“Greed is good” is the battle cry of Gordon Gekko in the movie “Wall Street” and it has been the battle cry of many executives in corporate America ever since.
But it’s just not true. It would be nice if it were.
Taking a concept such as greed, which allows you to put your own interests above those of the people around you and turning it into something that is ultimately good for everyone, is quite a trick.
Dictators have been trying to sell that thought process to people for centuries. But when it is your village that is getting raped and pillaged, the whole concept just seems to go out the window.
Value is another word that seems to have lost some of its meaning lately. When talking about publicly traded stock, executives often talk about adding value as their primary goal.
However, their idea of adding value is often very short term and is narrowed down to simply dealing with the price per share of the company stock.
If you grow up around a family-owned business, it doesn’t take long to realize that there is a lot more to the value of a company than the price per share.
I understand that the average shareholder in a publicly traded company has much less attachment to the company than the average shareholder of a privately owned company, but I just can’t believe that they care only about the price per share, regardless of how it was achieved.
This quest for increase in stock value has led to some pretty bad decisions over the past few years.
Trying to boost profits in a given year versus adding real long-term value has to be part of the reason why so many banks were willing to give so much money to so many people who eventually couldn’t pay it back.
When you add greed to the picture you get incentive programs set up to reward short-term profits with little regard for long term soundness or “value.” It is a recipe for disaster and that is just what we have seen this past year.
Lessons not learned
However, what concerns me the most is how little we have learned from this lesson. The accusations that my generation has a feeling of entitlement are getting harder and harder to fend off as the stories come rolling in.
We learned of AIG taking government money and that they took their top employees on a big trip all within the same week.
We then learned of the Detroit Big Three automakers’ top executives flying their company jets to Washington to ask for money to avoid bankruptcy. The stories will live on for quite some time.
The Wall Street Journal published an article on June 19, “CEOs of Bailed-Out Banks Flew to Resorts on Firm’s Jets.”
It illuminates the apparent personal travel of top bank executives from banks that have taken TARP money. The story mentions Citigroup, PNC, Bank of America, and Regions Bank among others.
In one account, Regions Financial Corp. CEO C. Dowd Ritter appears to have used two of Regions’ jets to ferry his family to a Thanksgiving trip to the Greenbrier Resort. He couldn’t get all of his crew on one jet so they had to take two. The cost of the ferry was estimated to be $17,700.
This story is particularly hard for me to read because I own Regions stock. I own some as a result of five mergers over the years.
The last merger cost many employees their jobs in the name of efficiency and many more have been lost as the market has declined.
During Thanksgiving week last year, Regions stock was trading just under $5 per share, about 13 percent of its value two years ago.
The company borrowed $3.5 billion in TARP money in an attempt to save the bank from bankruptcy only two weeks before Thanksgiving.
But someone thought it would be a good idea to spend $17,700 of my money (as a shareholder I am one of the owners, so that money is partly mine) and the use of two of my jets to take Mr. Ritter and his family on holiday.
I would rather have paid for six more months of work from one of the tellers who had been let go, or taken a chance on a small business loan to a family business that is caught in this economic melée that is no fault of their own.
Something, anything, that at least has the chance of adding value.
The bank issued a statement that any travel on Regions’ planes “either personal or business was within our policy.”
I am glad that we have a company policy for these kinds of things – it shows that someone has at least made an effort to give guidelines for our employees to go by.
But company policy should never take the place of doing what is right. I can’t think of a single shareholder who would be upset to find that Mr. Ritter had reimbursed the company for his trip even if it wasn’t required by company policy.
Scott Reed, CIMA, AIF, is CEO of Hardy Reed Capital Advisors in Tupelo.
Scott Reed/Special to the Journal