Wednesday, October 8, 2008

Corporate arrogance

AIG, you know, the huge insurance company that received $85 billion of our money to stay open (that's right, $278 from each and every man, woman, and child in the United States), is now defending itself for a corporate event in which they spent $440,000 at a "posh California retreat." Included was $200,000 for hotel rooms and $23,000 for spa services. Their defense is that the event was for independent life insurance agents, and "no AIG executives from headquarters attended."

Here's what AIG fails to realize: instead of being accountable to 14 directors, or some large number of shareholders, they are now responsible to 300 million owners, each of whom has some stake in the decisions their executives choose to make. And these aren't directors, who roll over and play dead when the CEO walks in the room, or shareholders who are given few real options in governing the operations of the company, these are 300 million ticked-off people who have seen billions of their dollars committed to propping up a corrupt system, and are really unhappy about it. AIG, and other companies who are being "helped" through this current crisis, may want to think about that before cutting a check for spa services.

More importantly, I would like to think this would put the conservative argument about privatization to rest once and for all, but it probably won't. We've been told for decades now that moving vital services to private industry is a good thing, because the profit motive provides incentives for efficiency that just don't exist in the public sector.

But here's the deal. Whether someone is an Assistant to the Associate Secretary of Defense in charge of procurement, or a corporate special events coordinator, it's all OPM (Other People's Money). As long as there is no direct connection between payout and paycheck, there's an incentive to spend with minimal justification. It's true in any government agency, it's true in any real business. (I had a lot more to say on this subject about three months ago.)

Will we see more accountability from the companies being helped? I don't know, but I'm guessing that specific cases will arise that will attract attention. If I were AIG, or a major financial institution, I would be seriously rethinking my "charitable and community" contributions and sponsorships. Should Bank of America really be spending thousands of dollars on this Sunday's Chicago Marathon? Maybe, maybe not, but all of these companies need to start thinking about how they might justify these expenses to their newest shareholders, the American people.

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