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Paul Allen claims in his book that Bill Gates tried on more than one occasion to reduce Allen’s relative ownership interest in Microsoft. Of course, the veracity of Allen’s explanation can be questioned even if the factual changes in percentage terms are a matter of public record. In focusing on whether Allen’s explanation is credible, The Wall Street Journal overlooks more fundamental category mistake in reckoning ownership as a species of compensation. Such an error may reflect a hypertrophy involving the value of money in American society—an exaggeration to which the journal may be susceptible as the foremost mouthpiece of American business.

The Wall Street Journal reports that Paul Allen has some critical things to say about his co-founder of Microsoft, Bill Gates. In general, Allen asserts that Gates tried more than once to reduce Allen’s relative financial ownership in the company. Whereas the journal focuses on the veracity of Allen’s claims—ultimately questioning the man’s credibility—I find in the story a case study on the difference between ownership and compensation for labor and on corporate leadership. I contend that the difference may often be minimized in business as well as by society, while particular CEOs are unduly projected onto the societal stage essentially as societal leaders.

Allen also claims in his book that in the mid-1970s, when he and Bill Gates were two college dropouts were based in New Mexico, Gates asked for 60% of their partnership because of his greater contributions to the creation of software for running the BASIC programming language on an early PC, the MITS Altair 8800. Allen says he had assumed that their partnership was evenly split, but he agreed Gates' request anyway. Several years later when Gates and Allen established Microsoft as a formal partnership, Gates asked to change their respective shares in the business to a 64-36 split, a demand to which Allen again agreed. Furthermore, in the early 1980s, Gates rebuffed Allen after the latter asked for an increase in his own Microsoft shares after his work on a successful Microsoft product called SoftCard, Allen writes that he was deeply disappointed in Gates’ response; he had known Gates since they were students at a prestigious private school in Seattle. "In that moment, something died for me," Allen writes. "I'd thought that our partnership was based on fairness, but now I saw that Bill's self-interest overrode all other considerations. My partner was out to grab as much of the pie as possible and hold on to it, and that was something I could not accept." Allen recounts that he sucked it up and thought, "OK…but one day I'm out of here." 
                                       
                                    Bill Gates and Paul Allen, co-founders of Microsoft

                                       By Doug Wilson/Corbis, printed in The Wall Street Journal 

Furthermore, Allen asserts that in 1982 he eavesdropped on a discussion in the Microsoft offices in Bellevue, Wash., between Bill Gates and Steve Ballmer, who went on to become the company's CEO. Allen claims that he heard the two men talking about his recent lack of productivity and how they might dilute his equity in the company by issuing options to themselves and other shareholders. Allen said he burst into the room and confronted the two men, both of whom later apologized to him and backed down from their plan. "I had helped start the company and was still an active member of management, though limited by my illness, and now my partner and my colleague were scheming to rip me off. . . . It was mercenary opportunism, plain and simple." If so, then the vaunted veneer of societal leadership that Bill Gates has attained by virtue of his achievements in software, sheer wealth, and philanthropy may be a projection of something more than the man, and thus a reflection of societal values.

Of course, there are two sides to squabbles, and this case is no exception. Gates's attempts to lower Mr. Allen's stake in the company reflected concerns that Allen wasn't working hard enough and wasn't commitment to the company, say people familiar with the relationship according to the journal. That was one reason, these people say, why Gates put a provision in their first partnership agreement that would allow him to buy out Allen if he thought there were "irreconcilable differences" between the two men. Allen refers to the provision but does not include a reason for it, which is telling. Furthermore, third parties with knowledge of meeting to which Allen refers claim that Allen puts himself in meetings that he did not in fact attend. If true, Allen’s claims regarding Gates could also be doubted, though there is factual support for the changes in ownership percentages even if not for the reasons.

