…Of TARP Pits and Dinosaurs

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expert perspective telescopeExpert Perspective by Grahall’s Robert Cirkiel

In an article by Boston Globe reporter Beth Healy published in the Boston Globe on March 8, 2009 she observes that “..in the post-bailout era, even small-time perks – like company cars and financial planning services – are probably on the way out for multimillionaire executives.”

My Thoughts on The TARP PIT And How To Avoid It

Dinosaurs were huge animals with very small brains. Ignorant of their surroundings, many died a slow and painful death simply by following one another into what became sticky tar pits. Corporations run the same risk if they continue to make the same bad decisions about executive rewards. Today’s executive reward programs are being undone in the court of public opinion.  People are angry about the current economic meltdown are and taking their wrath out on corporate executives. And, the wrath is not limited to executives at TARP participating companies. All executives in public companies are feeling the heat. Before you know it, private companies will also be under attack. What’s next, self-hating sole proprietors turning on themselves?

The problem is that executive rewards are no longer governed by logic, business planning, and formula. Instead, emotion and perception rule. Much of this frenzy is generated the President, Congress and the media. Maybe they are just playing to the public but who knows? Don’t forget that the Government now has a stake in the TARP companies and know full well that if only TARP companies scale-back their executive perqs, they will lose executive talent to non-TARP institutions and that will cheapen the value of the TARP companies. As TARP owners, that does the government no good. Companies cannot avoid the heat, not right now and maybe never again.

Perhaps this is not so bad. This is a good time to take a hard look at the executive reward program from an unemotional and fact based perspective. Will the reward program drive business success? Are the amounts right? How about the mix? The time to examine this is now, not only to silence the critics but more importantly, to attract the talent that is sure to become available.

Examine what is prudent for your organization. Maybe getting rid of the jet is a good idea, but maybe it isn’t. Keep what helps run the business. Don’t rule out increasing the package where appropriate. Here are a few tips:

1. Avoid following the pack. This is a good time to deviate. Market comparisons should focus on the best companies.
2. Make sure to communicate. Anything that flies in the face of public opinion needs to be explained. Be transparent and stick to your guns.
3. Do not skimp on health and wellness initiatives.
4. Raid, raid, raid!!!

Finally, avoid borrowing from the TARP if at all possible. If you must engage in government borrowing, shop around. Maybe you’ll get a better deal from China.  Email Robert Cirkiel at robert.cirkiel@grahall.com

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