Monday, March 03, 2008

Failure Bonuses

I'm not on the board of any multi-billion corporations, hell I'm not on the board of any single dollar corporations or non-profits, but if I was, I would be scratching my head at a proposal to award massive pay raises, and large scale retention bonuses to the leadership team that took what was once one of the most profitable and predictable business models in the world, and turned it around to sustain massive losses and destruction of the basic value proposition. I would be very curious as to why I would want to retain this team in the first place.

And if I was on a board and was asked to approve the hiring of a C-level individual who took part in this fiasco, I might suggest that this individual be hired as the desk guard as that position could not seriously damage my company's net worth. But that is just me, and not Wall Street, as MBIA's leadership is getting shown more money than competent second string NFL cornerbacks are receiving from the New Orleans Saints. [Via CNN]

MBIA Inc. granted raises to some of its executives and offered bonuses to managers who stay another year as part of a plan to retain key people during a troubled period for the company.

In a regulatory filing Monday, the Armonk, N.Y.-based bond insurer said its compensation committee last month approved salary increases of as much as 60% for some executives. The committee also approved a "retention award" of as much as $2.3 million for executives who stay with the company a year.

MBIA (MBI) said it approved raises for 2008 after the company's stock plummeted 75% in 2007, because the company needs to retain people during a "critical period."....

Screwing up massively and losing credibility, respect and billions of dollars and people in charge are still getting rewarded. It is amazing how the risks and penalties of these screw-ups are transferred down the responsibility chain and the rewards never follow. Only the shit flows down hill, not the sunshine and rainbows.

Short sightedness is being rewarded, and we are systemically shocked when short sightedness dominates decision making. Amazing!

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