I read this over the holiday and was tempted to comment then, but instead went off to stuff my face yet again (I have no doubt I put on at least 10 lbs in the last several weeks). I came across it again just now, so thought I would express myself…
Angelo Mozilo, Former Countrywide CEO, Claims He Doesn’t Know What ‘Verified Income’ Is
http://www.rollingstone.com/politics/blogs/taibblog/angelo-mozilo-former-countrywide-ceo-claims-he-doesnt-know-what-verified-income-is-20121228
I like Matt’s writing a lot. He is colorful, seems very well informed and, though clearly expressing bias, argues his point of view effectively. However, in this case (and a handful of others like it) I think he is off the mark. He seems to be assuming that these people got into their positions of power on some sort of merit system, thus implying that at one point or another they actually had to be responsible for understanding what they did. I think the opposite: that they got their lofty positions simply because they were born to the right parents, were sent to the right schools and hung out with the right crowd. That one winds up in charge of JP Morgan and another winds up in charge of Countrywide is just happenstance. Thus, according to my thesis, none of these guys actually have to have learned about anything related to the business they ‘manage’ and as such, it is totally plausible to me that they plead ignorance when questioned. No doubt, in my mind, they _are_ ignorant about the nuts and bolts of the companies they ‘manage’. There are, of course, exceptions to any rule, but I suspect that if you dig around you will find the majority of the Fortune 500 companies are managed by people who have never held more than a token ‘real’ job (Romney immediately comes to mind) their entire lives. When one is more successful than another it seems to boil down to who inherited the least dysfunctional company (or who made their inherited company less dysfunctional with their ‘management’) and rarely, if ever, has anything to do with their own intrinsic skill or knowledge (though, I suppose, superior contacts might tilt the playing field somewhat).
I have studied business rather intensively since I was around 13, so I have been following current business events for about 35 years now (of course, I have also studied business history as well). In the generation plus I have been actively watching the daily evolution of business I do think that there has been some noticeable dumbing down, though I want to be sure to point out that positions of power in business have historically _always_ gone to the most well connected (hence born to the right parents, went to the right schools, etc.) and this hasn’t appreciably changed. What I think has changed is that historically there was at least some effort made to educate the ‘up and comers’ in their ‘assigned’ profession such that they were positioned to actually make competent (or at least not incompetent) decisions. Today, given the short average life expectancy of a CEO (around 5 years) and the clear knowledge to anyone who cares to look that in a company of any significant size it takes at least 4 years before any decisions a senior executive makes to have an impact, it makes perfect sense that our current crop of ‘leaders’ wouldn’t bother to learn any details about what they are ‘managing’, it would be a total waste of their time and effort! Families used to be in charge of organizations (often with elements of vertical integration) and while there was a firm requirement that any senior executives be members of the family (sometimes marriage was allowed, but often not) there were generally several candidates and the one that showed the most intellect and interest was generally the one trained (and often trained for a decade or longer) and later put in charge. Today, families are rarely in charge of organizations any longer, so the money hungry thieves we call CEOs now can run rampant raping and pillaging for their 5 years, then off to the next host from which they can suck lifeblood, with no consequences what so ever.
Even in the case where the CEO actually gives a damn about the company it doesn’t mean that she will be good for the company. While this is not an ideal, take Enron as an example. Ken Lay and Jeff Skilling probably thought that their pal Andy Fastow was just the guy to sort out all that complicated accounting crap and therefore they wouldn’t have to bother with it. When you hire an expert and trust that expert isn’t it rational to assume that the expert is going to tell you to do things that you don’t necessarily understand? If you wanted to take the time to become that expert you probably wouldn’t have had the time to become the CEO in the first place, right? Thus, I find Lay and Skilling’s protestations of ignorance even more plausible than that from Matt’s posts, these guys were relying on an expert specifically brought on because of his expertise. That he turned out to be a lying sack of shit intent on self enrichment, damn the torpedoes, is the real source of the problem. Of course, in my mind, when you hire someone who deviates substantially from the norm (GAAP, in this case) you should be willing to step up and accept responsibility, but ‘responsibility’ is a foreign word to the vast majority of the oligarchy. However, they trusted Fastow (likely because they went to the same schools and no doubt hung out with the same people) and after all, Fastow was making them lots of money, what is not to love?
Of course were the Enron scandal to happen today the world would collectively yawn; there would be no charges, no trials, no convictions. Heck, we are only talking about 10’s of billions of dollars, why did everyone get so upset back then? Today, even trillions is hardly enough to get people to look up from their Rice Krispies.
Anyway, my point is that it isn’t necessary to posit some sort of vast conspiracy or bald-faced lying on the part of these CEOs, they probably never did know what they were doing. Of course, in my mind, that is even greater grounds for being drawn and quartered, but sadly I don’t have much influence around here.
