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March 2009
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Always Two Sides

I suppose it has always been this way but recently I have observed far more black or white behavior. Whether you are reading a newspaper article, a blog or listening to someone on TV one would believe there is only one side to every story. The concept of collecting all the facts and weighing different opinions appears to be getting lost. A case in point is the recent open letter of resignation from AIG executive Jake DeSantis.

The letters and comments that have followed his letter seem to miss the point – there are two sides to every situation. When I talk to business people, especially senior executives and people who work in finance and private equity, they voice true outrage at the reaction from Congress and others over executive pay and bonuses. Their outrage is the “everyone in business/finance is evil” assumption driving the discussion and legislation. Many of these folks have made millions making deals that saved companies, created jobs and paid taxes. They would be the first to admit that it is an imperfect world but their wealth has come from putting together far more good deals for the American people than bad deals.

The facts are that how we remunerate people is a totally different issue than how we deal with questionable performance or whether businesses should get government support. Mixing all three of these in one pot only makes the issue too irrational for any hope of making the right corrective action. Because the decision was made to bail out AIG or any of the banks does not have any relevance to how executives are compensated. This does not mean that executive compensation should be off the table but it should not be done in the context of a very different problem. Different problems require different solutions and both sides of each situation must be considered if we ever hope to make “the right” corrective decision.

We live in a country where the top 5% of earners pay somewhere around 30% of the taxes. We live in a country where living the American dream is being a success – yes, making money. We live in a country where we pay athletes or actors hundreds of millions of dollars to entertain us with their specific ability. Why have we begun a crusade that vilifies businesspeople that have the skill sets required to run our ever larger more complex businesses? Not every bank or every business is full of money grubbing, incompetent over paid managers. Why then is Congress and the media so focused on convincing the American public that this is so.

In a free democratic society we will always have the robber barons who take advantage. We always have the Bernie Madoff’s and other scoundrels will bend the rules and steal our money. We have laws that address these situations. What we have not had is the discipline and resources to enforce those laws. I have written before about the dreaded pendulum swinging back too far and doing more damage than good.

There is nothing that is perfect and what is right in one person’s perspective can be totally wrong to another. It is for this reason that we must continue to remind ourselves that there are always two sides to every situation.


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