A new way of do­ing busi­ness

The Compass - - OPINION -

I“We can’t solve prob­lems by us­ing the same kind of think­ing we used when we cre­ated them.” — Al­bert Ein­stein.

t’s a mes­sage every­one has to take se­ri­ously in­clud­ing busi­nesses, gov­ern­ments and av­er­age fam­i­lies. In Canada and around the world, work­ing class peo­ple are mired in stress, won­der­ing how the deep­en­ing eco­nomic cri­sis will im­pact their lives.

Many are won­der­ing “Will I have a job to­mor­row?” or think­ing “I am 50 years old and worked in this par­tic­u­lar in­dus­try all my life; can I find an­other job at my age?”

Over the past few months hun­dreds of thou­sands of work­ers faced the re­al­ity of those ques­tions as they were handed a lay­off no­tice. Now they face other ques­tions, “How will I pay my mort­gage? How will I put food on the ta­ble?”

Cana­dian un­em­ploy­ment num­bers are far worse than ex­pected. In mid-March Prime Min­is­ter Stephen Harper ad­mit­ted he ex­pects the un­em­ploy­ment rate to rise above where it stands at 7.7 per cent, the high­est since Septem­ber, 2003.

In Fe­bru­ary, 82,000 Cana­di­ans were sent to the un­em­ploy­ment line. What’s worse is those num­bers are on top of the 129,000 jobs lost in Jan­uary. Since Octo- ber , ap­prox­i­mately 295,000 Cana­di­ans lost their job and south of the bor­der ap­prox­i­mately 12.5 mil­lion Amer­i­cans are out of work.

Now some economists sug­gest the cur­rent re­ces­sion could be a much longer and deeper af­fair than ex­pected. Where will it end? That is a bil­lion dol­lar ques­tion.

And out of all of this eco­nomic un­cer­tainty comes news out of the United States that has left peo­ple across the globe en­raged.

In the midst of the worst eco­nomic cri­sis since the Great De­pres­sion AIG (Amer­i­can In­ter­na­tional Group) is pay­ing out $165 mil­lion in bonuses to some of the very ex­ec­u­tives who plunged the com­pany into red ink in the first place. This is the same com­pany that has gob­bled up $170 bil­lion in bailout money from the Amer­i­can gov­ern­ment.

Greedy, un­eth­i­cal, reck­less, de­plorable. What­ever you call it, it is ex­actly this kind of self-serv­ing cor­po­rate think­ing which plunged the United States into this eco­nomic cri­sis; the very eco­nomic cri­sis which pre­cip­i­tated a global re­ces­sion.

Rest as­sured, AIG is not the only com­pany re­ward­ing its ex­ec­u­tives with ex­or­bi­tant bonuses, even when those same com­pa­nies are los­ing money hand over fist.

You only need look at Wall Street which paid out $18.6 bil­lion in bonuses last year. Most of those bonuses were paid out by the same com­pa­nies ask­ing the Amer­i­can gov­ern­ment for a bailout.

And it’s not just a U.S. prob­lem. In Aus­tralia, Pa­cific Brands was handed a cool $15 mil­lion as­sis­tance pack­age from that coun­try’s gov­ern­ment only to grant $7 mil­lion in salary in­creases to board mem­bers and se­nior ex­ec­u­tives who then pro­ceeded to ship 2000 jobs over­seas. How’s that for a slap in the face?

Ap­par­ently the more money a com­pany loses, the bet­ter the bonus for ex­ec­u­tives.

Last year Mer­rill Lynch boss Stan O’Neal re­tired, tak­ing a fi­nal pay­check of $161 mil­lion. That’s right af­ter the com­pany an­nounced $8 bil­lion in losses.

The head of Cit­i­group, Chuck Prince, in 2008 re­ceived a farewell pack­age amount­ing to $38 mil­lion in bonuses, shares and op­tions. That was, again, right af­ter the com­pany was forced to make multi­bil­lion-dol­lar write­downs.

Across the At­lantic in Bri­tain, Bar­clays pres­i­dent Bob Di­a­mond took home a salary of £250,000 last year; his to­tal pay, in­clud­ing bonuses, reached a whop­ping £36 mil­lion.

Any com­pany hand­ing out this kind of bonus has ab­so­lutely no right to be looking to gov­ern­ment for a bailout. And gov­ern­ments shouldn’t even en­ter­tain the thought of giv­ing them one red cent of tax­pay­ers’ money.

Is this kind of abuse hap- pen­ing in Canada? It’s likely a case of none of them have been caught yet.

It’s fine to live in a free en­ter­prise sys­tem but the un­der­ly­ing rule has to be fis­cal re­spon­si­bil­ity and ac­count­abil­ity. Be­fore any com­pany re­ceives fi­nan­cial as­sis­tance there has to be a detailed plan in place and that plan had bet­ter not in­clude ex­ec­u­tive bonuses.

A bet­ter idea would be for gov­ern­ment to get out of the busi­ness of sup­port­ing and, in fact, re­ward­ing cor­po­rate greed with bailout money.

The econ­omy has to be al­lowed to cor­rect it­self without bil­lions in tax­pay­ers’ money do­ing noth­ing but bol­ster­ing ex­ec­u­tive lifestyles.

Com­pare it to a frost bit­ten foot that has de­vel­oped gan­grene. You do what you can to save the foot but there comes a point where you have to sac­ri­fice the foot to save the body.

The same ap­plies to the econ­omy. Th­ese trou­bled cor­po­ra­tions are like that rot­ting foot; if they can’t man­age them­selves fi­nan­cially and stay alive, it’s time to sever all ties.

Gov­ern­ment has thrown away far too much money in stim­u­la­tion and re­cov­ery pack­ages. As yet it has stim­u­lated lit­tle and the econ­omy is still head­ing into an even steeper nose dive. It’s sim­ply a bailout that went bust.

Gov­ern­ment med­dling into eco­nomic af­fairs has solved noth­ing. In fact it has likely done more harm than good.

It can be summed up by say­ing, “If you al­ways do what you al­ways did, you will al­ways get what you al­ways got.”

— By Kirk Squires, a free­lance writer liv­ing in Shoal Har­bour.

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