A solution to the Financial Crisis

At the heart of the financial crisis is the moral failure of company leaders.

They don't give a rat's ass about the long or medium term future of their companies. So they don't bother with sticking to sound business practices.

Why? No accountability. They aren't held accountable for their failures. If they screw up badly and get sacked, they walk away with massive payouts in the millions of dollars. Its obscene and perverse.
Richard Feld, the CEO of Lehman Brothers, will walk away with $299 million dollars (on top of the 500 million dollars he earned during his tenure)

Heck even without the financial payout, if someone is being paid millions of dollars as an annual wage, do you think he'd really be hurt if he got sacked after performing miserably in 5 years time? He's got the money why would he care?

Even with the company in serious crap, the top management are busy feathering their nests, and trying to squirrel away as much nuts as they can.

But heck, its just human nature. If you don't have laws or a culture holding them accountable for their actions - they really don't give a damn. Put a bunch of monkeys in charge of a leaky ship, and the first thing they'd be doing would be to place as much bananas into the life boats before casting off and leaving you to drown.

So how do you raise the level of personal responsibility and accountability?

For starters: Acknowledge that the success of the company is not solely due to the actions of one or two top managers. Its also due to the efforts of many responsible hardworking individuals right down the chain of command.

Then make it mandatory for all top management - CEOs, CTOs, to accept a basic wage - ie $100k - and receive their top payment in Special Preference Shares. They pay a dividend percentage based on the profit of the company. And they can't be traded or sold ever until the owner dies, then its converted into ordinary shares and distributed to the heirs. If the company becomes totally unprofitable after they leave- their shares are worthless.

Second: Extend their liability for the failure of their actions. If under their watch, they lose hundreds of millions of dollars- they ought to be held responsible for that failure and face financial retribution.

Third: Extend the Reach of Corporate Regulators. Too often you hear of CEOs who adopt shoddy accounting practices, racking up massive corporate expenses, ruin the company's long term viability - and running away to the Bahamas to live a life of luxury. No, this can't continue. Someone who commits fraud on this massive scale must be caught. But this is a work for the Foreign Ministries to fix up. Frankly, I'd prefer to pay a team of mercenaries to go over and bring the bastard back.

Fourth: Beef up the powers of the regulators. If you have poorly paid understaffed police, and a soft-headed Judiciary - you're going to end up with crooks who get away with murder - like we do here in Australia. Fix it up. Train Ninjas for the role and institute tough penalities for transgressors.

BTW, watch this video for an explanation of how the Financial Crisis was caused.

And set these laws into stone. Make it very very hard for them to be changed. After the Great Stock market crash of 1929 - Congress put into place the Glass-Steagall Act - to prevent a similar disaster from reoccuring. It was repealed in 1999. I remember that moment - I thought OMG they've removing the Glass-Steagall Act!!! Then someone more experienced than me said: "Relax lah, modern banking has progressed since then. Look, the banking industry isn't going to collapse. They're too smart for that now."