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May 16, 2009
The Facts
Qualifiers from the life insurance industry were recently approved for receiving federal TARP funds. Of the six most recently approved, one is now turning down the money. Ameriprise Financial had previously submitted an application for the funds, but lost interest when certain conditions were placed on the loan.
Jim Cracchiolo, chairman and CEO of the company, said “while we appreciate Treasury’s approval of our application, we have elected not to accept funding. We have carefully evaluated our current position and expectations for the future, and we are confident that our current capital position and access to potential additional funding sources are more than adequate”. Other companies are still deciding whether or not to accept the money.
Like the banks, the insurance boys are concerned about the government placing limits on executive pay. There are other concerns, but pay limits seems to be the driving force behind declining the offer.
My View
Many years ago I was associated with a company that was in dire financial straits. The company was hocked to the hilt and it was obvious they would fail. The owners brought in some advisors to discuss alternatives for survival. It didn’t take long to realize the advisor’s intentions were to take over the company for them selves, so they were dismissed. But what has stuck in my mind are the extreme measures the advisors told us we must take in order to survive. One example was as follows: “When you are down to your last lead pencil and you come to me for a new one, you will need to bring your used pencil. If the pencil is more than two inches long, you will not be given a new one”. The company closed down three months later.
The decision makers of the companies that have received TARP money or been offered TARP money must make decisions based on sound judgments. That sound judgment must have the company’s overall best interest in mind. If not, then the decisions are not sound. And it appears most CEO’s are making decisions based on what got them in trouble in the first place — greed.
Of all the things that can affect a company’s survival, the amount of money paid to executives is not a factor as they and their ardent supports would have us believe. Common sense tells us that. You must remember that in order to get those ungodly pay packages these executives have to convince the public otherwise. If unsuccessful in their efforts, they have to accept a reasonable pay. So they are not going to give up on that idea. They have nothing to loose by fighting the fight and every thing to gain if they win.
If a CEO makes a decision to accept or not accept financial help based on whether or not his pay package is affected, then one of two things are at work — the company really does not need help and they are simply looking for free money or the CEO is willing to let the company fail for totally selfish reasons. Therefore, as for as we the taxpayers are concerned, the offer for help should be immediately withdrawn if the CEO even balks at the idea of limited executive pay. PERIOD!! But we the taxpayers have no say-so in the matter. Our only purpose in life, as far as they and our elected and appointed officials are concerned, is to supply the money.
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