If Gates was putting more effort into the business, an argument based on that could be made that he should receive a higher percentage of the ownership so he would receive more dividends. However, it could also be argued that ownership, unlike compensation, is based on having founded a business (or having purchased the rights to such a basis by buying stock-ownership). Gates may have conflated compensation with ownership in demanding a greater percentage of stock, essentially regarding the latter as compensation in treating dividends as a form of salary. Such a conflation may distort property ownership in a way that minimizes the fundamental difference between an owner and an employee. Of course, an owner can work as an employee of his own business, but the two roles are distinct. Gates’ mistaken notion of ownership may have been formed out of a society that over-values executive compensation, and more generally money. Consider, for example, the much higher compensation packages that American managers receive relative to their European colleagues. Relatedly, the ratio of executive to “lower level” employee compensation in the U.S. is much higher than in the E.U.  Such differences point to differences in societal values, and such values can, if exaggerated, lead to category mistakes. So Allen’s complaint against his boyhood friend and business partner may actually be a critique of a much larger problem in American society.

Click to add a Comment or Question (and View Posted Comments) on Bill Gates and Paul Allen at Microsoft and the wider implications for business and society. 

In terms of corporate governance setting executive compensation to align the employee's incentives to the financial interests of the company even beyond his or her term of employment, it is apparently quite easy to go overboard. This can include severance packages for top managers--packages that may not reflect the performance of the executive. At the very least, it would appear that corporate lawyers are not writing very good contracts. Worst yet, insider board-management friendships may mean that the gap between achievement and severance pay may be intentionally wide. Sadly, the innocent non-management investors whose interests are not adequately represented in the board room pay the price, even if they don't perceive it on an individual level.  Even so, the lack of fairness alone calls for an end to the insider luxuriating.  The case of BP, whose rig exploded in the Gulf of Mexico in 2010, provides a good case study.

BP’s CEO Tony Hayward lost his CEO position—or he wanted out—at the tune of $1.6 million per year to be a non-executive board member at BP’s Russian joint venture. In addition, he could draw on his pension valued at over $17 million  and could keep all of his BP stock options that could be worth millions if BP bounces back. At the time of the announcement of his stepping down and BP’s 2010 second quarter loss of $17 billion, BP Chairman Carl-Henric Svanberg said in a statement: “The BP board is deeply saddened to lose a CEO whose success over some three years in driving the performance of the company was so widely and deservedly admired.”  The statement evinces either an attempt at PR or a state of denial.  Hayward became CEO promising to put safety first.  To say that he succeeded in his own priority would be to ignore facts.

In testifying before the investigative subcommittee of the US House Committee on Energy and Commerce a month after the explosion, Hayward stuck to his script in saying he is for safety.  “Since I became CEO, we have made a lot of progress [on safety],” he said. ”We have focused like a lazer on safety.”  When asked about the reports from company employees of unsafe corner-cutting at Deep Horizon, Hayward replied that the company’s investigation is in progress. ”I haven’t drawn a conclusion,” he said to Rep. Waxman the full committee’s chairman. Waxman replied, ”you are stonewalling and evading responsibility.”  Challenged by Rep. Peter Welch to point to even one bad decision made by BP, Hayward said, “I’m not able to draw that conclusion at this time.” Asked by the subcommittee’s chairman, Rep. Stupak, if it was improper for BP to have overruled the contractor’s recommendation that BP’s intended changes to the blowout preventer not be made because, as Hayward himself had written, the equipment is the failsafe mechanism (i.e., if it fails, nothing else can stop the oil from gushing out), Hayward replied, “the blowout preventer is the failsafe mechanism.”  In spite of BP’s role in the disaster, Hayward wasn’t giving anything away in his testimony even though being more forthcoming would have helped the committee write legislation to prevent such a disaster in the future. Another representative asked Hayward for his opinion on skipping tests at Deep Horizon. Again, he said he could not answer the question until his company’s investigation was complete because he wasn’t there.  “Because you lawyer told you not to answer?” the representative asked in reply. It is not beyond reason to suppose that Hayward’s lack of opinion on matters pertaining to his business is part of a larger effort of the people at BP to evade the charge of negligence, which would increase the company’s financial liability. In other words, BP’s management was still acting in their own interest, as well as that of the BP stockholders—even in the midst of culpibility for a major disaster. This can be seen in the red-tape in BP’s claims process.  In spite of the company’s role in the disaster, the management was oriented to determining “legitimate” claimants.

