Sunday, March 15, 2009

Corporate Theft

Among the many odd claims being presented by the thieves that run many American corporations today is the assertion that it would be a violation of employment contracts to reduce (or better yet, eliminate) bonuses paid to the incompetent managers who allowed their companies to go bankrupt. Make no mistake, these companies (AIG, Merrill Lynch, Citigroup, etc.) are technically bankrupt. Only federal bailout funds kept them from admitting it and thereby triggering a wipeout of employment contracts (just look at airline bankruptcies that were specifically designed to void union contracts for an idea of how this works).

In the financial world, only the top brass are given actual employment contracts. The average employee may be fired at will and without recourse -- perhaps receiving two weeks severance and a cash out on unused vacation. But the millionaires at the top, in collusion with the so-called "trustees" on the Board of Directors, have made sure that they are well insulated against anything like failure, stupidity or global economic collapse.

In recent years the "compensation packages" of these captains of capitalism have increased astronomically (even as the average wage earner's pay stagnated) often under the claim that the increased productivity of the lowest paid workers somehow justified multi-million bonuses to folks who get to fly in the corporate jet.

There is word for this type of behavior -- conversion. As a legal term, conversion refers to the illegitimate taking of assets (in this case, corporate funds). Theft is the criminal term for essentially the same thing.

Corporate managers are hired to run the company that is owned by the shareholders. Yet too often the managers collude to transfer massive amounts of corporate funds to themselves -- regardless of the performance of the stock or the corporation itself. The moral hazard is too tempting and they succumb. The very individuals who make hiring, firing and compensation decisions vote themselves a pay increase. And co-sign contracts with each other to make it all legally binding come hell, highwater or technical bankruptcy.

It is easier to identify corporate theft when you have a transparent crook like Bernie Madoff lying his way through billions of dollars. But the principle is the same when employees of the shareholders (i.e., CEO, president, etc.) skim corporate income into their own pockets with a "heads I win, tails you lose" contract.

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