September 22, 2021 5:13 am

CEOs And Company Directors – The Good, The Bad And The Downright Greedy

Shocked, appalled, stunned, enraged, speechless. Just some of the emotions I have experienced over the last couple of months as bank upon bank fell over around the world and whole countries begin to face the repercussions of a global financial melt-down.

I have always believed that crisis brings out the best or the worst in all of us. CEOs and company directors are no different. It is easy to be a leader in the good times, the true test of character of a leader is how they cope with the bad times. And to date, not many of them have impressed.

Because of the greed-is-good cult we now seem to be part of, in NZ this year we watched numerous finance companies fall over causing huge distress to their investors. Fortunately even as things worsened, confidence in our banks was and still is, pretty solid. We may have looked on the rest of the world with envy over the past few years as other countries seemed to be leaping ahead in the financial stakes; but the conservative stance of our banks has paid off. And I’m sure every New Zealander is now grateful for that.

The first CEO in NZ to leave me speechless was a man called Rod Petrecevic, executive director of a finance company (Bridgecorp). He now faces numerous criminal charges. Bridgecorp     Top 10 Building Companies collapsed owing 14,000 debenture holders NZ$459million, yet during 2008, even though it was obvious the company was in serious trouble, he continued to draw his obscene salary; continued to take investor money; stashed all his very expensive toys into a trust fund. After the collapse he had the sheer audacity to go to court to get performance bonuses he believed he was owed!

One of our long term business heroes – Eric Watson and his business partner Mark Hotchin set up the finance company Hanover and fronted it with a famous, and trusted, TV presenter. They encouraged Mums and Dads to invest their hard earned savings and amassed an incredible NZ$1 billion. Meanwhile they had set up a shadow company and were using these funds to invest in risky investments of their own. Tragically for all concerned, the cards have come crashing down. No doubt these smart cookies will have stashed plenty in off-shore accounts so will be OK – but tough luck on the poor old (and most of them were old) investors.

We watched the directors of one of our power companies – Contact Energy – preparing to give themselves a 100% increase in director fees, even though every day newspapers, radio and TV were reporting yet another financial collapse. This brave band of men had awarded themselves a 90% increase just 3 years previously. Fortunately the Australian parent body saw sense and pulled the plug on the increase. But it has already cost the company a 5% drop in customers as enraged customers went elsewhere.

But the NZ examples pale into insignificance when we hear that the CEO of Lehman bank (the first bank to collapse in the USA) had earned a quarter of a billion dollars over a 10 year period; presumably he would have had a senior management team on similar salary packages. How can any business sustain these humungous packages?

And as if these levels of salary aren’t obscene enough, we read that Bob Nardelli, CEO of Home Depot (USA) for 6 years, was on a salary of US$42million, yet during those 6 years the share price of the company fell 8%. He was removed from office yet walked away with a US$210 million golden handshake.

I hear also that the CEOs of Fannie Mae and Freddie Mac could be due severance packages in the region of US$24 million each even though both companies collapsed leaving massive debts and thousands of home owners facing mortgagee sales! The mind boggles.

But the absolute top prize for sheer, unadulterated arrogance, has to be awarded to the 3 CEOs of the US car industry arriving in Washington to discuss a bail-out package for the car industry. They each arrived in their private jets, a round trip which cost US$20,000 per plane (a round trip 1st class on a domestic plane would have cost just under US$300 each). They were in Washington to demand a bail-out package for the car industry – their rationale – all the people that would be put out of work if Washington didn’t bail them out! Bit like a wayward teenager spending money like there is no tomorrow, arriving at the home of his/her parents in a top-of-the-range Aston Martin (on hire purchase of course) demanding that the parents take out a mortgage on their home, to continue funding their darlings extravagant lifestyle.

I think not! Enough has to be enough. Tragically it isn’t the CEOs in this case who will suffer, it is the thousands of employees they have let down with their greed and their arrogance.


Surely the primary aim of any CEO or director is to ensure the ongoing viability of the company they represent.

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