Corporate America's perfect storm of waste and greed
Recently, Ohio-based bank Fifth Third (FITB) drew criticism for its decision to spend $900,000 on a promotional scratch-off game that was designed to bring in fresh customers. Critics allege that the company, which received $3.4 billion in the recent bailout, wasted taxpayer funds on an expensive and pointless promotion.
On the bright side, at least Fifth Third's scratch-off game could be explained as a legitimate marketing expense. The same cannot be said of bad bailout poster-child AIG (AIG), whose lavish retreats and outrageous bonuses have inflamed taxpayers and politicians alike. Even in AIG's case, though, there's something of a silver lining to the anger and disgust: We're finally getting a chance to see how many of our once-respected corporations really do business.
For example, Chrysler's decision to spend hundreds of thousands of dollars on full-page thank-you notes in The Wall Street Journal and USA Today, probably seemed like a good idea at the time. The automaker must have thought that the American public would be impressed by its gratitude. Instead, scores of people wrote in with comments that ranged from mildly disgruntled to paint-blisteringly profane. The most effective response may have been the simple statement, "We were forced to help you. Thank us by acting responsible for a change." On the other hand, style points go to the person who stated "I'll put my kids on a mule before I'll put them in a Chrysler. Suck it, you parasites."
Of course, Chrysler's lack of sincerity might have been a problem, too. While it was thanking the American public, the car company was also suing individual states in an attempt to keep them from setting their own emissions standards. Somehow, the statements of appreciation rang a little hollow when the automaker was paying a fortune to block the democratic process.
As egregious as Detroit's expenses are, they don't really hold a candle to the excesses of Wall Street. While not as impressive as AIG, Citigroup (C) showed an astounding disregard for public perception when it tried to justify the purchase of a $50 million private jet after receiving billions in bailout bucks. Similarly, the financial services company's decision to spend $400 million to put its name on the New York Mets' stadium was particularly tin-eared, particularly given the fact that it was raising interest rates on its credit cards, even as it solicited bailout cash from the government.
Speaking of blowing dough on sports teams, Bank of America (BAC) has drawn fire for its sponsorships of the Boston Red Sox and the New England Patriots, as well the millions it spent on naming rights for Boston's Bank of American Pavilion. Ken Lewis has argued that these marketing expenditures are vital, stating "There are lots of business executives who just really enjoy having access to the teams and the athletes."
This might explain why Bank of America spent an estimated $10 million on a five-day, 85,000 square foot Superbowl party. The company's "NFL Experience" event and corporate sponsorship entitled its executives to seats at the game, access to exclusive parties, and use of a luxury suite. BOA claimed that it was contractually obligated to continue its sponsorship, but GM (GM), another corporate sponsor currently taking taxpayer money, chose to keep its execs at home.
While BOA was spending taxpayer money on sporting events, it was also using public funds to help organize the fight against the Employee Free Choice Act, a bill that would allow companies to unionize by either voting or by collecting written forms from a majority of employees. While BOA seems to be heading the fight, it is joined by AIG, another bailout recipient.
From outrageous self-indulgence to expensive self-promotion, the bailout has beautifully demonstrated that American business is too fixated on grand gestures, often to the exclusion of restrained competence. While football players and free drinks can be very impressive, many of BOA's customers would undoubtedly be more impressed by responsible stewardship of their hard-earned money.