How American Corporations Lost Their Ethics

It began in the 1970's. I saw it start and lived through it getting out of hand. It simply started with companies competing to hire MBA's from the hottest-of-the-hot business schools in this country like Harvard. To get these guys, businesses took a page out of the professional sports teams' playbooks. They gave out signing bonuses.

These MBA's were ultimately fast-tracked in a management stream to advance to the highest levels of authority within a corporation. In their rise to the top, these highly desirable MBA's might have been enticed to switch teams. The enticements could have been golden parachutes, stock options, big offices, cars, and even access to corporate jets. To protect their investment, this forced their current companies to counter offer with even more goodies.

And, so, the "fat catting" in corporate governance was born. Those MBA's that moved to the top of many of America's corporations had always been strung along with financial enticements; so, they thought nothing of it. Corporate life had conditioned them to believe that they should always get the perks; regardless of whether or not they were performing well or not. As the MBA perk-getters moved up the ladder, they started to proliferate the giving of perks to others. That's when perks stopped being used as rewards and just started being a cultural mindset in America's corporations. It wasn't what you did (anymore) but what your title was. More often than not, the title was given to protect a company's investment and was not really based on performance.

The only way that this mindset can be broken is it to put performance matching back into the conditions for receiving the perks and the parachutes. My guess is that companies won't do this voluntarily; even though, to do so would be good P.R. So, I suspect Congress or the Securities and Exchange Commission (SEC) will have to mandate it. I don't think Congress should establish either minimum or maximum salary levels. The individual companies should be free to set a base pay level to attract quality leadership. But, the perks like the stock options, golden parachutes, etc. should be tied to the company's performance. I believe all CEO's and other company executives should have a certain amount of their pay in company stock. If the stock does well, the CEO will be all the better. If not, that CEO or other execs will suffer along with the stockholders, who are the real owners of the company.

And, that's just my opinion.