Such conduct is similar to that of the banks that fought more regulations in the wake of the bank’s own culpability in the financial crisis of 2008.  Even amid the culpability, the banking lobby owned Congress (according to Sen. Dick Durbin).  In treating the fiduciary duty to the stockholders as absolute, the banks and oil companies evince not only a reductionism in the face of a larger business environment, but also an apparent selfishness that borders on a personality disorder.  Even if such managers are vaunted by their stockholders, there is the question of whether corporate governance has a susceptability to rewarding managements that screw up.

Hayward claimed at the hearing that he set the tone from the top at BP (in stressing safety). Given the pattern of continued safety violations, including those at Deep Horizon, his function doesn’t appear to matter much.  Accordingly, one representative asked him what his bonus would be for 2010.  Apparently his bonuses were not always in line with the profitability of the company.  Having made safety his priority is particularly telling, given BP’s continued track-record. In terms of corporate governance, if a management of a company under which shirking safety has resulted in a disaster even as the CEO has made safety his priority is not removed by its board, the owners of the company have a legitimate grievance against their board members. It is difficult to say whether Hayward was pushed out or wanted out. He had become public enemy number one in the US.  Even if he was ousted, the financial conditions of his ouster were out of sync with the results of his “leadership” (e.g., a $17 billion loss, and a huge contingent liability in the Gulf).  The disjunction between executive compensation and the executive’s results reflect very badly on corporate governance itself.   For any BP stockholders bemoaning the drop in the company’s stock price and the deminished or delayed dividends, removing the strong bias in corporate governance itself that is in favor of incumbant managements (e.g., proxies, proximity to the board, the business judgment rule) might well be a priority in the wake of the disaster in the Gulf of Mexico.

Source: http://www.msnbc.msn.com/id/38423486/ns/business-oil_and_energy/

The near credit-freeze that came to a head in September of 2008 meant that even in the ensuing recovery, managers at American companies would be hesitant to spend their companies’ cash reserves. $838 billion for S & P’s 500 Index in March, 2010, was up 26% from March, 2009. Accordingly, managers have been hesitant to hire. From late 2007 to late 2009, payroll employment dropped by nearly 8.4 million by July, 2010; only 11% of the lost jobs were regained. Robert Gordon, an economist at Northwestern University, points to the shift in executive compensation more in the direction of stock options. This arrangement gives managers more incentive to cut costs more in recessions and hold off in hiring in recoveries so that profits might surge first. However, one could point to the mandatory delay stipulated in some executive’s options to buy stock as giving them an incentive to look to the longer term.  Lynn Reaser, another economist, points to the lack of available external credit even more than a year after the financial crisis of 2008. She argues that managers conserved cash because they couldn’t rely on outside financing. However, firms like Apple, Yahoo, and Google are debtless and doing very well, so I would question the premise that outside credit is something to be desired.  Managers betting on leverage typically allow their irrational exuberance to distort their debt-to-assets and debt-to-profit benchmarks. If managers have become more averse to debt, maintaining higher cash reserves is not a bad thing, even when little interest is made on the cash. Once the new level is achieved, then only replenishments would be needed, so the diminishment of a firm’s investing in equipment or new hires would be temporary—to build the reserves and then to keep them stocked.  Drawing on their firm’s cash reserves rather than asking a bank for a loan or selling bonds proffers more freedom and self-reliance—qualities that are valuable even though they are difficult to quantify.  So we might view the recovery from the financial crisis of 2008 as a systemic correction in which managers were weened off their reliance (i.e., addition) on debt. Of course, the key lies in holding to the correction rather than falling off the wagon. Perhaps there should be an AA for debt-ridden businesses.

Source: Robert J. Samuelson, “The Big Hiring-Freeze,” Newsweek (August 2, 2010), p. 26.

One of the perks of corporate office is the presumption of stature and legitimacy.  In other words, the general public typically brings all sorts of assumptions along when reading about the behavior of a CEO.  I contend that the reality of the person behind the curtain is far different from what is portrayed.  That is to say, at least with respect to how CEO's typically want to be viewed in terms of corporate responsibility, I suspect that the reality in the executive suites is far different.  In fact, the reality can be downright childish.  Richard Fuld, who was the CEO at Lehman Brothers, may well have behaved like a six year old when upset. Had the general public been given a view of Fuld's antics, we would have shaken our heads not simply out of utter disbelief that such immaturity could be in such a position, but also in recognition of the gap between public and private persona.  Such a gap is dangerous in a republic wherein the electorate is to hold the government in check (and the government in turn is charged with protecting the public and the market system itself from being compromised from firms too big to fail). 

