Greed is Good?

by Sachin Balagopalan on October 6, 2008 · 1 comment

One of my all time favorite movies from the eighties was Wall Street - the Oliver Stone movie that brought us corporate raider Gordon Gekko (played by Michael Gouglas) . Of course the highlight of the movie was the “Greed is Good” speech Gekko makes to the shareholders of Teldar Paper where he proclaims that “greed is good”. That phrase of-course set the tone for the Reagan era boom during the eighties on Wall Street and the opulence that followed it. Depending on your point of view you either hated or loved Gekko and either way it seemed like everyone knew at least one person in their lives that resembled Gordon Gekko.

The Los Angles Times has a timely piece this week where one of the co-writers of the movie, Stanley Weiser talks about the movie.

After the film came out, many people who worked in the financial world felt that they knew someone like this character; others claimed he was unrealistic and gave Wall Street a bad name. But if director Oliver Stone and I had a nickel for every time someone uttered the words “greed is good,” we could have bought up the remains of Lehman Brothers.

As the years have gone by, it’s heartening to see how popular the film has remained. But what I find strange and oddly disturbing is that Gordon Gekko has been mythologized and elevated from the role of villain to that of hero.

In wake of the latest financial crisis I think it is appropriate to ask the question if greed is indeed good? As the stock market dropped below the 10,000 mark in four years today - and at one point during the afternoon plunging as much as 800 points - we saw the CEO of the bankrupt Lehman Brothers, Richard Fuld testify before congress.

One Lehman document among thousands reviewed by the House committee showed that four days before the bank filed for bankruptcy protection, Lehman’s compensation committee was asked to grant $20 million in “special payments” for three executives who were leaving, Mr. Waxman said. An e-mail exchange recommending a delay in bonus payments was apparently brushed aside.

Another document showed that executives were warned in a January 2008 meeting that the company was facing liquidity problems. Yet the firm moved forward with capital outlays, including $5 billion in bonuses, $4 billion in shares and $750,000 in dividend payments between 2007 and the firm’s bankruptcy filing on Sept. 15.

During the testimony it was also revealed that Fuld himself made close to $350 million in bonuses and compensation during the last 8 years. The highlight of his testimony for me was this …

Mr. Fuld’s individual compensation, which totaled some $350 million since 2000, was repeatedly criticized by lawmakers. But Mr. Fuld pointed out that he had still held 10 million shares in Lehman when the bank filed for bankruptcy, and therefore lost out on tens of millions in additional compensation.

“Lost out on tens of millions … “. You’ve got to be kidding me! This clown drove the company into liquidation after making $350 million dollars in the last eight years and he wants us to feel sorry for him?

As the LA times piece states, Gordon Gekko would probably remind us how he warned us 20 years ago that lack of corporate accountability would come home to roost some day. And the bailout? He would most definitely not approve!

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