Lessons for Small Biz in Bank Blowups

No one pities CEOs these days, what with their stratospheric compensation, company-paid perks and golden parachutes. Even when they do get fired, they don't have to join the line at the local unemployment office.

Still, most of us wouldn't want to be running a major financial institution these days, when bank CEOs seem to be dropping left and right. Citigroup (C - Cramer's Take - Stockpickr) and Merrill Lynch (MER - Cramer's Take - Stockpickr) both gave their CEOs the boot late last year; this week, Wachovia (WAC - Cramer's Take - Stockpickr) did the same. Washington Mutual's (WAMU - Cramer's Take - Stockpickr) CEO got to keep his job -- barely -- but was forced to give up his chairman title, a move that was the result of pressure from shareholders.

All this fallout from the subprime mortgage mess may seem far removed from the average small business owner (unless your small business happens to be a title company or mortgage lender). But the lack of confidence in Wachovia's and Washington Mutual's leadership serves as a cautionary tale for anyone who runs a business, no matter what size.

It's not as if Wachovia's CEO was trolling suburban subdivisions, hustling no-interest loans to unqualified buyers. But the current mortgage meltdown is partially the result of incentives put in place by high-ranking executives. Those top dogs are now realizing that any shady dealings within their companies -- no matter how far removed from their corner offices -- can bring them down, too.

The lesson here is clear: If you give your employees incentives to cut corners, however unintentionally, their shoddy tactics can eventually be pinned on you. You need to know how your subordinates operate, because you may ultimately be the fall guy for their mistakes.