The march of corporatism continues today as the Obama administration’s “stress tests” for TARP-funded financial institutions await release. Now the Obama administration has heavily hinted that it will expect these institutions to change management if they don’t do well on these mid-term exams, apparently aiming for the decapitation of CEOs at companies like Citi and BofA just as Obama did with GM (h/t Geoff A):
As has been leaked (of course) the banks will have 30 days to come up with a plan once the results are made public.
One very interesting note, which David Zaring picked up on, is that in this 30 day period “…firms will need to review their existing management and Board in order to assure that the leadership of the firm has sufficient expertise and ability to manage the risks presented by the current economic environment.”
In other words, if you’re on the least-favored CEO list — we’re looking at you Citigroup CEO Vikram Pandit and Bank of America (BAC) CEO Ken Lewis — it’s time to start talking about succession, planning for the future and resignation.
Once again, the Obama administration sticks its fingers into the boardrooms, through the facility of TARP funding. Under normal conditions, of course, the US government would have absolutely no say in the hiring decisions and compensation practices in the private sector, leaving those policies to stockholders. This White House has shown itself adept at using TARP as a lever to force companies to bend to their will and dance to their tune. With Obama, that tune will undoubtedly sound populist and biased; think “Look for the Union Label” instead of Pink Floyd’s “Money”.
These CEOs should have known better to let the government into their boardrooms in the first place. Most of them took the TARP money willingly (although a few got pressured into it). In that sense, perhaps another tune seems appropriate today. The great Al Green sang “The Snake” 40 years ago and in another context entirely, but it’s hard to argue that the CEOs shouldn’t have known darned well that they would get bit in the end: