All The World’s A Stage…
All the world’s a stage,
And all the men and women merely players;
They have their exits and their entrances,
And one man in his time plays many parts…
Last scene of all,
That ends this strange eventful history,
Is second childishness and mere oblivion,
Sans teeth, sans eyes, sans taste, sans everything.
William Shakespeare 1564-1616
There were plenty of actors reciting their lines and creating theatrics for the markets on Tuesday when news “broke” that The Northern Trust Bank had spent lavishly on a golf tournament in Los Angeles. The irksome part, I guess, is that the bank had accepted bank bailout funds.
No less than Maureen Dowd chimed in:
Talk about being teed off.
The economy is croaking and bankers are still partying at a golf tournament here on our dime.
It’s a good argument for nationalization, or better yet, internationalization. Outsource the jobs of these perfidious, oblivious bank executives to Bangalore; Bollywood bashes have to cost less than Hollywood ones.
The entertainment Web site TMZ broke the story Tuesday that Northern Trust of Chicago, which got $1.5 billion in bailout money and then laid off 450 workers, flew hundreds of clients and employees to Los Angeles last week and treated them to four days of posh hotel rooms, salmon and filet mignon dinners, music concerts, a PGA golf tournament at the Riviera Country Club with Mercedes shuttle rides and Tiffany swag bags.
Barney Frank and John Kerry were apoplectic:
“This behavior demonstrates extraordinary levels of irresponsibility and arrogance,” Frank wrote in a letter to Northern Trust’s chief executive. The letter was signed by 17 other Democrats on his House Financial Service Committee.
“I’m sick and tired of picking up the newspaper and reading about another idiotic abuse of taxpayer money, while our country is on the brink,” Kerry said in a statement after sending a letter to Treasury Secretary Timothy Geithner.
Similar concerns were expressed when AIG spent money on a lavish conference at a spa after being essentially “nationalized.”
I am no bank apologist. In fact, my position has been clear. Let them fail. No more dollars for bailouts.
But the problem here is not with the banks and their executives. Expecting them to act differently just because they’ve received taxpayer money to plug the holes created by greedy, selfish, incompetent, self-serving hubris is too much to ask. Banks, investment companies, large insurers and brokerages have been receiving government support in the form of laissez faire attitudes towards off-shore tax havens, weak accounting rules and accountants’ enforcement of mark-to-market, lax enforcement of antitrust provisions regarding double-dealing by ratings agencies, good-housekeeping seal approvals intended to lull investors into complacency provided by the government-sanctioned oligopoly called the Big 4 audit firms and various billion-dollar tax breaks for a while.
I no more trust the bankers to do the right thing with free, no-strings attached money than I trust my beloved, cupcake of a Rottweiler Rosie alone with my nieces and nephews. She can eat a remote control whole, batteries and all, and then lick my toes with a smile.
The problem is the bailouts. They were rushed in, with no conditions, expectations, controls or frameworks for monitoring. And we put the firms who were responsible for looking the other way while it was all happening in charge of developing the controls and monitoring.
What kind of a Twilight Zone are we living in?
Don’t take my word for it. Here’s Elizabeth Warren’s opinion.
Treasury Secretary Timothy Geithner, like his predecessor Henry Paulson, also has failed to articulate a clear strategy for the $700 billion rescue, said Elizabeth Warren, head of the Congressional Oversight Panel for the Troubled Asset Relief Program. The bailout is now called the Financial Stability Plan.
“These general frameworks do not provide an adequate foundation to oversee Treasury’s activities or to measure the success of the TARP or the Stability plan,” Warren, a Harvard Law professor, told the House Financial Services subcommittee on oversight today.
Ok, I promised you some Riviera Country Club scoop. I was chatting on Saturday with a friend who has it. The word about the sponsorship and its conflict with the bailout funds was already out on Saturday. But it took until TMZ.com, of all pubs, reported the info on Tuesday for the Congressional talking heads to start bloviating.
What he said:
Truthfully, this is, in my opinion, a huge joke.
I’m no fan of the banks, etc., but so far as I can see, Northern Trust is getting shafted here. First, not one media report I heard yesterday mentioned that this was a PGA Tour event (i.e. a well-known, high-profile promotional vehicle), instead simply saying that they “hosted a golf tournament” – as though it was some private getaway for executives. TMZ (I’m told) even made a big deal that participants were “being driven around in Mercedes” – those being being tourament courtesy cars that are provided free!