One might argue that Richard Fuld was an exception--protected at Lehman by an enervated or compromised corporate governance system. One could point as well to Mark Thain, the CEO of Merrill Lynch, who in over-extended early morning merger talks with Ken Lewis, the CEO of Bank of America, was preoccupied with the matter of executive compensation. Merrill Lynch would have gone bankrupt at the open of business that morning, and Thain was pressuring Lewis to sign off on large bonuses for himself and his colleagues at the defunct Merrill Lynch. Even so, one could argue that Thain simply evinced a particularly selfish and greedy CEO who didn't have a good sense of priorities. What, then, if a group of Wall Street CEO's shrunk from responsibility even when the financial system itself may have hung in the balance?  It would not be a case of a rogue CEO acting narrowly in contradistinction to the example of J.P. Morgan in the panic of 1907.  Might it be that the age of corporate statemen had passed by the time of the crisis in 2008?  If so, might we be occastioned to taking mice to be men?  Such a practice would point to the need to recalibrate our standards.

On the weekend of September 13-14, 2008 before the Monday when Lehman Brothers declared bankrupcy and Bank of America agreed to purchase Merrill Lynch, Treasury Secretary Henry Paulson and the New York Federal Reserve President Tim Geithner summoned the CEO's of the major Wall Street banks (except Fuld) to the Federal Reserve building in New York City.  Paulson and Geithner told the assembled executives that they needed to figure out how to save Lehman because if that bank were to go under, the financial market itself would stand a good chance of collapsing.  He reminded the assembled CEO's that the process would entail a domino effect wherein their respective banks would fall, one by one in quick succession. Incredibly, the CEOs were in denial on whether their established institutions could indeed fall; the status quo has such staying power. Furthermore, the CEOs were slow to view the viability of the financial market itself as their responsibility, in spite of the fact that their own self-interest depended on it.  Incredibly, on the Friday night and Saturday, they tried to figure out how their firms could profit from picking over Lehman's remaining assets.  On the Saturday morning, they resorted to doing impressions of Paulson and Geithner and betting on a computer game on one of their blackberries (you might want to re-read this last sentence, as it is so incredible that men of such power and responsibility would behave like teenagers--and at a time of crisis no less!).  Finally on Sunday, Barclays offered to buy the financially viable part of Lehman and proposed a consortium funded by the other banks in the meeting to support Lehman's debt.   Even though Barclays should perhaps have agreed to join the consortium, the other banks were on the brink of agreeing to contribute at least a billion each to the consortium--essentially propping up the mistakes of one of their rivals while letting another rival (Barclays) to walk away with the "good" Lehman.  The British government ended up refusing to allow Barclays to buy even the "good" Lehman, making the CEO's look good in comparison.

I have to give the CEOs credit for agreeing to the consortium. They would have been acting as a group as J.P. Morgan had acted in 1907.  However, the antics of the modern day CEOs during the first half of the weekend evince a childish behavior that is difficult to reconcile with men making millions a year and running firms too big to fail.  The financial system hung in the balance and the CEO's of the banks too big to fail were literally behaving like teenagers until Jamie Dimon of JP Morgan exercised some statesmanship (similar to JP himself in 1907) by stepping up to the plate and asking the other bankers to contribute a billion each too.

Diamond notwithstanding, I have to conclude that what we are led to believe concerning the men and women behind the CEO label is far too convenient for them may be inaccurate, and perhaps even manufactured as though a sort of brand management. Just as candidates for elected office are sold like shinny products, we may be under an illusion with regard to business "leaders."  Andrew Sorkin, author of Too Big to Fail, which is my source here (see pp. 330ff), said on a television interview that he (and we) didn't know much about what was going on in the banks during the crisis "because they didn't want us to know" (Tavis Smiley Show, PBS, 11/9/09).  That is, it is no accident, kein zufall, that we will likely remain asleep or ignorant to the nature of the man behind the curtain.  It is in the Wizard's interest that the curtain remain closed from our view. However, thainks to glimpses, we can investigate just who the people are who run firms too big to fail. It can perhaps be said that promotional processes from middle to upper management should be re-examined from outside of the executive suite.  I suspect that the extant promotions are too often simply matters of connections, friendships and power within management, rather than of maturity.

