General Motors, The Bailout, and Corporate Governance Reform (Part 2)

The three auto makers came to Washington for a bailout.  They had no plan and arrived with no commitments that would ensure careful use of any funds received from Congress.

AIG gets a $65 billion bailout and throws a $400,000 party for sales people.  GM and the other car manufacturers come to Congress and ask for $25 billion, with no plan and no gurantee the money will be used in any effective manner then fly home in private jets, with Rick Wagoner making use of a $36 million luxury aircraft.  As ABC reported:

• All three CEOs - Rick Wagoner of GM, Alan Mulally of Ford, and Robert Nardelli of Chrysler - exercised their perks Tuesday by flying in corporate jets to DC. Wagoner flew in GM's $36 million luxury aircraft to tell members of Congress that the company is burning through cash, asking for $10-12 billion for GM alone. . . . While Wagoner testified, his G4 private jet was parked at Dulles airport. It is just one of a fleet of luxury jets owned by GM that continues to ferry executives around the world despite the company's dire financial straits.  . . .Wagoner's private jet trip to Washington cost his ailing company an estimated $20,000 roundtrip. In comparison, seats on Northwest Airlines flight 2364 from Detroit to Washington were going online for $288 coach and $837 first class.

Wagoner, who joined GM in 1977, is steeped in a culture that looks in, not out.  How else can one explain such an obvious gaffe?  And, where was the board?  Its true that the board cannot step in at every mistake but surely the board can set the tone. 

Of course, directors who want to discuss this at a special meeting have a problem.  The authority rests with the chairman and, like most large public companies, Wagoner is both the CEO and chairman.  He's unlikely to call a meeting that will have as its purpose a trip to the wood shed.  Of course, this is a mirror image board, one that Jon Macey at Yale would likely argue was captured by the CEO.  There would be no trip to the wood shed even if a meeting were somehow called.