Profit, Corporate Leaders, and Bankruptcy

The profit motive is what drives our capitalist society. It provides an incentive to produce goods and services in the most efficient way possible, thus leading to innovation and invention. Alot (or a lot) of the time it is a force for good, or at least progress, in our country, but sometimes greed can be a very harmful thing.

Corporate leaders become corporate leaders to make money... for themselves. This should mean that they have an incentive to make the business they chair make money. It would logically hold that the more money a company makes, the more money the CEO and other higher level executives make. Unfortunately, this isn't the case, and here we see the flaw in the profit motive theory. The CEO's pay (and multitude of bonuses and special pention plans) is determined by the board of directors. The people on the board also like to make money, and they're very good at it. They're favorite activity is giving each other pats on the back, followed by raises. "Our stock is plumeting? Well at least you tried, here's a multi-million dollar bonus." "The company's in bankruptcy and we have to cut employee pentions? Oh well, have another bonus." This viscious cycle of bonuses means that CEO's have much less of an incentive to make the company turn a profit. Indeed, bankruptcy is very appealing to corporations because it allows them to take certain 'cost-cutting' measures, such as getting rid of employee pentions, slashing employee pay, laying off hundreds of workers, and... most importantly... give the CEO a raise.

If there is to be any reform of America's bankruptcy laws, it should start at the corporate level to prevent execs from robbing their company while it sinks into the abyss, with thousands of American jobs sinking with it. Reform is the patriotic thing to do.