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Tuesday, November 07, 2006

The Responsibility Era Starts Now

In the signature promise of his 2000 campaign, George W. Bush pledged to usher in a Responsibility Era. Once he got the job, the president forgot all about that promise, but on Tuesday, the American people are going to keep it for him.

After record budget deficits, repeated political scandals, rampant bureaucratic incompetence, and the president’s stubborn refusal to admit mistakes, hold anyone accountable, or level with the American people, we thought the Responsibility Era couldn’t begin until Bush left office. But Americans aren’t willing to wait that long. For most voters, the 2006 election is about holding the Bush administration and the Republican Congress accountable for failing to provide the new direction the country so desperately needs.

The new direction Democrats offer this year includes many new ideas, but the most important is to bring back an old one: responsibility. More than any other value, responsibility has the power to solve seemingly intractable problems. We saw that during the Clinton years, when reforming the welfare system and balancing the budget showed that a new direction made progress possible in areas where failure had once seemed inevitable.

Over the past six years, we’ve seen how much weaker our nation is in an era without responsibility. No one will ever forget the shocking image of thousands of poor people in the Superdome after Hurricane Katrina, trapped by neglect even more than by the weather. Corporate shams at Enron and elsewhere rattled faith in free enterprise. If Americans had any faith left in politics, the parade of scandals led by Jack Abramoff, Tom DeLay, Bob Ney, and Mark Foley shook that, too.

Responsibility begins at the top. That means living up to the highest standards of public service. It means putting the nation’s books in balance, not running the country into debt. Above all, it means doing right by the future by making honest, good-faith efforts to solve the country’s problems, at home and abroad.

Citizenship is not an entitlement program. It’s not about giving people a program for every problem; it’s about establishing the tools and conditions that will enable them to make the most of their own lives.

Our best leaders have always understood this. The Founders set out “to form a more perfect Union.” Abraham Lincoln appealed to “the better angels of our nature.” F.D.R. rose from his wheelchair to show Americans how to look past their own pain, and to see how the fight would make us stronger in the end.

Americans understand it, too, and are bitterly disappointed that their president does not. Bush should have fired Donald Rumsfeld long ago. All four leading military newspapers just demanded the defense secretary’s resignation. But only last week, the president pledged to give Rumsfeld two more years to keep failing.

If the president won’t hold his own administration accountable for letting America down, the American people will have to do it for him. That’s a message they’ll send loud and clear on Election Day.

In a real Responsibility Era, we’ll set a new direction for America and hold Washington accountable for results. For the last six years, there has been a fundamental disconnect between the people and their government. At every turn, George Bush tried to make reality fit his ideology. To no avail: From Iraq to Katrina to the deficit, he saw his ideology mugged by reality.

A dose of reality and responsibility is exactly the medicine our ailing political system needs. The more we focus on the hard realities of the war on terror, the more we will do to build a world that looks up to America with respect and wants to emulate our way of life, not destroy it. The more seriously we take the real threats to our culture, the harder we will work to raise our children right, and the prouder we will be of what they become.

And the sooner we restore accountability to our political system, the sooner the American people will get the new direction they deserve and our country needs. At every turn, President Bush and the Republicans have failed to deliver the Responsibility Era they promised. If the voters have their way, the new era of responsibility will start at last on Tuesday.

Vote As You May, Bush Will Still Decide Foreign Policy

If you are one of those people — and there are a lot of you — who think today’s election is a referendum on President Bush’s conduct of foreign policy, in Iraq in particular, you are right. But if you are also one of those people — and there are some of you — who think that Tuesday’s results will have an impact on that foreign policy, then you are probably wrong.

If the Democrats win either the House or Senate (or both), there should be little doubt as to the reason for their victory. In a time of war, the conduct of American foreign policy becomes the electorate’s chief concern. Recently pollsters for ABC News / Washington Post asked respondents which issue will be foremost in their minds when they cast their vote. Iraq topped the list at 31 percent. Add to this the percentage of respondents who said terrorism would be foremost (11 percent), and a plurality of those surveyed named foreign affairs as the most important issue in this election. Last week pollsters for Newsweek asked respondents the same question. In the Newsweek poll, Iraq also topped the list at 32 percent, and terrorism came in third at 12 percent. That’s 44 percent of respondents who named matters dealing with foreign policy as the most important issue of the 2006 election.

This is the third election since the war on terrorism began, for the United States, on September 11, 2001. In the previous two elections, the prominence of national security issues has helped the Republicans. But times have changed. National security and American foreign policy still dominate our politics, but the Republican advantage on those issues has almost been erased. And you most likely already know why. The lack of a clear victory in Iraq has soured the public on President Bush and his perceived enablers in the Republican Congress. Last week’s New York Times poll was especially revealing. Not only did respondents cite Iraq as the single most important issue in this election, they also seem to have repudiated Bush policy. Only 20 percent of respondents in the Times poll said the United States was winning in Iraq. Just under a third of respondents approved of the manner in which Bush has conducted Iraq policy.

All year long, Democrats have portrayed the midterm elections as a referendum on Bush while Republicans have emphasized the costs (in their view) of Democratic majorities in Congress. Because the electorate so strongly disapproves of the conduct of the war in Iraq, it looks as if the Democratic portrait of the election will most closely reflect Tuesday night’s returns. The problem for Democrats is that while they will almost certainly benefit politically from Bush’s failures in Iraq, they will also have almost no power to change things.

