The Hightower Report
Public utility watchdogs keep close eye on corporate executives' parties; become a head honcho and get rewarded for not producing
It's always good to know that our public utility watchdogs are on the job performing such essential regulatory tasks as quaffing margaritas and munching hors d'oeuvres with the corporate executives they're supposed to be watchdogging.
PARTY DOWN WITH UTILITY REGULATORS
Regulators from all 50 states gathered recently in Austin for the summer confab of the National Association of Regulated Utilities Commissioners. These are the folks charged with protecting you and me from price gouging and other rip-offs by telephone giants, cable TV companies, electric utilities, etc. If you're curious about how good of a job they're doing for us, just take a peek at your monthly bills.
One big reason these industries are allowed to keep gouging us is that our watchdogs seem to think the best way to keep a close watch on corporate executives is to sit next to them on bar stools. The commissioners did not come to Austin alone. They were joined by hordes of industry lobbyists and executives, who eagerly used their corporate credit cards to buy drinks, dinners, and other amusements for the regulators while also having cozy chats with them to push for regulatory favors.
A group of electric utilities, for example, threw a $30,000 bash at an upscale Italian restaurant to entertain the commissioners, giving the utility honchos a chance to bend the ears of the officials about the industry's wish to deregulate electric rates. Likewise, SBC, the largest of America's regional telephone giants, took over a popular bar for a night to lubricate commissioners and woo them to lift controls on phone rates.
Of course, all involved deny that there's any favoritism or unethical behavior here. If you've got the time and money, you too could fly to the next big meeting, pony up $30,000 or so for a party, grab a bar stool, and enjoy some quality time with your utility regulators. It's a free country ... for everyone who can pay the price.
If you're a rank-and-file employee and you don't produce, you're handed a pink slip. But if you're a top executive who doesn't produce, you get a golden handshake.
A LESSON IN CORPORATE ETHICS
Wall Street giant Morgan Stanley recently gave us yet another demonstration of this inequity and hypocrisy, which goes to the core of modern corporate ethics. In late July, the firm's acting president announced the firing of a thousand brokers from its retail division, sternly declaring: "We must constantly review the performance of individuals in the retail group and identify those who are not up to our standards."
Fine. Nothing wrong with accountability. But contrast this businesslike pruning of weak performers on the company's front lines with the pampering of two weak performers at the top of the corporate hierarchy. Philip Purcell, the firm's CEO who presided over a 50% decline in Morgan Stanley's stock value in the past five years, finally was dismissed also in July for his inadequate performance. But Purcell was not curtly shown the door, as the thousand brokers were his descent from the top was eased by an exit package that included a bonus, stock payments, cash, pension, health care for life, and other perks worth $113 million!
Then came Stephen Crawford, a 41-year-old protégé of Purcell's. Even though Crawford had never run an operating unit at a Wall Street firm, he had been elevated by Purcell to the lofty rank of co-president of Morgan Stanley a post he held for only three months. Yet, unlike the rank-and-filers, Crawford's fall from the heights was cushioned by a soft pile of cash. He walked away with $32 million. A Morgan Stanley board member who helped orchestrate the pampering of Crawford dismissed critics of the sweet deal, saying: "I don't think that Steve's compensation is out of the norm."
Exactly. The ethical norm is now so perverted that the outrageous has become commonplace.