This blog contains posts and comments written by students in Dr. Tufte's economics classes at Southern Utah University.
3/31/2009
One down, hopefully more to come
The evening news two days ago brought what I believe is encouraging news to the government bailout plan. GM CEO Rick Wagoner was forced out of the company by the Obama Administration as part of its agreement to loan the failing car company more money. Finally, after billions of dollars already handed out to companies such as Ford, GM, Chrysler, AIG, etc. Someone is being held accountable for the mistakes that helped cause such financial problems within these organizations. I just hope the same thing happens with AIG, who has infuriated the public and congress for handing out $165 million in employee bonuses since first receiving government assistance. No employee, especially CEO’s, CFO’s, and other top tier managers who are directly responsible for the success or failure of their companies should be getting million dollar bonuses. While bonuses were not a deciding factor at GM, I am happy that the government is finally holding people accountable for poor management. You can’t give some who’s lost billions of dollars due to poor choices another couple billion in aid and expect them to suddenly be much smarter in their management decisions. Hopefully this is just the first of several “boots” of failing company’s managers. You can read about Rick Wagoners forced resignation here: http://abcnews.go.com/Business/wireStory?id=7204767
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4 comments:
It is great to finally see people held responsible. I wonder why now was the time to do that and not earlier. With respects to the $165M in bonuses, that is business. Top managers get huge payouts so I don't know why this comes as a surprise to anyone those bonuses are being paid. It is also interesting to look at the math--$165 Million out of $173 Billion--that is only .095% of the money they received. We really ought to be concerned with where the rest of the money has gone and where the rest will go (much of the money has gone to other financial institutions). This link has a diagram showing where most of the $173 Billion has gone. http://flowingdata.com/2009/03/20/aig-bailout-where-173-billion-went/
It is impressive that the government is making a stand and forcing the company to start to look at what has made them fail. GM has made steps by selling different chains to slim down a bit, but this is going to cause some big changes to happen hopefully for the better. Maybe the government should have forced a few other companies to make some changes too.
I agree that it is nice to see someone held acountable for years of mismanagement and poor decision making, but I'm guessing that this is more show than substance. Unitl these ceo's come out and personally state remorse and admit guilt, I'm sure they have no problem being a scapegoat while enjoying time off in Aruba.
I am no fan of Rick Wagoner, and GM has been on my bad side since I was a teenager.
I also think if the government is going to get involved in GM, that they should have some say in who runs it.
But, having said that, there's a board that could've fired Rick Wagoner and didn't. They're either incompetent, or they know something that we don't.
Then there are hostile takeover investors like Kirk Kerkorian. They did want Wagoner out, but were never able to convince enough people to go along with them. Both of those parties are either incompetent or they know something that we don't.
Then there's the competition that could've taken over GM in a friendly way - like Mercedes did to Chrysler. They didn't: either they're incompetent or they know something we don't.
All of these parties had a shot at Rick Wagoner - who had one of the longest runs at the top of GM, and who while no one says he's horrible isn't a "master of the universe" either. And yet, all these other parties are either jointly incompetent, or there's something deeper going on here.
My worldview is that you just can't have everyone being incompetent at the same time. If that's the case, than firing Rick Wagoner just isn't that great an idea.
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