One might reasonably argue that given the state of things, the evening parties might have been curtailed a bit, but Northern Trust is trying hard to return the event to its former glory, spending LOTS of $$$ on promotion, upgrading the event’s temporary facilities, etc. The PGA Tour is an ideal marketing vehicle for them, and in my view, they did zero wrong here.
The LA Junior Chamber of Commerce (why “Junior?”) which runs it has been mailing it in for at least five years, partially (perhaps) because the previous sponsor, Nissan, had largely lost interest after moving their HQ to Tennessee. Historically, this was one of the two or three biggest events in golf (not counting the four Major championships) and Northern Trust seems intent on rebuilding that status with a larger purse, more advertising, more perks to attract elite players (read: Tiger), etc.
For all I know, they might be the biggest robber barons on earth. But in this particular instant, while a really shrewd mind might have scaled back the evening events for cosmetic reasons, they did nothing whatsoever out of line relative to any large professional golf event.
So far as I can see, they did NOTHING that every other sponsor of a PGA Tour stop doesn’t do – save for doing it on a slightly larger scale than many (but certainly not all) because they’re trying to rebuild the event, and because this is L.A.
This whole thing is ludicrous, and grossly unfair – and that’s coming from a Democrat who absolutely blames Wall Street. But NT is getting shafted here.
Barring any malfeasance as yet unreported, this is much ado about NOTHING.
Here’s the thing. Most if not all companies that receives Federal funds via either one of two vehicle: contracts or grants. In either case there is a written document setting forth the rights and responsibilities of the parties. For example, the Federal Acquisition Regulation (Volume 48 of the Code of Federal Regulations) contains literally hundreds of pre-written contract clauses, along with prescriptive guidance that tells warranted contracting officers which ones to include in various contracts and how to administer the contracts. There are OMB Circulars to tell educational and not-for-profit institutions what to do and how to do it. There is case law going back to World War I to tell attorneys and judges how to interpret these clauses. Same thing for grants. There are cost principles that tell commercial institutions what costs can be billed and what costs cannot be billed to the Federal government.
Then along comes TARP and it was clear at the time, just as it’s clear now, that the previous Administration was not interested (or if you prefer did not have the time) to fit the TARP funds into the existing framework that would have provided guidance to the parties involved and set appropriate expectations. What are TARP funds? Are they contract funds for which something is expected in return? Are they grants? No — they are some bastard red-haired stepchild, neither fish nor fowl. And we should NOT be surprised when recipients of TARP funds take advantage of all the loopholes the Feds gave them.
But it was surpremely stupid for NT to act the way it did. They saw the auto execs get grilled over the private jets, when we all know that the marginal cost of the jets’ trips to DC was de minimus. It’s not the fuel & pilot that costs the money, it’s the ownership costs. But still Congress yelled about the corporate jets and the Daily Show did its pieces and now it’s ingrained in the American subconscious that the auto industry failed because the executives flew on private jets. So my point here is that NT should have known better. Hiring the big name bands was stupid; throwing the lavish parties with the Tiffany gift bags was stupid; and spending so much so obviously was damn-near criminally stupid. The NT executives may not have expected the reaction they got; still they should have expected something.
Quentin Tarantino said it best:
Still I hafta say, play with
matches, ya get burned.
You don’t be givin’ Marsellus
Wallace’s new bride a foot massage.
You don’t think he overreacted?
Antwan probably didn’t expect
Marsellus to react like he did, but
he had to expect a reaction.
Yup, I totally agree. I think accountability should take the form of compensation packages linked to performance. We need to look at five and ten year horizons.
A pat on the head from me to Rosie. It is just our very animal nature we are watching on display these days. Oh how I wish we could quit denying what we are and pretending we are what we aren’t. Maybe then we could devise a form of governance that actually works.
Try Daniel M. Wegner’s THE ILLUSION OF CONSCIOUS WILL and Daniel Goleman’s VITAL LIES, SIMPLE TRUTHS: THE PSYCHOLOGY OF SELF-DECEPTION if you need help understanding why we bless the meek at church and turn around rob them at the office.
Nice piece Francine, it’s good to know there are some who understand.
The official justification behind the bailouts has been to save the banking system. The fact of the matter is the actions taken have only accelerated its demise by destroying the foundation of every banking system, TRUST. The only chance the gov’t ever had of solving this crisis was letting each and every institution who took too much risk fail and by prosecuting each and every executive who knowingly committed fraud. Those actions, and only those actions can bring trust back into the system. The actions taken thus far have done the exact opposite by continuing to mask the toxicity that is STILL lying out there.
