Anybody else noticing an uptic in justifications for obscene CEO pay?

[JHB]

This week I've run into two articles this week, one in The Economist:
Rich man, poor man
The first rule is to avoid harming the very miracle that generates so much wealth. Take for instance the arguments about high executive pay. Some say this is simply a matter of governance—and forcing company boards to work better. If only it were that simple. High pay is, by and large, the price needed to attract and motivate gifted managers, as our special report argues in this issue. The abuses of companies such as Home Depot obscure how most high pay has been caused not by powerful bosses fixing their own wages, but by the changing job of the chief executive, the growth of large companies and the competitive market for talent. Executive-pay restrictions would not put that horse back in its box, but they would harm companies.
http://www.economist.com/opinion/displaystory.cfm?story_id=8554819

and the other in Newsday (reprinted from the Washington Post):
Worth the millions they're paid
Yes, corporate compensation has gone sky high, but the result is better-run, better-performing companies than the United States has ever had. And most of us - from shareholders and investors to average consumers - are reaping the benefits.

If you want to blame anything for today's inflated compensation packages, blame the hostile takeovers and the leveraged buyouts of the 1980s. Remember the days of the corporate raiders? Twenty years ago, those guys were everywhere, cruising the market for likely takeover targets and offering hostile bids, at premium prices, on well-known but poorly performing companies. The raiders would claim management had failed to perform its basic duty to the companies' shareholders, which was to increase the value of their investment.
***
The best chief executives have proven records demonstrating management ability in complex corporate situations. They know the rate of chief executive turnover at large corporations has increased significantly. If things go wrong, their contracts may be all they have, so they negotiate the best they can going in. No doubt you'd do the same.

Today's chief executives are paid well when they deserve to be. But public companies have become better managed in the past 20 years, with increased profit margins, productivity and return on investment. Those that haven't have become targets of mergers or buyouts. Or they have replaced their chief executives. Isn't that the way we want it to be?
http://www.newsday.com/news/opinion/ny-opsmi235063327jan23,0,6861669.story
(Shorter version: Swindlers and compliant pols in the 80s got away with looting corporate assets, so now that's the norm, and that's a good thing, sez another tenured university economist with a safe job)


Anyone else noticing an uptic in high-profile, out-to-the-public justifications for why the current corporatist framework is a good thing and us peons should stop complaining? Anything on cable?

[Demeter]

1. Haven't Seen ANY Gifted Managers Since????

Anybody remember the Conglomerate Scandal of the 70's? How about the massive frauds of the Reagan era (Savings and Loans, anyone)? And how about them Rangers and Pioneers, bleeding their companies dry to feed the insatiable Bush political machine?

There aren't any gifted managers--and I have my doubts about the Turnaround specialists, who might be the only category deserving of such a name. There are only pirates, and bigger pirates.

[Phoebe Loosinhouse]

2. These compensation packages are actually illegal if someone

would care to pursue it. These are PUBLICLY held companies. The executives and Boards of Directors are LEGALLY BOUND to act in the best interests of their stockholders. It is not in the best interests of their stockholders to plunder the capital of the company and divert it into their personal coffers. That money should be paid out as dividends, or put into R&D, or used for capital imporovements, or to compensate and retain and reward their employees.

The only person I ever thought who would address this is Eliot Spitzer. Congress won't address it, because how many of them sit on or their relatives sit on these BOD's?

At some distant point, the world will wise up that these greedy greedy corporate pigs have basically been running a Ponzi scheme on the American public and international investors.



A Private company can do whatever the heck they want with executive compensation.

[CrispyQ]

20. I suspect we'll see more & more private companies.

The greed is absolutely mind boggling.

[City Lights]

3. "gifted managers"

:rofl: That's a good one!

And when the shit hits the fan, the "gifted managers" always claim to be out of the loop. :mad:

[calmblueocean]

4. Absolutely!

I've seen these articles popping up more and more recently, with justifications that I nearly always find preposterous.

These modern CEOs sold out America's manufacturing base, child labor laws, environmental laws, and are now in the process of selling out our information worker base. For this they get 400x the average worker's pay?

The sad thing is, within my conservative family, this issue always brings cries of "They deserve whatever they can get!" There's a cult of wealth worship in this country, and a large number of people don't care how they got it. The fact that someone got rich at all makes them worth worshipping. There's nothing quite so sad as watching a dog lick the hand of a master that beats him.

[Union Thug]

7. "Cult of Wealth Worship"...

I've been calling it a cult of CEO worship that grew out of the 80's greed is good fantasies, but I think your statement is more accurate, as it casts a broader net.

And to your family: Nobody 'deserves' the kind of obscene wealth we are talking about here. As Clint Eastwood once said, "Deserves got nothing to do with it." :-)

[Cassius23]

14. Well, if nothing else..

They are demonstrating how far removed they are from reality. Soon they'll figure it out.

[michreject]

5. Which is worse?

The ousted CEO getting the severance package or the courts allowing it?

[acmavm]

6. Maybe they feel like the peasants are getting close to having

had their fill. They don't call them the Predator Class for nothing.

[Vipassanaman]

8. Unvarnished Greed.

If things go wrong, their contracts may be all they have, so they negotiate the best they can going in. No doubt you'd do the same.

