A Quick Question for Financial CEOs

photo credit: Tracy O

I’m not a mathematician. I admit that I completely suck at math, a big part of why my childhood dreams of becoming a programmer were dashed and I switched to writing. However, I think I spot a number issue here.

You see, many of your banks and firms have received billions of dollars in government assistance over the past few months. You say your firms needed it to stay afloat and, looking at your staggering losses, I am definitely hard pressed to disagree.

But then comes the rub, you take that money and, out of the funds, you give yourselves and other executives multi-million dollar bonuses. While I grant that it was only a percent of a percent of the bailout money spent that way, it certainly shows a lack of care and concern for saving money at a time where your companies are, supposedly, so desperate to stay alive they need government help.

This, understandably, upset the public. After all, very few taxpayers earn anywhere near the amount of money you guys do on your worst years and we aren’t getting any serious government assistance. In large part, we’re the ones financing you. So we made some noise and the government heard. President Obama signed an executive order limiting executive pay to just $500,000 and adding some additional oversight.

How do you guys respond, by trying to give the money back.

This begs a simple question. What are you guys thinking? Sure, you don’t get to keep making your multi-million dollar salaries, but you get billions of dollars in cold hard cash and you get to keep your business afloat. What is there to decide?

I have a sneaking suspicion that even laypeople are better with money than you guys and I think I can prove it pretty easily.

Turning the Question Around

Let’s change the scenario a bit. Instead of a big major financial firm, we’re talking about a single family with a regular Joe the (insert occupation) as the dad and regular working mom. They don’t make millions of dollars, they don’t make $500,000 per year, combined they probably make just a little over $50,000.

But they do have one thing in common you CEO-types, they’ve made some bad financial decisions. Through a series of shoddy investments, bad debt management and unfortunate events they are buried in bills. They’re staring down bankruptcy and foreclosure. They’re behind on their payments and are expecting to get hit worse in the coming months, financial death is staring them in the face.

But then an investor of sorts decides he can’t stand to see the family go under. He looks at their books and decides to give them $100,000. It’s enough to pay off most of their debt and cover the house until things settle down. The only thing he asks in return is that the family curtail some of its unneeded expenses, such as eating out only a few times per week, and that he be allowed to check their financial statements to be sure that they are spending his money wisely.

Would they turn him down knowing that doing so would mean their kids being homeless and starving? No. They would be grateful for the money and, so long as the interference wasn’t unethical, harmful or illegal, they would be grateful for the help. They would make sacrifices to keep their family stable.

That’s what smart people who care about their future and the future of those around them do. They do what they must to survive. However, it seems that you don’t agree with that basic survival instinct and are willing to take the entire economy down with you.

Two Scenarios

As CEOs of major institutions, you don’t seem to be ready to make the same basic decision. Your lifestyle takes a hit and your company faces closer scrutiny, next thing you know, you guys are begging to return the money and chance it alone. This tells me one of two things:

1. You didn’t need the money in the first place and you were just trying to scam the government.
2. You would rather watch your company go bankrupt, watch everyone who works for it lose their jobs, lose your own job and take the world economy down with you than change your lifestyle and face some new regulations.

In the first scenario, you are just a con artists, the second you’re spoiled brats who would ruin countless lives to get their way.

When you signed the deals to take the money, you knew full well that the government had the right to change the agreement. You must have thought you had the government pretty well in your pocket to think that you could be so reckless in flaunting the government’s money and not expect at least some repercussions.

Well, even though they’ve started going a little easier on you, giving you some wiggle room in the caps, I can imagine it has to be a pretty big shock that you struck a nerve deep enough to cause such a strong reaction.

Some Quick Advice

Once again, I’m no mathematician, but I know that billions are worth 1000 times more than millions. I also know that your companies are in dire straits, largely thanks to your own short-sighted management, and you need the money.

So here’s my advice. Take the cash. You’d be stupid not to. Whether you agree or disagree with the idea of a bailout, you have to admit that a CEO with a company in the tank would be dumb not to accept it. It would be like refusing a lifeline when you’re drowning in the ocean.

If you’re crying about the salary caps, don’t forget that you’ll still be making ten times more than your average employee. You’ll still be rich by most people’s standards. Sure, you might have to sell a house or two, but you’ll live. You won’t go hungry, unlikely many of your employees who depend on you if the company closes.

If you’re worried that the regulation might make you less competitive later on, you’re asking the wrong question. Right now your company may not be around long enough to feel those pressures. The one time your job demands you think in the short term is not the time to finally get wise about long-term planning. If you’d been doing that well five years ago, you wouldn’t be in this mess.

Accept the money and its strings graciously, be glad it is there at all. Many smart people think it is unwise to give you the cash at all so now is not the time to get picky about the terms. You need it, it’s there, take it.

Things will be a lot worse for everyone, including you, if you don’t take it and your company sinks. Not only will you not be able to maintain any of your quality of life, but you’ll be likely running from mobs with pitchforks and torches.

But hey, I suppose its exercise.

Bottom Line

The bottom line is this, I don’t usually talk about politics as those discussions seem to go nowhere, but this isn’t a political issue to me. Turning down billions of dollars because it comes with a few million in strings is just stupid. Math doesn’t change based on your political party.

Equally stupid is worrying about your company’s competitiveness ten years down the road when it may not survive six months. It’s like ignoring a bullet wound because the treatment might cause a long-term cancer.

The dirty truth is that running a business is a bit like being a doctor. With medicine, every patient will die at some point, the goal is to give them as long and as healthy of a life as possible. With business, every company goes under at some point. Some last hundreds of years, most less, but everyone succumbs. Though it is theoretically possible to keep a business going forever, the reality is very different.

Right now you are a doctor staring at a very sick patient. Treat the disease that might kill it now and, if it survives, then you can worry about the long term. It’s the responsible thing to do.