By Brett Arends, MarketWatch
BOSTON (MarketWatch) — Here’s a brain-teaser for you.
Which corporate honcho bragged recently about his company’s strong resources, positive outlook and outstanding “execution” skills? Who said he was “particularly pleased” at recent developments, and predicted “competitive returns to shareholders in the quarters ahead”?
Tim Cook at Apple? Alan Mulally at Ford? Mike Duke at Wal-Mart?
None of the above. The answer is Jon Corzine, who runs MF Global Holdings Ltd. /zigman2/quotes/227704097/composite MF -7.89% He made those remarks a week ago. Yesterday the company filed for bankruptcy.
One week. No kidding.
You may be watching the news about MF Global and shrugging. You may think, “minor blowup on Wall Street, few injured.”
But you’d be wrong. What just happened at MF Global illustrates everything wrong with the U.S. economy. That’s right: It’s all here!
1. Spin, spin, spin
On Oct. 25, just days before the company collapsed, Corzine told investors that MF Global’s exposure to European government bonds was fine. These were “opportunities” to make good money, he said, and the position was “fully financed.” He added: “We remain confident that we have the resources and expertise to continue to successfully manage these exposures to what we believe will be a positive conclusion in December 2012.”
And this was in print — no mere throwaway quote on a phone call. Corzine added that over the past three months, a few things really stood out. “We were particularly pleased with the repositioning of our mortgage, credit and foreign exchange businesses; the performance of our commodities group; and the common alignment of our brand to strategy. These efforts reflect positively on our ability to execute and deliver competitive returns to shareholders in the quarters ahead.” Ah, good times!
Is shareholder capitalism working?
Taking a look at Nabors CEO Eugene Isenberg's $100 million severance-type payment.
2. Don’t think, just tick boxes
MF Global blew up because it took big risks and they didn’t pay off. But that’s okay. The company had a risk management “process,“ so everything was just peachy.
“The Company’s risk-management framework is an integral part of our control structure,” it boasted in is most recent quarterly filing. “Our risk management approach emphasizes compliance with our risk management policies and practices and each employee’s responsibility to function as a risk manager.”
MF Global recently undertook a new review of its risk management process. Given that the company blew up a few months later, you might assume that this review found flaws. Not at all. “The results of the review, together with certain aspects of our risk management framework, support our conclusion that the Company’s compensation programs do not encourage unnecessary risk-taking. Moreover, we believe that there are in effect adequate safeguards that would prevent, discourage or detect excessive risk-taking.” So that’s OK, then! They had a “framework.” And “compliance.”
Oh, and by the way: Marvel at how much jargon the company packed into those few sentences.
3. Heads they win, tails they flip again
You’ll probably hear a lot in the days and weeks ahead about how much Jon Corzine and the other honchos have just “lost” on their MF Global incentive payments, restricted stock, and options.
The options racket is grossly misunderstood by the wider public, which is, I suppose, just how the honchocracy like it.