America’s Endless Capacity to Reward Failure

Please God give me the luck to enter the upper echelons of the American elite - the upper, upper crust where normal rules don't apply, where illogic reigns, where failure doesn't have consequences, only out-sized rewards. Please give me the luck to fail splendidly one day (even to bring a major company or a nation itself to near ruin) and yet get nothing less than the platinum parachute that a lucky few deserve:

  • Stan O'Neal, CEO of Merill Lynch, recently led the bank to take a $7.9 billion write-down because of bad deals in the sub-prime market, resulting in a $2.3 billion loss, the worst loss in 93 years for Merrill. As he began to feel the heat, O'Neal secretly started looking to sell the bank to Wachovia, a deal that could have personally netted him an estimated $250 million. Instead, the board of directors ousted him last week and he got to walk with $161.5 million in securities and retirement benefits, the fifth-largest exit-pay package for a U.S. executive. It's good to be the king.
  • As the subprime mortgage market melted down this summer, James Cayne, the chief executive of Bear Stearns, was nowhere to be found. In this midst of the crisis, two of the bank's hedge funds collapsed. But, according to The Wall Street Journal, Cayne was out of town for ten days and incommunicado. No cellphone. No Blackberry. Nothing. Where was he? Playing in a bridge tournament in Nashville (and it's alleged by the Journal that he has a penchant for smoking pot at such tournaments). Fortunately, his team placed in the top third of the competition, and he gets to keep his highly lucrative job. In the meantime, Cayne let Warren Spector, the company's President, take the fall. And Bear just announced that it's laying off 2% of its workforce. It's good to be the king.
  • Don Rumsfeld, the former Secretary of Defense, used the Iraq War as a proving ground for his theories about how the US army should fight the modern war and defend itself against the unknown and the unexpected. Rumsfeld's mantra was to keep the armies small, mobile and high-tech. And that's what we did for four years in Iraq, despite mounting evidence that we had too few troops on the ground. Rumsfeld, who could never adjust his theories to the realities in Iraq (see this piece in the Armed Forces Journal), eventually got forced out, leaving behind a mess that will consume the US for a decade or more. What's the fallout? Months later, Rumsfeld gets Stanford's seal of approval. In September, Stanford's Hoover Institution announced that he will join as a "distinguished visiting fellow" where he will participate on a task force of scholars and experts focusing on "issues pertaining to ideology and terror" in a post 9-11 environment. It's precisely the same flawed vision that landed the US in a deep hole that the Stanford-affiliated think tank is choosing to honor. Once again, it's good to be the king.

Amen.

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  • Carol A says:

    People in the USA should not feel too badly about this – it seems to be all too common in other parts of the world. The worst part of this behaviour is that the corporate answer when things start going bad is to start laying off employees, not the ones at the top who caused the problems, but the ones at the bottom of the heap. I mean, it was the junior office workers who caused all the problems, right?

  • Matt says:

    This blog has some fascinating stuff. I really enjoy it. However, every now and then I get something I didn’t subscribe for: political or social commentary from the editor. I subscribe because it is a “guide to smart media.” Please stick to your unique value proposition. Thank you.

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