The structure of American constitutional government entrusts the presidency with primary authority over foreign affairs. The upper house of the legislature has the power to ratify treaties and both houses exercise power over the purse. In the past, Democrats have used that power to cut off funding for unpopular wars such as Vietnam. But the Democrats I talk to say it is unlikely Nancy Pelosi would choose to fight such a divisive battle with President Bush. It is more likely House Democrats would put to a vote a resolution proposing a timetable (without any specific times) for American withdrawal from Iraq. Let’s say it passed. How would Bush respond? He’d ignore it.

There are two ways Congressional Democrats might be able to influence American foreign policy. The first is that, if Democrats gain a majority in the House, they will begin to launch investigations into war contracts and waste in military spending. And they will also be sure to harangue administration officials whenever one shows up for a hearing. Democrats can be nosy, and they can be loud.

Second, if Democrats win big tonight, it will become more and more difficult for the administration to avoid the fact that its current policies in Iraq have brought it nothing but controversy and unpopularity. If Bush has any chance to rescue his reputation, it lies in adapting to realities on the ground — perhaps by sending more troops to buttress the Maliki government — and changing the cast of characters in Washington, perhaps by letting Defense Secretary Donald Rumsfeld resign.

In the end, though, voters hoping for change must recognize that in matters of foreign policy, it is the president, for better and for worse, who is the ultimate decider.

Monday, November 06, 2006

America's Laziest Man

November 7, 2006
Op-Ed Columnist

Last year, Barry Diller took home a pay package worth $469 million, making him the highest-paid chief executive in America.

His shareholders didn’t do so well. Stock in the main company he runs, IAC/Interactive, declined 7.7 percent last year. For the three years ending in December 2005, the stock was up just 11 percent — compared with 49 percent for the S. & P. 500.

Just think! If you’re capable of running a company only a little worse than the average C.E.O., then Mr. Diller thinks you’re worth almost half a billion dollars!

So I’m delighted to announce that Mr. Diller is this year’s winner of my Michael Eisner Award, given annually to commemorate the former Disney chairman’s pathbreaking achievements in corporate rapacity. The winner of the Eisner award receives a shower curtain — this year it’s a lovely pink floral model costing $5 — in honor of the $6,000 one that Tyco’s shareholders purchased for their former C.E.O.

There’s nothing wrong, in principle, with a big pay package. Baseball players, movie stars and investment bankers often get outrageous pay, but after arms-length negotiations. That is capitalism at work, and nobody is getting ripped off.

In contrast, as John Kenneth Galbraith once noted: “The salary of the chief executive of the large corporation is not a market award for achievement. It is frequently in the nature of a warm personal gesture by the individual to himself.”

Consider Mr. Diller. As my Times colleague Geraldine Fabrikant noted in an article about his pay, he owns 2 percent of IAC but controls 56 percent of the voting stock. In effect, he chooses the board — and thus the members of the compensation committee who decide his pay.

There are different ways of valuing compensation. A research firm called the Corporate Library calculated Mr. Diller’s as $295 million from IAC (not counting another $174 million from Expedia, an IAC spinoff). Most of these sums were in options that had been granted much earlier but exercised last year.

Another way to look at it is to focus not on the value to Mr. Diller but on the cost to the company. By that method — counting newly issued options but not the exercise of older ones — IAC paid him $85 million last year, according to a research firm called Glass Lewis & Company.

Each research firm said that by the method it used, Mr. Diller was the highest-paid chief executive last year.

“This is a grab fest,” said Jonathan Weil, managing director of Glass Lewis. “I don’t see any justification for this company paying him that.”

So how does the company justify it? In its proxy statement, IAC said that its aim was partly to align Mr. Diller’s interest with those of the shareholders. Funny alignment, since it meant that a sum equivalent to 9.8 percent of the company’s profits last year vanished into his pocket. In contrast, in the best-governed companies the chief executive takes home an amount equivalent to 0.2 percent of earnings.

IAC also said that the package was necessary to “motivate Mr. Diller for the future.” Goodness, this man needs a lot of motivation! He required about $150,000 every hour just to get motivated — suggesting that he may be the laziest man in America.

Mr. Diller spent 20 minutes trying to drum sense into me, but I’m not sure it was worth $50,000 worth of his time.

“It’s by any standard a great deal of money,” he said of his compensation, but he also advised that “it’s lazy and dumb” to focus on income from options that were issued years ago. His icy tone almost froze my telephone line.

As for the newly granted options, he noted that to be exercised the stock price must rise and he must stay with the company for five years. He initially insisted that they thus had no value, although he backed off when I cited Black-Scholes option pricing models that value his new options in the tens of millions of dollars.

Am I being mean to Mr. Diller? Perhaps. He is a giant in corporate America who has sometimes shown tremendous vision on behalf of shareholders (the same was true, early on, of Mr. Eisner).

But we have a broad problem in this country of C.E.O.’s reaching into the till and overpaying themselves at shareholders’ expense. The average C.E.O. earns 369 times as much as the average worker, compared with 36 times as much back in 1976.

Better governance and more transparency may encourage restraint, and so may a dash of ridicule. Let’s hope that Mr. Diller will shower behind his pink vinyl shower curtain and learn the concept of shame.

Sunday, November 05, 2006

Maira Kalman - The Principles of Uncertainty: Paris

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