The New York Post reports that 66% of the income growth in the United States between 2001 and 2007 went to the top 1% of all Americans. In 1950, the ratio of the average executive’s paycheck to the average worker’s paycheck was about 30 to 1. By the year 2000, that ratio had exploded to between 300 to 500 to one. Because American executives tend to be paid more in total compensation than do their European colleagues, the ratios are lower in in the E.U. Hence one might ask what is behind the trajectory in the United States. Does a shift from manufacturing to knowledge-based industries occasion a widening economic gulf? Even as late as 2010, the United States still had the largest manufacturing sector in the world. I suspect that the change is not so much tied to the number or even proportion of factory workers as it is to changes in executive compensation. Specifically, in the 1990s stock options took off as a part of such compensation because boards wanted to tie executives' compensation to long term firm performance. Even if the alignment of incentives was strengthened, a side effect was an explosion in the overall level of a given executive's compensation. In other words, if an executive's company did well, so too did his or her total compensation package. This byproduct in turn raised the ethical issue of fairness.  Specifically, is a CEO's work really worth tens of millions in a given year to a firm or to society at large?  Is a CEO's effort really so much more than that of a mid-level manager or an employee in operations?  To obviate any ethical violations of fairness, which human beings seem able to detect innately, boards could reduce the overall compensation packages of executive managers even as the proportion in stock options is increased.  Lest it be argued that the market demands the higher amounts, it could be argued that that market is an oligarchy rather than being competitive. If so, there might be a legitimate role for the U.S. Government as an umpire establishing and protecting competitive markets. Otherwise, an oligarchy can become a self-perpetuating club that functions primarily in the interest of its members, which occasions the ethical objection of fairness.

Source:  http://www.nypost.com/p/news/opinion/opedcolumnists/so_long_middle_class_GoGvE3xMnYXzZpS2OMGZsI

The financial reform bill approved in December, 2009 by the US House of Representatives proposed to regulate the financial industry and keep firms from growing “too big to fail.” The bill can be likened to a ship made of Swiss cheeze, yet seemingly seaworthy. A key intention of the bill was to gain control over the vast market in “over the counter” derivatives by forcing trading onto open exchanges, where regulators can monitor it. Unregulated derivatives were behind much of the havoc that nearly brought down the financial system in 2008, including the subprime-mortgage-backed securities that put many firms underwater and the credit default swaps sold by AIG, the giant insurance company that sucked up about $180 billion in bailout money. The $592 trillion global market in these mostly unmonitored derivatives remained in 2009 among the most profitable businesses for the biggest banks—Goldman Sachs, JPMorgan Chase, Citigroup, Bank of America, and Morgan Stanley—and Wall Street doesn’t want Washington tampering with it. Early versions of Frank’s bill allowed many derivatives to continue trading off exchanges. The bill, Frank wrote, “could be subject to manipulation” by “clever financial firms” seeking to evade a requirement that they trade derivatives on open exchanges.

The story of how those loopholes got into the derivatives bill, even with Frank at the helm and the wind of public outrage at his back, shows just how powerful the Wall Street banking lobby remained nonetheless—and just how complex Wall Street’s financial instruments had become. Many of the key lobbyists were in 2009 in the same gang that helped get us into this mess before, and they were spending huge sums a year after the near meltdown. In the first three quarters of 2009, financial-industry interests  spent $344 million on lobbying efforts, putting them on pace to break all records. This did not include political donations and issue ads. Even more impressive was the lobbying strategy that money was buying. The banks sought to stay in the background and put their corporate customers—a who’s who of American business, including Apple, Whirlpool, and John Deere—out in front of the campaign. “This is an orchestrated, well-funded effort by the banks to manipulate our legislation and leave no fingerprints,” says a congressional staffer involved in drafting the legislation. The financial industry argued that curbs on derivatives do hurt just Wall Street, but also the corporations in Main Street America—the “end users” —that need them to hedge risks.  However, the more custom-made and out of public sight a derivative is, the harder it is for investors—and regulators—to assess its fair value and real risk. This makes it easier for the banks to charge a large “spread” and earn big profits. Frank heatedly denied that he'd been fooled, though he conceded he was catching up on some of the details of the bills he was pushing through. “I’ve become responsible for dealing with a lot of things that are new to me. I didn’t have a great deal of knowledge. I’ve been relying on a whole lot of people,” Frank said. In allowing some exemptions from exchange trading, Frank said he was merely accommodating the corporate end users—not Wall Street—who want to continue doing these private trades in derivatives.  The Wall Street lobby didn’t give up. After Frank had toughened up his stance on derivatives, the lobby tried to redefine what certain kinds of exchanges do.