I didn’t realize it was a PGA event. That makes 100% more sense to me now.
Its interesting to think about how you should manage your promotional activities in light of receiving government funds. I agree that the oversight is weak (Who had time to develop it really?) and I am not surprised by the anything that NT, AIG or anyone else did since you can just ask corporate culture to turn on a dime because the taxpayer says so.
I got into it with my socialist fiance concerning these types of events. I was saying that it might be an economical way to get around executive compensation caps. If your goal is to retain the “brain trust” that you have, than it is probably cheaper to pay your execs 400k salaries and have a few multi-million dollar events then to pay them in the upper six figures and have the traditional gigantic bonuses. In the end, It’s probably better to let people leave if they are not going to be motivated to work in this environment.
My fiance of course feels that everyone’s salary should be capped and about 150k, but that is another story.
Francine – saw the Northern Trust postings, and had seen all the negative misleading articles about the “golf tournament”. I noted with interest that you did post the one, accurate, article re: the PGA event – which this was, and NT had done nothing to hide their sponsorship.
FYI – Buick is sponsoring golf tournaments,…although they did end their sponsorship of Tiger Woods.
Ford sponsored Phil Mickelson, but didn’t renew its contract with him last year when it expired.
Golf is a big advertising medium for many companies. It is a multi-billion dollar international business – between playing golf, purchasing golf equipment and accessories and clothing, and golf travel. The demographics of golfers and those who watch golf – the PGA and LPGA, European events, and the other lesser tours fits many of their demographics – higher income, persons who buy cars and jewelry and second homes, take vacations, invest in the stock market, have private bankers and financial advisers (yes, even today -although, on a lesser scale). You can be sure that many of the people attending and watching the Northern Trust tournament were the types of customers that NT markets to.
The sponsors of the tournaments and the golfers look at it this way – the dollar value of the exposure they get. For example – for Nike – when Tiger is on TV all weekend in a tournament, the exposure for them translates into extremely inexpensive advertisng. The swoosh is on TV for hours. Today, for example, Paul Casey was on TV for 36 holes of golf in the World Golf Championships…a Nike guy…with Nike hat, clothing, clubs…the swoosh was on TV. He played against Jeff Ogilvy – who is sponsored by Puma. It’s advertising. They all have to still promote and advertise – even the banks and the car companies.
It’s a sad day when – for example – an auto supplier (true story here in Detroit) sponsors a charity golf event for a major charity….in its home community…..and while still honoring its commitment to the charity event, isn’t sure they want their name associated with the event in print media or on the free radio spots – because of “how it will be perceived” when the company is losing money and people are taking pay cuts or losing their jobs. But you know what – they are doing the right thing…using the event to entertain customers and to give back to the community to “do good”.
Yes – they have to be honest, fair, and responsible – and they should be held to a higher standard when they are taking Federal TARP money. Howver – we owe it to them to also be honest, fair, and responsible. And..if they are playing by the rules and not doing anything illegal with the money….then, we need to accept that. If our government needs to attach strings and force more accountability – then, they should…because, certainly, some of the companies that have taken (even, begged for) government bailout money are not playng fair, are stretching the rules, are doing things they shouldn’t be doing.
In my opinion – the NT tournament was not illegal nor immoral. Bd judgment? Possibly – possibly not – I haven’t seen where anyone has asked them for their analysis of the cost/benefit of sponsoring this tournament. And – note – Ginn Resorts, a few weeks ago, backed out of its commitment to sponsor LPGA and Champions ZTour golf tournaments – and, was promptly sued for breach of contract.
Life goes on. The companies still have to operate, sell, advertise, produce, promote. Yes, they have to be smart and honest about it. But we have to be honest about it and how we treat them, too. The “lavish golf tournament” stuff re: Northern Trust was, at best, totally unfair to them. And at worst, it was a smear campaign.
Please consider whether people are upset at the sponsorship of the golf tournament — which was almost certainly paid for prior to receipt of the TARP funds — or at the other shenanigans, such as hiring the House of Blues in its entirety for the night for a special concert by a headlining act. What do you think that cost? $100,000? $500,000? Somewhere in that neighborhood, I would guess. And for what? Do you think deals were closed at the bar? Were business partners wooed by Earth, Wind & Fire, or Sheryl Crow? I think not. I can’t conceive of a reasonable business jusification for that kind of excess.
There is sponsorship — brand awareness — and then there is wasteful, tasteless excess without any business justification whatsoever. It is the latter actions that draw folks’ anger, and not the first.
