Richard S Fuld, Jr, former CEO of Lehman Brothers (now bankrupt) –
Fuld had become more isolated and arrogant. (p.208)
As the firm’s leverage increased, Fuld’s grip on his management and board grew. He was revered by so many people in his circle of senior advisers that almost no one dared to speak out about the firm’s risk and leverate, and almost never to Fuld himself. Everyone else was so scared to be cursed at in public or even fired that they simply kept their mouths shut.
Fuld’s leadership was more like that of a cult leader than even that of an imperial CEO. (p. 209)
Maurice R (“Hank”) Greenberg, former CEO of AIG (now bailed out by the US government) –
Greenberg had begun the financial products group that sold all those [now discredited] credit default swaps in the late 1980s….
Greenberg had a love-hate relationship with the group and its various leaders. He hated the risks they took and the independence the top people in the group sought. But he loved the profits the financial products group … produced.
Yet Eliot Spitzer, the New York State attorney general and by now Wall Street’s most famous enforcer, believed Greenberg ran a company that regularly committed accounting fraud and created fictional profits through a series of sham transactions that had nothing to do with credit default swaps. Greenberg considered these possible transgressions so trivial that he called them ‘foot faults,’ as in a minor foul in tennis.
Greenberg eventually did resign…. (p. 204)
[and the financial products unit nearly drove AIG bankrupt]
John A Thain, former CEO of Merrill Lynch (bailed out by being forcibly merged into Bank of America under pressure from the US government)
Over time, it became difficult to keep track of every statement coming out of Thain’s mouth that turned out to be wrong since nearly the moment he had taken over as CEO. (p. 417)
Thain was becoming unhinged; during a briefing in one of his finely decordated conference rooms that had been part of the $1.2 million office spending spree, people close to the firm said, he completely lost his compusure when an aide informed him about the size of the [company’s] losses. What Thain did isn’t clear, but Merrill Lynch had to replace a shattered glass panel that appeared to have been the target of the CEO’s rage. (p. 419)
– Sanford I Weill, former CEO of Citigroup (bailed out by the US government)
But in reality, Will never really ran anything. He was a visionary, to be sure, but one whose vision was so myopically focused on building the empire had lusted for for so long and on its share price that he ignored just about everything else. (p. 144)
So here we again have reminders of how bad leadership of major US financial firms lead to the collapse. We had discussed a series of such factors and how they obtain in health care, suggesting that health care is undergoing a bubble likely to burst just as badly as did the financial/ housing bubble.
However, I supplied these quotes not just to underline this point. It turns out that Mr Fuld, Mr Greenberg, Mr Thain, and Mr Weill have something in common other than having helped to lead their financial firms toward the brink, something in common with relevance to health care.
We recently discussed the outsize compensation given to the current CEO and other top leaders of one of the country’s revered medical centers, New York – Presbyterian Hospital. I suggested that such “compensation madness” will continue to inflate the health care bubble. What that post did not discuss was how these leaders got to be so well paid. Presumably, their compensation was set, or at least acquiesced to by the Board of Trustees of the hospital. So I thought it might be entertaining to see who is currently on this Board.
According to the medical center web-site, the Board of Trustees as of October, 2009, was quite large (including 88 people by my count). The web-site lists only names, not biographies, so that who most of the members are was not obvious. This lack of transparency, which is not uncommon in health care organizations, would make figuring out who all the people ostensibly responsible for the $9.8 million dollary man are quite laborious. However, I did recognize a few names immediately. These were Richard S Fuld, Jr, Maurice R Greenberg, John A Thain, and Sanford I Weill.
Thus, the Board of Trustees of New York – Presbyterian Hospital includes four of the most well-known architects of the global financial meltdown. Thus, is it any wonder why the Board of Trustees was happy paying the CEO of a not-for-profit health care institution at a level comparable to a for-profit corporate CEO? (And is it any wonder that the Dean of the Faculties of Health Sciences and Medicine, and Executive Vice-President for Health and Biomedical Sciences at Columbia University, one of the two medical schools that provide students, trainees and faculty at New York – Presbyterian Hospital, once admitted that the school’s main criterion for faculty success was ability to generate external funds, which he called being a “taxpayer,” rather than ability to teach, research, or take care of patients?)
As we have discussed before, boards of trustees of not-for-profit health care institutions have a primary duty to uphold the institutions’ missions. Thus, one would think such boards would be selected according to their dedication to their missions. But perhaps, in the grubby real world, there may be more important criteria, possibly such as the size of their donations to the institution. Furthermore, those likely to donate the most may be more likely to be richest (and perhaps most in need to making themselves appear philanthropic and public-spirited) than the most fervent upholders of patient care, teaching and research.
Maybe giving stewardship of our once proud health care institutuions to people most likely to defend their missions, rather than most likely to donate a lot of money, would result in somewhat poorer institutions which do a better job of patient care, teaching and research.