Northern Rock board could keep their jobs

Following is a letter sent to the Editor of the Telegraph of London:

The possibility that the senior management of Northern Rock will stay in their posts is exactly what should NOT happen (“Northern Rock board could keep their jobs”). The moral hazard of any bailout is accentuated by not having senior managers lose their jobs when they manage their companies to the point of needing a bailout.

Depositors cannot be expected to be on top of these issues.

The losers of any bailout need to be the senior managers and the shareholders, otherwise, why not bet the shop and, if the bet comes off, I am rewarded with millionaire bonuses and, if not, apply for a bailout and start again.

The wrong message will be sent if this senior management team remains.

Onésimo Alvarez-Moro

See article:
Adam Applegarth, the chief executive of Northern Rock, and the rest of his board could be allowed to stay on to run the bank as an independent concern under radical proposals being considered.

One possibility being discussed by the Government and the company would see Citigroup, the US bank advising Northern Rock, provide a funding line of up to £10bn to enable the board to run it for the long term, The Sunday Telegraph has learned. The details of Citigroup's funding line are still being negotiated but it is understood that the money is not linked to any particular bidder and could be granted to Northern Rock's existing management. "It is an option," said one source close to the situation.

See full Article.