Balzac’s maxim that “behind every great fortune lies a great crime” may yet prove a fitting epitaph for American capitalism. A recent survey by the Wall Street Journal reveals that CEOs at major US financial and real estate firms converted tens of millions of dollars of overvalued stock into cash prior to the eruption of the current financial crisis, even as many of their corporations approached the precipice.
The Journal analyzed the fortunes of CEOs from 2003 to 2007 based on executive compensation and stock sale data. Fifteen of these CEOs took home more than $100 million in cash during this period. At the high end was Charles Schwab, who made over $816 million from his self-named accounting firm, almost all of it from stock sales.
Of the 120 publicly traded firms the Journal analyzed, CEOs cashed out a total of more than $21 billion. However, data was gathered only from publicly traded companies, and thus does not include similar fortunes that have been made by “hedge fund chiefs, Wall Street traders, and executives who sold their companies outright.” Nor did it include data related to exit packages, the multimillion-dollar “golden parachutes” awarded to retiring or fired executives.
Two months ago, federal food regulators said they were unable to set a safety threshold for the industrial chemical melamine in baby formula. Now, however, they found a way to settle on a standard that allows for higher levels than those found in U.S.-made batches of the product.
Food and Drug Administration officials on Friday set a threshold of 1 part per million of melamine in formula, provided a related chemical is not present. They insisted the formulas are safe.
The agency had left the impression of a zero tolerance on Oct. 3 when it stated: “FDA is currently unable to establish any level of melamine and melamine-related compounds in infant formula that does not raise public health concerns.”
The FDA and other experts said they believe the melamine contamination in U.S.-made formula had occurred during the manufacturing process, rather than intentionally. The U.S. government quietly began testing domestically produced infant formula in September, soon after problems with melamine-spiked formula surfaced in China.