TOP TALENT

Posted in Rants on February 7th, 2011 by Ed

I am about 3/4 of the way through Overhaul by Obama appointee and "car czar" Steven Rattner. It's worth reading on a number of levels, talking extensively about the many factors behind the decline of the auto industry, the nightmare of working in Congress, the bigger nightmare of watching everything die in the Senate, and the politics of a hostile anti-regulatory climate. Most interesting, however, is the fact that he pulls no punches regarding how much of the auto industry's trouble was/is of its own making. Free trade and increased competition certainly did a number on the Big Three, but that shouldn't obscure the fact that these companies were run terribly. Like, epic bad. A group of people randomly selected from the phone book could have done as well. Maybe better.

Anyone who follows the domestic auto industry even casually already knows this. To know the name "Rick Wagoner" is to know exactly what kind of ass clowns were making the decisions that drove the world's largest manufacturers into the abyss. Although Rattner does not say it (being a finance / Wall Street guy himself) I think this is a very important point to bear in mind in an economy with such staggering levels of income inequality. Simply put, why do so many of the Upper Management caste make so much money when they are so egregiously terrible at their jobs?

The whole argument behind bloated executive compensation is that companies must pay big in order to attract the very best people. In reality we find that many of them – and Wagoner will be the poster child for years to come – are world class idiots. There is no other way to put it. There is no candy coating on an objective assessment of his performance and that of the other GM/Chrysler top brass. If the one trick they seem to have learned in their expensive educations (cut costs + something something = PROFIT!!!) doesn't work they are dumbstruck. They stand around like deer in headlights until someone fires them. GM paid Wagoner $23 million as a severance package, and yet the guy seemed incapable of grasping concepts that an undergraduate would probably get. He knew less about the auto industry than the average car blogger.

If executives get paid so goddamn much to ensure that only the finest talent fills those important positions, why do the companies large enough to take down our entire economy keep failing so spectacularly? With the exorbitant compensation packages offered to executives at AIG, Bear Stearns, Lehman, GM, every major airline, and dozens of other failed Fortune 500 companies in the past 20 years, why could none of them attract "talent" talented enough to recognize the imminent failure of those billion dollar enterprises?

So much of it boils down to the dominant ethos of the post-New Deal economy in this country – IBG, YBG (I'll be gone, you'll be gone). Individuals in these positions have no long term view of the health of the business, the economy, or anything but their own personal bottom line. Just do whatever enriches us today and don't worry about the consequences. By the time the company is either insolvent or begging for a bailout, I'll be gone and you'll be gone. Honestly, I doubt Rick Wagoner and his nine-figure net worth care much that the economy has gone to shit and his former company is now on life support. He and the many others like him on Wall Street and throughout corporate America are doing just fine right now having been lavishly compensated for "talents" that appear in hindsight to have been limited to lining their own bank accounts and making stupid decisions.