We've had an interesting confluence of events lately, one bringing with it an opportunistic chance for those who would seek to pounce upon my distaste for hypocrisy and inconsistency to accuse me of the same. In the past ten days or so, we've had a Navy Cruiser grounded off the coast of Hawaii, and we've had the heads of the major Wall Street firms hauled before Congress and told that their pay (and those of their senior executives) was going to be drastically reduced by legislative fiat.
In the case of the former, I supported the Navy tradition and practice of relieving the Commanding Officer of that vessel; in the latter, I advocated a dream sequence in which the executives and their assistants told the Congress and the Obama Administration (and the class envious American people) to "fix it yourself". Seizing upon a perceived inconsistency in my logic, some have attempted to equate the situations. In the process, they have 1) significantly misinterpreted my support for single sanctions in the relief of commanding officers 2) significantly misinterpreted or plainly made up my logic with respect to Wall Street executives and 3) demonstrated a profoundly misplaced sense of class envy. There is no inconsistency in my thinking on this matter.
First and foremost, what makes the tradition and practice of removing Commanding Officers from their positions in the event of mishaps so special is its uniqueness in our society. What makes it unique is the unique concept of command at sea, something not found in many other bureaucratic structures in our society--certainly not in American business. Command--and the concomitant inexorable linkage in authority, accountability, and responsibility--is possible only because of the amount of responsibility vested in the Captain. In the case of the cruiser off the coast of Hawaii, we look to the Captain for responsibility because he ultimately decides the disposition of his ship. Had the battle group commander ordered him to proceed to that spot--had the Navy removed his paper charts and forced him to navigate with a specious electronic system only---had he grounded his ship in an attempt to save lives in battle--had he positioned his ship to obtain a more advantageous fire support situation---had his ship lost all mechanical control in the event of a catastrophic failure of engines and generators--each and every one of these events would logically be seen by most to mitigate the Captain's responsibility because others would have assumed portions of it. But it is not so in the Navy (at least not generally--there are exceptions). Again, the Captain decides on the disposition of his ship. If after the battle is over, or the crisis is past--he is shown to have disobeyed a lawful order, well then he is gone anyway.
We do not vest our CEO's with this kind of authority, and any attempt to affix a level of responsibility to any one of these CEO's or even the group as a whole denies many other worthy parties of their due in the blame. Let me quote from an earlier entry I made on the extent of shared responsibility in the current crisis:
"We find ourselves today in a crisis of our own making. Well-intentioned politicians on both sides of the aisle looked at the distribution of wealth in our country and realized that not only did home ownership represent a large portion of individual wealth, but that it made up a disproportionate amount of the difference in average family net worth between white America and the rest of the country. To address this difference, policymakers (again, on both sides of the aisle) pushed for programs that would make obtaining mortgages easier. Mortgage lenders were pressured to lower their standards, and they pressed back for government protection from the increased risk of default. Enter Fannie Mae and Freddie Mac, who insured many of these “sub-prime loans” and the financial world who further reduced the risk to lenders by “securitizing” the mortgages—eventually reaching a point in which there was no asset to back the debt. Heavy marketing of these new mortgage vehicles attracted speculators and middle class customers, many of whom improperly assessed their own risk tolerance as they took on more debt than their previously sufficient cash flows could handle. Government regulators looked the other way or improperly assessed risk, all in hopes of fueling the policy ends of increased home ownership and economic growth. Upon a predictable decline in housing prices, the whole house of cards (pun intended) fell in on itself helping to cause our current situation."
So we are to perp walk these guys off to jail while Barney Frank and Chris Dodd go on pompously berating the men who made their policy goals happen? Should we remove Barney Frank and Chris Dodd punitively from their jobs while George Bush walks free? Or should we just haul them all off to jail and be done with it? Whereas command is the singular responsibility of the Commanding Officer, these CEO's operated in a heavily regulated and overseen market in which their latitude and prerogative was greatly impacted by conditions and circumstances beyond their control. A Captain does not answer to shareholders or a board of directors. A Captain at sea is in a very real sense law unto himself. This is not the case with CEO's.
To my second point--has anyone heard me say or write that I don't think CEO's guilty of malfeasance, manipulation or any other criminal act should escape prosecution? I hope not, because then you would be guilty of hearing and seeing things. I want the FBI to investigate and prosecute to the fullest extent any and all executive who did not play by the rules. I want them to go to jail. I want them to be punished for acts that were plainly illegal and for which they were responsible. Additionally, has anyone heard me full-throatedly support bonuses for executives in failing firms? Has anyone heard me say that there is any logical and conceivable reason these executives should have been compensated as they were? No. I supported here in this blog, the levels of compensation they were making when their companies were returning shareholder value. I think the system is out of whack when it compensates people for diminished shareholder value.
Finally, this wasn't about folks being prosecuted...this was about a group of (largely) men with hundreds of years of experience in an increasingly complex financial world having their worth and value controlled by the Congress of the United States in an act of flat out class warfare. This was about the concept of creative destruction, in which recessions and contractions in a capitalist system are necessary to its continuing growth, and the kind of vision and experience that will be necessary to set the stage for our recovery from this current contraction. This was about a wake-up call to those who would look to our government as the engine for this recovery without thinking clearly about what our government does well and what it does poorly. This was about trying to bring perspective to the fact--not the opinion--that the current crisis had many fathers, and that looking to scapegoat the CEO's was childish, short-sighted, and potentially dangerous.
So, have I been inconsistent? Not from where I sit.