because these companies failures would have sent us into Great Depression II.

I understand these people had contracts and public opinion forced many of them to return the commissions. In my mind when the govt bailed them out it became force majeur and all contracts were off at that point. Hurricane Katrina if you will.

These people complain that they worked for nothing but their commission. That is only part of the truth. What is more true is they were working to keep a system afloat where they would continue to earn millions in salaries and commisssions so they could continue vacationing in St Moritz and support the rest of their lifestyle.

[LeonBNJ]

Perhaps a good example would be those who work for the profitable 90% of AIG that wasn't involved in the junk that has brought them down. They too could lose their bonuses (although they should share some cuts as well for the benefit of the overall company). When corporate jets get grounded or orders for them cancelled in a public relations butt cover, 100's of people with good paying jobs operating, maintaining and making them were gone.
Yes some excess need to be cut, including some corp planes, compensation and bonuses, but do it reasonably, not as a knee jerk reaction to the pesants.

[bandit09]

As one of the peasants, send me some money.

[roland123]

Uh, I''m pretty sure the taco joint wouldn't be bailed out and propped up by the government, so the worker most definitely wouldn't be getting paid because the business would fold.

pathetic

[Brian Ross - Huffpost Blogger]

When it comes to being EMPLOYED by someone, roland, it doesn't really matter whether you sling burgers or you broker billion dollar deals. Your contract is your contract, was my point. If you did something to effect the policy at the company that created the situation, you should be accountable and forfeit any bonuses. The people who worked below the executives and administrators are, in many caes, the ones whose compensation comes when they deliver a service or bring in a deal. To ding them in the name of keeping you happy is just as wrong as allowing upper management to create the programs that lead to the high-risk debt and derivatives problems.

[roland123]

You think taco stand employees have contracts? If the place goes under and the sheriff locks the doors before they get paid, they wait in line to get pennies on the dollar.

Do you think they would have received the bonuses had the company been forced into bankruptcy?

I'm sorry, but I refuse to weep for people who, for years, have been collecting salaries and bonuses inflated by artificial, imaginary "profit."

[customgreen]

I think you are missing a critical point. Do you really think that a financial tycoon needs to press the flesh to get the deal over the other guy? Hell no, with technology there is no reason for person to person. Video conferences, fax, e mail, IM all make it a very small world. The real reason that they keep the corporate jets is tone deafness. If you are a company that is going downhill on an express train the very first thing you do is eliminate all the non essentials. Jets are a non essential. When Iaacoca took over Chrysler in the 70's and saw what a mess the previous head left the company in (he was an acountant Mr. Ricardo) he cut non essntials. The first thing to go was the Corporate Gufstream. He understood what real sacrifice meant. As far as compensation goes, just because you are a lower level employee that doesn't absolve you from wrong doing. Everyone in the financial world knew that the process that was happening was wrong. You can't absolve yourself by saying..Hey I am just a manager, they CEO's are the real bad guys. Corporate responsibility needs to be out in front and that means an intense microscope. Average Joe is struggling anymore he is commiting suicide. People are desperate and when they see some rich pr*** getting a 2 million dollar bonus for helping sinking their world they want some accountability. I see no problem with these people sacrificing.

[Brian Ross - Huffpost Blogger]

Interesting, but I would disagree, respectfully, on a couple of key points.

Your Iacoca example is not really a good one. Chrysler may have lost a Gulfstream, but they made liberal use of fractional jets in its place, which, all things considered, is a small net savings. You can have a need to put a manager on the ground in three cities in one day on a particular product roll out, let's say. That is not generally possible on a commercial flight system that operates with the types of delays that are common. There are still a lot of deals, particularly in mergers and acquisitions, where you can't phone it in, and even video conferencing will only get you so far. I see increased use of those technologies already where it makes more financial sense to hold a meeting that way. When the chips are down, though, sometimes an appearance by a CEO or by a merger team from a company may mean the difference between a firm getting or losing a deal.

[Brian Ross - Huffpost Blogger]

As for the people below, I was not referring to managers. They would still be management, and therefore accountable. On wall street, there are a lot of guys who make market and do other kinds of business booking who are not management and the majority of whose income is earned by briniging home certain target numbers. Guys like these get caught in the crossfire between Washington and their bosses, which is wrong. They did nothing to deserve being singled out save deliver enough revenue for their companies to deserve compensation. I would hope, green, if you booked $100 million worth of business, and were not a manager, that you would be able to keep a $2m bonus for your hard work

[BARRISTER]

A wise cool head honestly setting out the facts without hysteria. How we wish there were more such in the Media.