The money that the industry can use to mollify congressional critics and bolster allies was not the only problem. The problem was even more intractable. Both Frank and his staff (and the corresponding committee in the US Senate) relied on the expertise of the banking industry in the fashioning of regulation for the industry.  Frank admitted that he didn’t know enough to keep on top of the drafts submitted by the industry (and end-users).  Additionally, it was difficult for him and his staff to assess where the industry’s “recommendations” were more “convenient” (meaning self-serving for the banks) than informational.   The financial instruments (e.g., derivatives based on mortgages) were at the time so complicated that congressional staffers who wrote the legislation depended on drafts submitted by the industry itself without being able to adequately screen them for bias.  There is an inherent conflict of interest in an industry even providing information. Therefore, I wonder whether the practice was worth its benefits to congressional staffers. 

The case seems to me like that of having a wolf provide the sketches for the design of the chicken koop, as if the design were an objective plan without any holes.   Even so, without the information from the industry with the vested interest, legislative staffs often do not feel competent to legislate on the complex markets of modern finance.  Indeed, they may not be, given the complexity out there.  But that is not a given.  We miss this point. To reduce the informational asymetry, Congress could direct that the markets be simplified to what they and the regulatory agencies could understand and thus regulate effectively. Opponents of the House bill claimed that the changes ensuing from the bill would limit consumer choice and stunt financial market innovation. Shortly after the House bill passed, President Obama suggested these risks are worth taking.

While applauding House passage of overhaul legislation, the President expressed frustration with banks that were helped by a taxpayer bailout and even as they were “fighting tooth and nail with their lobbyists” against new government controls.  The bank lobbyists spent more than $300 million in 2009 trying to scuttle the bill.  This alone should be enough to shut every congressional office to the lobbyists.  How widespread is the fecklessness!  As the wake of the bill’s passage, Obama said the economy was only then beginning to recover from the “irresponsibility” of Wall Street institutions that “gambled on risky loans and complex financial products” in pursuit of short-term profits and big bonuses with little regard for long-term consequences. “Americans don’t choose to be victimized by mysterious fees, changing terms and pages and pages of fine print. And while innovation should be encouraged, risky schemes that threaten our entire economy should not,” he said. “We can’t afford to let the same phony arguments and bad habits of Washington kill financial reform and leave American consumers and our economy vulnerable to another meltdown.”

So where were our legislators on this point?  Missing in action, most of them.  However much Obama's remarks can serve as a palliative, it must be admitted that the President could have gotten on the banks and refuse to sign a final bill containing deflating loopholes gained by the efforts of the lobby with a vested interest in the legislation.   I don’t believe the President would have risked his re-election contributions from Wall Street by telling Congress to be firmer in resisting the banker taskmasters.  Hence, the U.S. Government is unlikely to take on the very existence of the banks too big to fail even as the most profitable of them quickly returned to risky trading on their own accounts.

Too often, congressional legislators (and the President) wince when it counts, ignoring the inherent conflict of interest in the industry’s warning of Armegeddon.  We need to accept the fact that ery reform has a cost, and that “reform” does not mean “catastrophe.”  If we capitulate to the wolves because there might be a cost otherwise, we miss the greater cost in capitulating.  That cost is not only economic, for it includes the selling of ourselves and our government to the highest bidder and the loudest bully.  When I look around the world, I see fecklessness at home.

