After reading a post over at Daily Kos, it seems like at some point companies are going to have to wake up and realize that they’re not promoting the type of behavior that they want to by handing out golden parachutes. Of course if we keep bailing out these companies they’ll just never get the lesson. Business is all about risk and sometimes if the wrong things happen then it’s appropriate that the business fails. It’s the job of the board of a company to make sure that these risks are minimized.
I’m not sure I agree with the concept of “too big to fail”. If the largest player in a market goes belly up and closes their doors due to some really poorly placed bets, then the market is designed to allow for new competitors to jump into the space. It would be an easy bet since it would be obvious that there was a need to fill. I would like to personally see a lot of the firms we have now in both banking as well as other industries go under. Share holders should lose everything, share holder lawsuits should go after the executives for idiotic decisions that destroyed the company, and a fresh breed of companies (that survived by not taking outsized risks) fill in the gap.
Risk taking is great, money is made off of taking well thought out risks, but if you never lose, then bad bets and bad ideas are never cleared out of the system. From the reading I’ve been doing lately on finance it sounds like there are just a whole lot of bad ideas that need to be cleared out of the financial system.