Greed of executives may kill Chrysler.

I blogged about this earlier when I noted that the auto manufacturers were shunning bankruptcy because of the executive compensation issue.

Now, it seems my prediction was true.

Chrysler, a company in danger of dying, has turned down federal loans to keep itself afloat because of...(drum roll please) EXECUTIVE COMPENSATION.

Sometimes the greed of a few can kill the livelihood of thousands.

Too bad.

Bankruptcy for automakers would make public executive compensation: The Real Reason for avoiding bankruptcy

For the past few months I've been wondering why the Big 3 automakers have assiduously avoided any thought of filing bankruptcy.

The stated reason is that it would undermine their market share since consumers wouldn't buy cars from companies in bankruptcy.

I find their reasoning a little off and have for awhile. Bankruptcy would allow the auto makers to renegotiate ALL their contracts with the unions while providing some protection for the already retired workers. This falls under 11 U.S. C. Section 1113 of the Bankruptcy Code.

After thinking about it, I've figured out the real reason the car companies don't want bankruptcy.

Executive Compensation.

Under the bankruptcy code, when a company enters Chapter 11, all executive compensation must be approved by the Bankruptcy Court. Insider compensation must be disclosed in the bankruptcy too so the public would find out the extravagant pay packages paid out.

With the economy in such shape and their companies in such a state, these executives know the court will deny them millions of dollars a year after balancing that with layoffs and bad business decisions.

Of course the public would rise up in anger over the millions of dollars paid for executives who made bad decision. That's ultimately the reason why the big 3 would lose market share. I'm sure the creditor's committees in these bankruptcies would also complain about the excessive salaries too.

This begs the question: What's more important? The bottom line for the executives or their fiduciary obligation to their companies and the economy as a whole?

Bank of America truly out of touch. Unwilling to share America's economic pain.

What a stunning display of "being out of touch".

Bank of America is worried that its failure to pay out about $50 billion in bonuses to top employees will cause many of them to leave the company.

Reportedly, the Bank worries that executives have "built a lifestyle" around the expected bonus and failing to deliver will cause dramatic harm to their lives.

Remember, that Bank of America received TARP money that the U.S. taxpayer must underwrite thanks to the Bush administration.

This should piss everyone off.

Here's my solution: Let the executives get mad and leave. Let's see them find other jobs in this economy. They'll feel the pains of fewer prospects that many others now feel.

Also, if these executives are so profligate in their spending that they cannot make it without excessive bonuses, then maybe they're living beyond their means. Not really a good sign for bankers.

Banks need to share some of the pain.