Once again, a CEO has gotten himself and his company into trouble. And once again, it started because thanks to Bush administration regulatory and tax policies, big business CEOS can suck other peoples’ money out of the companies they run. They make the perpetrators of the famous Brinks robbery look like pikers.
Who suffers? Usually it’s confined to the stockholders. Their equity gets diluted and their profits get drained off by money vampires in the executive suite busy making their grabs for megamillions, or even billions.
THIS TIME IT’S EVEN WORSE
This time, a new executive “compensation” scandal helps explain why health insurance costs are outrageously high in this country.
The News York Times this morning reported that Dr. William W. McGuire, former chief of UnitedHealth Group one of the two largest health insurers in the United States, was forced to resign from the company yesterday. He also had to give up some – but only some – of the $1.1 billion he holds in stock options.
You read that right. $1,100,000,000.
Don’t feel too bad for Bloodsucker McGuire. According to the Times, “he will still take home hundreds of millions of dollars from stock options. Over his 18 years at UnitedHealth, he banked more than a half billion dollars. UnitedHealth said last night that it was still negotiating whether he would receive a $5.1 million a year pension, which is called for in his employment contract.”
Furthermore, McGuire’s cronies shared in this shady ripoff. Says the Times, there were “45,000 separate stock option grants made to company employees.” What the Times doesn’t say – and perhaps nobody has even been able to calculate yet – is what the total cost was not only to the company's stockholders but also to the poor chumps (or their chump employers) trying to buy health insurance at a reasonable price. Somebody has to come up with all those billions the chairman and his buddies pocket for themselves. That somebody is you, pal.
There’s even more to the nightmare. Read the Times story (URL at the bottom of this article) and you’ll discover such shady practices as backdating, and what comes down to watering down the stock to enrich the chief and his cronies.
Remember, this is out of earnings that you or your employer paid into the company as insurance premiums, or were owed as dividends.
HOLY COW! AARP
SUPPORTS THESE THUGS!
One of the nation’s largest sources of supplemental Medicare health insurance is AARP. And guess who AARP’s supplemental insurer is? You guessed it. United HealthCare.
By the way, the head honcho at AARP is Bill Novelli, former handmaiden to big business when he was at the helm of the PR firm Porter Novelli. And wasn’t it Novelli who supported the present crummy prescription drug coverage for seniors, with the nightmarish “donut hole" and a chaos of confusing and ever-changing coverage choices?
Novelli said he supported the present system instead of holding out for a better deal because, according to his tortured logic, some insurance coverage was better than none at all. Right, and if you have a brain tumor, cutting off your head is better than no surgery at all.
Speaking of heads, should Novelli still be at the head of AARP? Should United Health Care (perhaps it ought to be renamed United Chairman Care) still be AARP’s health insurance company?
I leave that to the membership of AARP, who seem unconscionably, slow to bring themselves to a boil of outrage. Here at The New York Crank, we have bigger fish to fry.
AMERICA NEEDS A CHANGE
IN HEALTH INSURANCE POLICY
America’s health is too important to be left to the tender mercies of big business and the self-serving profiteers who run it.
This country needs to go to a single payer system, like most of the rest of the Western world. What would such a system look like? It would look a lot like Medicare.
Talk to most seniors and you’ll find that – except for the prescription benefit supported by Novelli – they’re quite satisfied with the way Medicare works. They get to pick their own doctors. They get to see specialists without obtaining permission from some insurance company clerk – or anybody else. And most of their doctor bills get taken care of.
But wouldn’t this cause an increase in taxes?
For sure. But hold on. You and your employer would stop paying out the king's ransom in health insurance premiums that’s now bleeding you dry. Almost guaranteed, government-insured healthcare would cost you less, simply because there’d be no legion of bloodsuckers to drain the system dry and no profits that need to be earned on top of operating costs.
WE ALSO CAN CURE
A LOT OF THE GREED WITH A CHANGE
IN INCOME TAX POLICY
Right now, the maximum income tax rate is 35% -- but only on the part of your income that’s over a third of a million bucks. Of course, if you earn less than $330,000 you pay a lower rate.
It’s that personal max tax of only 35% that makes corporate crime pay. Here's why:
If you grab money from your stockholders or customers – legally or otherwise – and if the money you grab is up there in the tens or hundreds of millions, or even billions, you still get to keep nearly two thirds of it. It has seemed – and probably will continue to seem -- worth the risk of getting caught to the likes of Bernie Ebbers, Ken Lay, Richard Scrushy and now William McGuire.
Even if you get caught – and then in a “compromise” designed by a not-entirely-impartial consultant you have to give some of the money back – you’re still hundreds of millions of dollars ahead.
Which leaves you plenty of loose change for $6,000 shower curtains, million dollar birthday parties for your second wife, and other “perks” of high-end money-grabbers.
But now consider: If from an annual income $2 million and up, the personal income tax rate climbed stratospherically, say to 70 or even 90 percent, the incentive to steal would vanish. Oh sure, the remaining 10% of, say, a $200,000,000 gift of stock to yourself is still more than $20 million – not exactly chicken feed. But somehow $20 million is a lot less tempting than $200 million. It starts to seem just not worth risking the possibility that you'll get your butt tossed into the slammer. So it would make a lot less sense to stick your hand in the cookie jar. And there would be a lot less demand for -- or temptation of boards ot directors to pay -- outrageous compensation.
CEOS GET DEPRIVED OF
For sure. They’d be deprived of incentives to steal, incentives to cook the books, and incentives to buy themselves costly toys (such as company-supplied limousines, jets and luxury apartments) with, say, your insurance premium money or the stock dividends you ought to have coming to you.
Only 25 years ago, most CEOs were making only a few hundred thousand a year. I don’t recall a single case where some Fortune 1000 corporation President or Chairman threw up his hands whining, “I can’t live on my salary,” and quit to pan for diamonds in Brazil.
Instead, big business attracted impressive management talent. Maybe it was even better talent than we have today, because the top people were in it for the joy of running a great company, or of growing a company, or of serving their customers and their clients.
Instead, we now have CEOs who claw their way to the top in order to grab more money for themselves.
A simple change in tax policy will fix that.
(For the full New York Times story about the scandal at United Health Care, go here):
Monday, October 16, 2006
Why health care is too important to leave to a bunch of greedy bloodsuckers out to get rich off your insurance premiums.
Posted by The New York Crank at 12:17 PM