No, I have some sense of shame. By if things go wrong, does he mean if the company loses money? Because I have seen quite a few cases where companies were losing huge sums of money, yet the CEO was making ridiculous sums.
"Yes, corporate compensation has gone sky high, but the result is better-run, better-performing companies than the United States has ever had. And most of us - from shareholders and investors to average consumers - are reaping the benefits."--Yes, just ask investors in Enron or Worldcom.
What about the directors of US auto companies whose policies have practically destroyed the US auto industry? Couldn't the average guy on the street done as well or better? Were we in danger of losing these huge talents to some foreign corporation if we didn't give them enough to fund the annual budget of a small country?

[90-percent]

10. Some thoughts

Our "free market" allows pro athlete's and pop stars to earn obscene amounts of money.

But their worth is determined by the public. (Kind of - Frank Zappa described record company exec's as "puds fresh outa college certified as economically smart")

CEO's have crony capitalism, where they serve on each others boards and nod and wink and give each other obscene deals where the rewards of fucking up and getting fired almost seem better than staying on the job. So their comp deals are both obscene and artificial in that their worth is not subject to the scrutiny of the forces of an open market. More of a privileged guild or cartel.

I hope stock holders get wise and stop being chumped by these obscenely greedy self absorbed bastards and bastardettes.

-85% Jimmy

[Cassius23]

9. Wow the Economist article really, really makes me irritated

Because it doesn't address a few simple questions.

What job is supposted to replace the ones that were/are outsourced?

The answer from my research is that most of the jobs are service jobs or what I call "McManagers"(this is a position that is technically considered a manager, but is usually paid around $20k a year, the term is coined from McDonalds who use this type of manager extensively). Usually they pay about 1/3 or sometimes even less of what the individual had before.

What about the mental health consequences to the life that globalization requires?

Who is going to pay for the bills that come as a cost of the massive anxiety that is generated when one has to be constantly afraid of their career going poof once every 5 years?

Furthermore, what about people who can't instantly adjust to a new career track when their old one has gone poof?

Not everyone can learn a whole new skillset every 5 years. Some people can only do a few things(they do them very well, but only a few things)

I just wish I knew what I could do to quickly and efficiently redress this issue.

Thanks for listening
Cassius23

[JHB]

15. Add in another point:

If everyone has to be able to learn entirely new sklillsets every few years in order to provide a "flexible workforce", just who picks up the bill for that? And if that is the case, why are tuitions for colleges and other places adults would acquire these new skills shooting through the roof (making it harder for people to make the allegedly-correct choices)?

[Cassius23]

17. I'm gonna start a new thread, can I quote this response?

N/M

[JHB]

23. As often as you like

n/t

[Cassius23]

11. And another thing

*forgot to add this, it just came to me while reading the other article*

The people who own enough of the stock that it has an effect on their overall wealth are part of the top 5% anyway.

So even when they say it benefits "everyone", "everyone" is mainly the people that we are grubling about in the first place!!!

[ChairmanAgnostic]

12. Enron Global crossing Xerox Pfizer Merck GM - great examples of

management successes.

I was thinking this very thing. Great topic.

[samplegirl]

13. Bush paved the highway for each and everyone of them.

and continues to do so.

[antigop]

16. Here's the reason -- Senate Finance Committee caps CEO deferred compensation

http://www.pbs.org/nbr/blog/2007/01/senate_finance_takes_on_ceo_co.html

>>
Democrats on the Senate Finance Committee have figured out two things: One, under the new, tighter budget rules the Democrat-led Congress just put in place, it's necessary to find additional money to pay for new programs. Two, CEOs have a lot of money.

So, it makes sense -- politically, at least -- to help small businesses stung by the minimum wage hike by sticking part of the bill on the nation's top CEOs. And, that's what happened today. The Senate Finance Committee passed a series of tax breaks for small business and paid for part of them by capping the amount CEOs can put in deferred compensation plans. The committee set the cap at $1 million. The new tax has a good chance of making it into law and would raise about $800 million dollars. Recently fired CEOs, like Home Depot's Bob Nardelli, would be covered under the change, which takes effect this year.
>>

IMO,we are seeing articles defending CEO compensation because of the new Senate Finance cap on CEO deferred comp plans.

[BlueIris]

18. K&R.

And I think I'm gonna go buy a copy of that Economist (we kinda let our subscription lapse).

[Cassius23]

19. I'd recommend going to a library...

and making a copy of whatever articles you want to see. Of course, I want to keep money out of their pockets if at all possible.

[WinkyDink]

21. This kills me. What? Are these guys gonna not work at all, if they can't find a job paying less than

a million a year?
Give me a break.

[NewJeffCT]

22. The biggest way to change these things

Is to make boards of directors far more independent than they are - there are too many friends and friends-of-friends on these boards.

CEOs (and other executives) are gaming the system as it is now. One of those big banking firms in NY had a CEO that had a contract that guaranteed him at least the average pay of his 4 top rivals in the business... nothing about company performance at all, just that he had to be paid on par with his rivals.

Would these executive people suddenly not work if their compensation was "only" $1 million/year instead of $50 million? I don't think so...

I don't know how to do that, however. Maybe having a special compensation board that is made up of the company's competitors (i.e., the Home Depot comp. board would have somebody from Lowe's and other similar stores) However, you then risk the "wink-wink, you scratch my back, and I'll scratch yours..."

[freeplessinseattle]

24. "harming the miracle" oh gag!!

this is such a sickening display it makes my blood boil. miraculous indeed.

[Phoebe Loosinhouse]

25. The only solution is for some giant shareholder (like Calpers)

to come in and file a class action lawsuit on behalf of their shareholders and pensioners. Or any other similar entity could and should do likewise.