Pigs at the Trough

As the financial crisis unfolds worldwide, it has become obvious that CEOs and financial experts were overpaid only for creating hype and doing very little actual work. It turns out that fancy degrees are no replacement for common sense.

The mainstream media was to large extent responsible for this as they gave a lot of coverage to their extravagance. Hopefully, this should lead to an end of the excesses and people should start leading a simpler lifestyle.

I always thought that investment bankers were overpaid, after all they are humans and make mistakes like every one else.   With collapse of Lehman brothers and sale of Merill Lynch,  the compensation for bankers will be rationalised in future.

John Rigas was the former CEO and one of the founders of Adelphia Communications Corporation, which at one time was one of the largest cable companies in the United States with millions of subscribers. The company was publicly listed and traded for several years, but had a reputation that its controlling shareholder, the Rigas family, was more interested in using the companies funds for their own luxury.

In 2002, the company was forced to admit that the Rigas family had had taken more than $2 billion in loans that were not recorded on the books. They were charged with hiding billions in debt at the cable company, deceiving investors and stealing company cash to line their own pockets.

Some of the personal luxuries funded using public money include
$13 million to build a golf course in his backyard.
$150 million to buy the Buffalo Sabres hockey team.
$65 million to fund a venture capital group run by his son-in-law.
Spent thousands of dollars to maintain his three private jets.
$700,000 for a country-club membership.
had ordered two Christmas trees flown to New York, at a cost of $6,000, for the daughter of the CEO.
ordered 17 company cars for personal use.
purchase of 3,600 acres of timberland at a cost of $26 million to preserve the view outside the Coudersport home of the CEO.

Partial  list of corporate chiefs who have fleeced their company (and indirectly their customers and employees) with their excesses:

Global Crossing founder and chairman Gary Winnick - $90 million mansion in Bel-Air

Stephen Hilbert, ex CEO of Conseco, an insurance company - house in Carmel, Indiana, with a personal basketball court that’s a full-sized replica of Indiana University’s Assembly Hall

Larry Ellison, Oracle CEO lives on a yacht named Sakura, the 192-foot, five-deck, $10 million floating mansion

WorldCom ex CEO Bernie Ebbers had a yatch named Aquasition, after the company he led hid more than $7 billion in losses

General Electric’s retired CEO Jack Welch - bought a couple of Boeing 737-700s . When the arrangement was made public in his divorce filings , Welch was forced to agree to pay $2 million a year to reimburse GE for the jet and a few other perks.

E*Trade ex CEO Christos Cotsakos -  $15 million loan

One of the reasons that there is very little manufacturing or production in USA are the higher labor costs. The grossly overpaid CEO’s of US companies are one of the reasons why the labor costs remain high.

In all companies, the chief executive has more responsibilities and usually devotes more time on company related work than a junior level executive. However, the time spent is usually only a few hours more than the standard office timings and does not justify salaries which are many hundred times the salaries of an average worker.

Though company policies highlight the importance of “teamwork”, the inflated salaries of CEOs indicate that most of corporate America values the CEO much more than any one else. The pay is often not linked to performance and even CEOs whose contract is terminated make millions of dollars.