The Curse of Giants | Part II

TitanicAn Essay by J. Richard Finlay

The blind eye which shareholders and analysts too long cast upon the abuse of excessive CEO pay is now being turned to the recent trend of monetizing ethical abuse. Who knows when the tipping point might come in the ever-widening wealth gap where capitalism is finally seen to cross the river of moral conscience and moves from being trumpeted as a source of social progress and individual incentive to one of middle class tyranny and public opprobrium. 

History is littered with the bleached remains of fallen giants, even of the corporate species. Nortel and BlackBerry not long ago led their industries. Today, one has vanished and the other is quickly disappearing.  Once legendary Bear Sterns opened its Wall Street doors in the 1920s and survived decades of ups and downs, including the market crash of 1929, the Great Depression and a World War. But it could not survive the blunders of its CEO and board in 2008.  The brokerage behemoth Merrill Lynch was founded at the outbreak of the first World War in 1914. Today it is barely an appendage of Bank of America after its subprime meltdown presided over by a clueless CEO who cashed out with tens of millions before the fall.

Some years ago another Canadian institution, Royal Trust, collapsed under the slumbering eyes of inattentive directors and stunned regulators.  Livent was North America’s largest publicly traded theatrical entertainment company. But its most artistic accomplishment came in the form of the highly creative, but decidedly unlawful, accounting engaged in by its Toronto-based founders Garth Drabinsky and Myron Gottlieb, who both swapped the company’s swank Manhattan condo for sentences in a Canadian prison.

General Motors had a hammerlock on the North American auto market that was thought to be unbreakable, until it limped pathetically to the wicket of government assistance and declared bankruptcy.  The “new” GM is today being rocked by the lingering effects of a culture that dismissed the risk of customer deaths from defective ignition switches as an acceptable business cost. Microsoft, once the dominant force in consumer software to the point where it actually fixed prices, has been reduced to selling software for competing Apple iPads on the rival iTunes store as consumers abandon its signature Windows software in droves.  And to the pantheon of vanished business icons, Bear Stearns and Lehman Brothers are now fully inducted, as are their former leaders, Jimmy Cayne and Dick Fuld.

In situations like these, and in many others, when disaster strikes the board of directors typically professes surprise and claims to have no idea what could have caused it.  Memo to board secretaries everywhere: Have a full-length mirror installed in the boardroom.Read more

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