Over the weekend the news exploded that Rick Wagoner "resigned" from his job as the Chief Executive Officer (CEO) at General Motors (GM). The "resignation" was clearly forced by the Obama administration. I am quite supportive of this action. Needless to say the forced resignation of the head of a major private corporation has led to a plethora of articles and posts concerning its appropriateness.
Larry Kudlow had a spirited discussion on this issues. Essentially the discussion can be divided into three themes: 1) Keep the government out of private enterprise, 2) Force the companies into a structured bankruptcy, and 3) Let the government take action to clean-up private enterprise. See Larry's article: "A ‘Truly Breathtaking’ Departure". (March 30, 2009)
When the news broke, my reaction was, its about time!!!! As I read on, I noticed that many comments were simply along the line of we have to keep the government out of private industry. I was aghast at the lack of logic behind these comments. If our corporate leaders are incapable of running their organizations they should either resign or be fired. The board of directors (who have a fiduciary responsibility to review the performance of the CEO and to act on behalf of the shareholders) appear to be out to lunch. To make matters worse, management frustrates the attempts of shareholders who question the actions of management to take measures against management. Private enterprise is about responsible and accountable corporate management not pillaging the company.
My conclusion, if corporate leaders run a corporation as their own private fiefdom and thumb their nose at the public and the shareholders; the government has a right to step in and remove them. We still have several hundred more CEOs to go, like those of GE and Pfizer.
Though Kudkow clearly views the removal of Wagoner as ushering in a new era of government controlled business, his show was quite gratifying at looking at the "firing" from a wide variety of perspectives. As an excellent comprise offered by Kudlow, which I did not think of, was using the bankruptcy process to clean-up these corporations. One way or another, corporate executives who fail to perform, need to be removed for the free market to survive and thrive.