Corporate Events and the Bailout

Today over at Huffington Post there’s an article about another bailed out bank spending scads of money on corporate junkets.

I understand the outrage.

As a Democrat, it’s hard to square the idea that a financial institution, who received financial help from taxpayers, would then turn around and use money, whether it came out of that pile or not, for something so seemingly frivolous.

As with most things, there’s another side to the story that’s not getting told.

As some of you may know, I do events like this. Not necessarily for banks or whatnot, but for corporations. Most of the time, these events are to reward top performers in their institutions for their work, or to bring in new business in promoting a specific product or service. This may not have been the case in this particular instance, but you get the idea.

Hundreds of millions of dollars every year are spent producing these events. From flights and hotel rooms for attendees, to catering and event space rental, to the equipment, like lights, sound and video, and staff, like me, to support the actual meeting.

This is an industry that flies under the radar. Few people ever really think what it takes to organize an event that may only support a few hundred people, but cost per person on a weeklong event can come to $1000 a head. The money spent goes to people like me, hotel staff and all the people who support the event throughout the chain.

Because of the planning that it takes to produce an event like this, we haven’t seen a huge downturn yet, but it’s coming. Most events start planning a year or more out. For most companies, the initial out of pocket expenses to produce such an event, makes it unrealistic to cancel. A cancellation may save some money, but with no return on investment. It makes more sense for them to do the event than to cancel because even though it may mean a loss of cash flow, they reckon it’s not as bad as the perception that would follow a cancellation, or the potential loss of investment on a new product or service rollout.

So while I understand the outrage, and the political impact of exploiting said outrage, as a capitalist, I also understand that the majority of these events are legitimate marketing expenses that organizations have used over the years to drive profit or brand loyalty in their customer base, or to increase a knowledge of standards or provide additional training to their employees.

Obviously, there are exceptions. I can’t defend events I haven’t done, because I don’t know enough about them. For that matter, I can’t defend some of the events I HAVE DONE. But the whole scene is more complicated than some would have you believe, and while I certainly have a great deal of self-interest in writing this, I also think it’s important to not “throw the baby out with the bath water” when talking about corporate events.

99% of the events that happen out there are not junkets, populated by balding men chomping on cigars, sitting in steam rooms wrapped in towels or getting Swedish massages. Nearly every event I’ve ever worked served some higher purpose for the company. They wouldn’t spend the money if they didn’t believe they would see some ROI, particularly now.

In closing, I would advise companies that have received any government money and intend to host an event to strive for more transparency. Bailout money may have been specifically for increasing fluidity in the credit markets, but the reality is that $700b cannot replace the $5t that was taken out of the market as the result of a loss in confidence. If your event’s purpose is to increase confidence to bring these people back into credit game, more power to you. You will need to disclose this to avoid public ire.

On the flip side, be responsible. I know this is a foreign concept to many out there, but while events like this may be inherently stimulative to the economy, they should not be used as an opportunity to reward irresponsible behavior. You’re already in the spotlight, don’t make it any worse on yourself.

Finally, while it may be politically expedient to key in on events as wasteful spending, don’t let this distract from the REAL problem; lack of meaningful and effective regulation on the financial markets. It’s hard for any politician to walk away from an easy smack down, but the truth of the matter is there is a lot of legislation that needs to happen to bring a positive resolution to the problem. Confidence cannot be restored until the financial markets have clear and effective rules designed to protect investors from the situations that led to the collapse. This may not be as sexy, or get you face time on cable TV, but ultimately, it’s the ONLY thing that is going to turn the credit market around.

One thought

  1. Steve, taxpayers have the right to be angry over most of this stuff. My belief, is that we are going to discover companies like AIG and many of the investment firms were both corrupt and incompetent. No risk management, bogus rating systems, ponzi schemes, misrepresntation of facts,….. the list will go on and on. As a republican, I would like to see my party talk about these system failures, but that “ain’t gonna happen.” Play time is over !!!

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