1:22 PM EDT, September 25, 2013
One can scarcely blame an appropriately-outraged Rep. Elijah E. Cummings for calling on AIG's Robert Benmosche to step down after the CEO compared the public criticism of the generous bonuses given top finance industry executives to lynchings in the Deep South. It's hard to know even where to begin with the outrageousness of that comparison.
The son of sharecroppers, the Baltimore congressman has a far better perspective on the subject of the Jim Crow era than the average individual. But it shouldn't take any particular degree of sensitivity to find something amiss with Mr. Benmosche's recent assertion to a Wall Street Journal reporter that scrutiny of bonuses to executives at recently bailed-out companies was "just as bad and just as wrong" as the violent repression of post-Civil War African-Americans.
Surely, anyone with even the slightest appreciation of U.S. history, the Civil Rights movement and (here must be the especially tough one for those who toil on Wall Street) the appropriateness of handing out seven-figure bonuses to banking executives months after they nearly brought the economy crashing down around us would never have come close to suggesting such a thing.
Mr. Benmosche later apologized for his remarks about "pitchforks and nooses," calling them a "poor choice of words" and that he didn't wish to offend. Fine. But somehow the thought formed in his head, and it's interesting to observe, too, that his pronouncement wasn't instantly on the public's radar. Even The Wall Street Journal didn't initially take much note of the outrageousness of his comparison, burying the quote deep in the original article.
Five years after the shocking collapse of Lehman Brothers and the revelation of the sub-prime mortgage derivatives and other risky Wall Street practices, it's disappointing to find that not only is the U.S. economy still inadequately protected from this threat but even the core attitudes of the senior executives behind them are little changed. Remember American International Group? The too-big-to-fail company had to be bailed out by the U.S. taxpayer, and members of Congress weren't too wild that, under such extraordinary circumstances, dozens of top executives were getting million-dollar performance bonuses.
Out of the financial crisis emerged the Dodd-Frank reforms, but for all the uproar the passage of that law caused on Wall Street, the actual reforms in question seem inadequate. Even now, the regulations promised by the law haven't come to fruition, including the centerpiece, the Volcker Rule, which is supposed to curb risky trading. Huge international banks are still too big to fail, and that makes the U.S. and other countries vulnerable to economic disruption.
Certainly, we don't begrudge the right of private companies to set appropriate levels of compensation for their employees. And those in the top ranks of banking and insurance are never going to be paid like public school teachers, firefighters or police officers. But surely when those companies have taken actions that have nearly brought the U.S. economy to the brink and required hundreds of billions of dollars in taxpayer bailout money to keep afloat, it's not unreasonable to expect executives to have a little skin in the game, too.
Here's what AIG's CEO and others in his industry are lacking — humility. As Tom Wolfe observed, they regard themselves as masters of the universe. Only such extreme egotism could possibly explain how anyone could equate what AIG went through a few years back under Congressional oversight to the kind of racist terrorism that was perpetrated against African-Americans. That's not some modest slip of the tongue.
But resign? No, Mr. Benmosche would then merely be regarded as having lost his right to free speech, a "victim" of political correctness, and the rest of us might delude ourselves into believing his views were atypical of people in his position. Better that public anger be directed at a more productive cause — at bringing greater regulatory oversight to his industry and to executives who have similarly lost perspective. It's time to implement more Dodd-Frank reforms, including the requirement that executive pay be reported to shareholders as a ratio to average worker salaries.
CEOs are fighting this regulation, but such is the power, at least one hopes, of public shaming. Those who fail to provide the typical employee with enough to live above the poverty line (without taxpayer-financed benefits, that is) can then explain why they, by contrast, deserve to live in thousand-fold splendor. Mr. Benmosche's potential protestations to the contrary, revealing such information to investors does not constitute a "lynching" of any sort, no matter how much genuine embarrassment it might cause.
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