— Tenacious T.
TT – Why would you “think not”? More importantly – do you know that they didn’t close any deals, or that they won’t close any upcoming deals because of this event? Why the skepticism – don’t you “trust” them?
I’ve been to events such as that. At golf tournaments and at conventions. While you may find it hard to believe – yes, business is done at them. Let’s agree to disagree – while you say “wasteful, tasteless excess with out any business justification whatsoever” – I say – likely (and no, I don’t know this for certain) they had business reasons for this – but since neither you nor I sat in on the meetings leading up to the event, and since neither you nor I have spoken with any execs at NT about this – neither you nor I are in a position to pass judgment – which is my point.
– Ron S
I hear you, and you make a valid point. Let me rephrase my position for clarity, and then we can agree to disagree.
Are there deals that can only be closed in large groups of people gathered to hear big-name acts? (Or, granted, just before or after.) Are there deals that can only be closed in the presences of spouses? Or, as I maintain, could those same deals (if any) have been closed in smaller, more intimate — and much less ostentacious — environments?
Why am I skeptical? Only because I have seen, over and over, those expensive perks used to entertain top leadership and their spouses (primary purpose) and entertain clients as an afterthought. I have closed deals after such largesse, but never during. And by “after” I mean days or weeks after, not just after. I never experienced a direct linkage between dropping thousands of dollars on a potential client and closing a deal. Such parties & whatnot were never the competition differentiator, or even relationship enhancer, that others claimed them to be. (Unless you had pics. That was always effective.)
I acknowledge, though, that your mileage may vary.
— Tenacious T.
I would argue that people are getting frustrated by standard business practice. I know it’s a tough sell. Does a golf tournament represent the best use of funds? Should we tell people barely getting by that their tax dollars should be spent on a golf tournament?
My main point is that the ways to safeguard taxpayer money are the same ways you guard shareholder value. You need to make sure interests are aligned. If you tie exec. comp to long term organizational goals, you can effectively align interests. One of those goals should be repaying the federal government.
It looks like NT has repaid (or is going to be repaying soon) all of the TARP money it was given/it borrowed.
NT was profitable last year.
Maybe, just maybe – they ARE doing a good job managing at NT? Maybe they are trying to safeguard shareholder value? If the shareholders don’t like it – and/or don’t like what and how management is doing – as always – they can sell and become ex-shareholders.
If NT pays back the TARP money then this is a non-issue for me. I have no issues with how they spend their own funds. Hire Earth, Wind, and Fire; hire Sheryl Crow; hire Nancy Sinatra. I couldn’t care less. I’m glad NT chose this path. If, as I’ve heard asserted, they didn’t need the TARP funds in the first place, then giving the money back should be no big deal.
You don’t like the publicity and strings that come with receiving Federal bail-out money? Give it back. Problem solved.
Wouldn’t it be great if all problems had such easy answers?
— Tenacious T.
If Northern Trust spent the equivalent on a direct-marketing campaign to attract capital from investors – there wouldn’t be anything exciting to report. Event sponsorship can be one of the most effective ways to bring in new capital. Event marketing is gets the prospective client’s attention and connects consumers with brands faster than any other media.
Should TARP institutions stop trying to raise money from investors and depositors? Just wait for more government bailouts?
Should they only use less targeted, less effective and more expensive promotional means like junk mail and radio ads?
Today I posted an article TARP from the POV of the event industry.
If Barney screams loud enough maybe we can ban all financial institutions from promoting themselves via live events.
Maybe we can stop all publicly traded companies from sponsoring trade-shows, conferences, employee incentive and the Christmas party too?
But who will employ all the limo drivers, waiters, chefs, florists, printers, car rental and airline employees?
Do we really want to destroy hundreds of small businesses in order to punish companies for marketing?
@TT – execs at those big shows get private booths and tents where they *CAN* close said deals. 🙂
Krupo and Brian,
I hoped I was clear in differentiating between brand enhancing events, such as sponsoring golf tournaments, and the ancillary events that surround them. I have no problem with the former if there’s a good business rationale for the sponsorship. I have no problem with the latter if the events are not ostentatious and a reasonable use of shareholder funds.
But what NT did doesn’t meet that standard. You can’t justify flying execs and their spouses around, throwing lavish parties with headliner-level entertainment and Tiffany giftbags, under any standard of reasonableness I adhere to. What’s the rationale? “Because we can,” that’s the rationale.
You do remember the allegations surrounding Tyco, right? How are NT’s actions materially different?
— Tenacious T.