Wharton MBA for Executives

First a small confession.  Before I started my current company, I worked for a financial software company.  We had a software product for the banking industry to help them process mortgage loans.  My role was to work on the WaMu team implementing our solution for their mortgage lending business.  We had hundreds of thousands of loans (if not millions) go through our system to help them process loans quicker.  So I suppose you can say that I had a small role in the current crisis.

But recently with the bad news on wall street, federal regulators seized WaMu and JP Morgain bought the banking assets.  One of the items of news to come out of this is the fact that the new CEO of WaMu had only been on the job for 3 weeks but with his severance, bonuses, salary…he could walk away with $18m!  Of course this has outraged the everyday citizens of America…except me.  Here’s one articles about this case: http://money.cnn.com/2008/09/26/news/companies/fishman_wamu/

So let’s talk about this for a sec.

1) The guy becomes a candidate for the job.  He looks at WaMu and realized how utterly messed up the bank really is.  He decides that if he is to associate his good name into the company and work hard to turn this bank around, it will require many millions of dollars.  These are his requirements.

2) The bank (board of directors, shareholds, etc.) are not obligated to accept his deal.  This is a free country…the bank can say no and the new CEO can say no.  Nobody is forcing anybody to do anything.

3) The bank decides to agree to the deal.

Now that WaMu has failed, the guy is probably going to get paid according to the contract that they all signed and agreed to.  So what exactly is the problem here?

Is the CEO a bad guy because he has too much greed?  Why?  Is there such a thing as “too much” greed?  Capitalism is a beautiful thing my friends.

Is this indicative of the problems we are having (overpaid CEOs)?  This is a free market economy.  If you don’t want to overpay your CEOs, don’t do it.  You’ll probably have trouble attracting the best talent but nobody is forcing you to pay your CEO that much.

So now the government decides to limit CEO pay at these failing banks.  IMO, that’s just un-American.  One of the reasons (among many) why people work hard and make the sacrifices in life that they do is to strive to become high paid CEOs and executives.  If the government decides to place a limit on their salaries, then the best talent simply will look to other industries.

In my most humble opinion, this guy didn’t do anything wrong.