By comparison, the British and French states of the E.U. set a 50% windfall tax on ALL banker bonuses within their respective states.   Throughout the U.S., it has been difficult simply dealing with the bonuses of the bankers at the banks that were bailed out; we were so afraid that the credit markets would collapse from a tax or that we shouldn’t touch the other bonuses.  Treasury limited the cash compensation for executives at companies that received the largest taxpayer bailouts to $500,000 and delayed some other payouts. The 25th through the 100th top earners at Citigroup, GMAC, American International Group and General Motors had to take more than half their compensation in stock, and at least half had to be delayed for three or more years. About 12 executives were granted exemptions to the $500,000 cash cap because they were necessary for the companies to “thrive, be able to compete, and not lose key people.”  The European industry-wide approach was stronger, and less apt to result in “talent poaching” that was likely to occur where only TARP reciprients are targeted.

Why is that we were convinced that we couldn't or shouldn’t go beyond the TARP reciprients in limiting exorbitant executive compensation?  Is imposing compensation (in all its forms) limits to protect the market from firms too big to fail really beyond the pale?  Is it really so much a threat to economic freedom? Certainly, it is a legitimate role of a government to protect the viability of the market.  The lack of any enacted windfall tax on bank bonuses (or compensation) in the Congress in 2009 or 2010 intimates the subterranean power of Wall Street in Washington.  Indeed, according to The New York Times, “heeding complaints from banks, the House rejected an effort to allow bankruptcy judges to restructure mortgage payments, a plan that has passed the House before but not the Senate.”  When the same thing happened in the U.S. Senate, Sen. Dick Durbin said publically that the banking lobby owns Congress.  House members also agreed to relax some of the proposed new controls on trading in derivatives. Rather than subject all over-the-counter derivatives to open trading, the bill would have subjected such derivatives only if they were traded between Wall Street firms, or with a major player like AIG. But the transactions between dealers and customers will remain largely hidden, so customers will not be able to compare the prices they are being charged with the prices charged to other customers.  That’s nice for the banks.  We miss this point, paying attention instead to speeches.  Words.

We are not keeping our eyes on the ball, folks; rather, we all too easily allow ourselves to get distracted.  In watering down financial reform, we agree to construct fake walls  on what reform is viable and constructive.  We convince ourselves that we must play inside the pen because insiders have told us that we should. We take harsh words against the pen on our behalf as tantamount to tearing it down.   In actuality, the words are a subterfuge meant to assuage us so we don’t vote differently in the future.  The wolves know that mere words can’t tear down the walls they have directed our representatives to observe.  We have become like herd animals, and our leaders like subterfuges.  It is no wonder that “real change” contrary to the vested interests has been restrained at best.  If a new consumer protection agency is the high-water mark of reform (i.e., banks too big to fail being allowed to go on…even as they have returned to risky trades for much of their 2009 income), we really do deserve the next financial crisis.  …or can a speech going after the financial industry obviate such a thing from happening again?

Sources: http://www.newsweek.com/id/225781 ; http://www.nytimes.com/2009/12/11/business/global/11bonus.html?_r=1&ref=world ; http://www.msnbc.msn.com/id/34380551/ns/business-us_business/ ; http://www.nytimes.com/2009/12/12/business/12regulate.html?_r=1&ref=business ; http://www.msnbc.msn.com/id/34393630/ns/politics-white_house/

By “a society of managerialism,” I mean a society characterized by overtly or tacitly manipulating other people.  Advertising is a notable example; it is so ubiquitous in modern society that I would not be surprised if its inherent manipulativeness has seeped into our psyches as well as human relationships.  In virtually any conversation an ordinary person might have with a person working in an organization (i.e., “on the job”), the employee makes use of his or her organization’s carrots and sticks.  It is so engrained in “organization speak” that we hardly recognize it.

In fact, some private individuals try to appropriate for themselves organizational “perks.”  That is to say, they make demands as though they were representing organizations, and they act like those demands are beyond their ability to alter.  For example, there are individual home-owners who in renting out a room, floor or the house itself  insist that an “application form” be filled out as though it were required.  Such forms typically indicate that a person’s social security number is required (even though it is against federal law for a private citizen or business to require it).  If proof of identity is desired, one could simply show his or her passport or driver’s licence.  That most property owners presume nonetheless that they are somehow owed another citizen’s government numbers is presumptuous; it is particularly rude if the person making the “demand” does not offer his or her own numbers in exchange.  The asymetry evinces a sordid and self-serving attitude that has strangely been swallowed by American society as valid.  Particularly with so many foreclosures, potential renters would be more than justified in requiring prospective lessors to fill out a property assessment form.  Potential lessees could presume their own organizational requirements too!  Information enabling the renter to assess the lessor’s mortgage payments and ability to continue paying would be relevant. Such information would include access to information on the relevant bank account and mortgage, as well as the lessor’s employment (to verify the income amount cited on the form).  If the owner can insist on an application form, a renter would be more than justified in insisting on a property assessment form.  That a given house owner would no doubt be offended by being presented with such a form, even as he or she insists on an “application form,” indicates to me that the typical property owner’s presumption is without foundation and that a double-standard is tacitly assumed.  That such presumption could be assumed as normal, even as “required,” in a society suggests to me that perhaps a managerial society is not as neutral, or “objective,” as it might seem.  In other words, its playing field is skewed—caused by the weight of managerialism and its propensity to overextend itself without any boundary.

In the film, The Matrix, Neo is eventually able to see the matrix for what it is: series of green numbers scrolling up or down.  It is only then that he has power through it.  Likewise, it is only when a person sees the allurements and arrows in an employee’s end of a discourse that the person/customer can fully resist them.  Seeing the attempted manipulation is apt to quickly lead to resentment, for it is presumptuous to assume that so much of one’s communication with another person must involve threats.  In other words, organizational employees tacitly view “outsiders” (and perhaps even their colleagues) as objects to be controlled.  It is as if these objects were feared as potential threats (so manipulations and threats are assumed necessary from the get-go).  There is also an element of unfairness in the mix.  A customer brings only the power of his or her money and word of mouth, whereas an employee representing an organization typically presumes that the potential customer is already under the organization’s policies and procedures.  Besides being presumptuous, the employee’s use of threats (as in, “you have to…”) is not fair play, given that the other person has no such weapons.  It is hardly imaginable that a potential customer would use phrases such as “you have to…”, even after one has become a customer.  It is the lack of symetry that ought to be obvious to us all, yet we tacitly accept it as “normal.”

There is evidence that the carrots and sticks have a rather narrow application with human beings, so much of the effort to induce or threaten may be in vain.  According to CNN, “In laboratory experiments and field studies, a band of psychologists, sociologists and economists have found that many carrot-and-stick motivators — the elements around which we build most of our businesses and many of our schools — can be effective, but that they work in only a surprisingly narrow band of circumstances. For enduring motivation, the science shows, a different approach is more effective. This approach draws not on our biological drive or our reward-and-punishment drive, but on what we might think of as our third drive: Our innate need to direct our own lives, to learn and create new things, and to do better by ourselves and our world. In particular, high performance — especially for the complex, conceptual tasks we’re increasingly doing on the job— depends far more on intrinsic motivators than on extrinsic ones.”

So organizational employees and their task-masters may well be selling their fellow human beings short in presuming that they must be buffeted with inducements and threats from the get-go.  Perhaps these organizational creatures are of the lower sort that function only by being manipulated and threatened.  Perhaps they project their own self-centeredness out onto ordinary, free, human beings.
In any event, we, the free-spirits, should call the presumptuous and insulting employees on their modus operendi.  Interruptions such as, “I am not in your organization so I am not subject to it as you are” or even more directly, “I do not appreciate being threatened” or “I feel insulted being sold to even as I am at the counter ordering” indicate to the employee that his or her antics have been made transparent.  Typically, the employee will feign ignorance of what he or she has been doing, or simply ignore the statements.  However, such responses will only confirm the rudeness—which is really passive aggression.  We are bombarded with organizational passive aggression every day and yet we are so used to it in the organizational society that we take it in without knowing it.  If I am correct here, much that passes for normal in managerialism is really sordid behavior that naturally causes irritation and frustration.

CNN source: http://www.cnn.com/2010/OPINION/03/02/pink.motivation.bonuses/index.html?dsq=38857033#comment-38857033