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Old 10-31-2008, 07:49 PM   #1
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Corporate benefits

I think we as a nation spend way too much time talking about taxes and not enough time talking about what is happening in corporate America.
Pensions are a thing of the past. More and more health care for retirees is a thing of the past and in some cases even for full time employees.

I used to think it was due to corporations having to stay competitive in the new global economy. Now I'm realizing the money has been shifted away from the workers and up to a very few at the top.

Here is an example, read the last sentence:

U.S. banks owe billions in pay, pensions to executives: report | Reuters

"...the government has sought to rein in executive pay at banks getting federal money as part of the Bush administration's $700 billion bailout program.
But overlooked in these efforts is the total size of debts that financial firms receiving taxpayer assistance previously incurred to their executives, which at some firms exceed what they owe in pensions to their entire work forces, the Journal said."

There is something really wrong here. How do we change this? I would not want to see the Government regulate salaries. Shareholders need to revolt, but most of us hold a lot of company stock in mutual funds. How did this shift happen?
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Old 10-31-2008, 07:55 PM   #2
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I have witnessed efforts by shareholders to force corporate executives to adopt a certain course of action. Shareholders voted in favor of various items during annual meetings.
They were all politely ignored by management. Never put into action. I'm not sure what power shareholders really have.
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Old 11-01-2008, 09:09 AM   #3
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Quote:
Originally Posted by Helen View Post
Shareholders need to revolt, but most of us hold a lot of company stock in mutual funds.
Yes, the interests of management and the boards of directors are not always in sync with the interests of the owners or with the interests of the country as a whole.

The most interesting idea I have heard is the idea of requiring/encouraging companies to always nominate at least twice as many candidates as there are openings on the board. Under the current system, if management nominates you, you become a board member, if management doesn't nominate you, fat chance. When it comes time to determine management's compensation package, as a board member you remember who really controls your employment, and it is not the owners.

Mutual fund management also has a definite conflict of interest. Every company in the US is a potentially lucrative client for almost every mutual fund management company in the US. So generally fund management violates their fiduciary responsibility to the fund management company if they vote their fund's shares in a way that might annoy an existing or potential major client. This case probably requires government regulation. I would frankly like to see a rule that requires mutual funds to pass through their voting choice to their shareholders. So if fund WeAlwaysGoUp has a 1,000,000.001 shares outstanding, and owns 123,456 shares of CON. Then when the CON proxy goes out, WeAlwaysGoUp needs to allow their shareholders to vote on how WeAlwaysGoUp should vote their CON shares. If 1,000 WeAlwaysGoUp shares vote against management, 900 shares vote for management, and 998,100.001 shares abstain, then WeAlwaysGoUp would vote all 123,456 shares of CON against management. Let the real owners who care decide.
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Old 11-01-2008, 09:40 AM   #4
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Quote:
Originally Posted by Helen View Post
I think we as a nation spend way too much time talking about taxes and not enough time talking about what is happening in corporate America.
Pensions are a thing of the past. More and more health care for retirees is a thing of the past and in some cases even for full time employees.

I used to think it was due to corporations having to stay competitive in the new global economy. Now I'm realizing the money has been shifted away from the workers and up to a very few at the top.

"...the government has sought to rein in executive pay at banks getting federal money as part of the Bush administration's $700 billion bailout program.
But overlooked in these efforts is the total size of debts that financial firms receiving taxpayer assistance previously incurred to their executives, which at some firms exceed what they owe in pensions to their entire work forces, the Journal said."

There is something really wrong here. How do we change this? I would not want to see the Government regulate salaries. Shareholders need to revolt, but most of us hold a lot of company stock in mutual funds. How did this shift happen?
I agree with you, but as a long time senior Manager, I don't think one is the solution to the other.

US Corporations simply cannot be competitive providing pensions and health care as they did in the past. Long-term, wages and benefits need to find a new equilibrium based on a global economy. Employees from emerging economies will see (are seeing) pay and benefits improve and employees from current leading economies will see (are seeing) pay and benefits decline - both are already happening and will continue. That's not to say they will be exactly equal, but emerging economies are not going to reach the former levels pay and benefits of US employees unless there is a substantial decline in standard of living for many. If China, India and other economies ever match the productivity of the US worker, the shift in standard of living here will be seismic...

There's no denying what has gone on with CEO's salaries, benefits, golden parachutes is appalling, repulsive, unfair, etc. But it's a relatively small cast of characters enjoying these undeserved riches. Putting CEO, Officer level compensation back in line with reality is not going to be enough to restore mainstream pay and benefits to anything like the norm of 20-30 years ago. It will only slow the erosion of mainstream pay and benefits.

IMO, we are never going back to more generous pay and benefits without more socialism, and that will bring a considerable reduction in standard of living overall here, so what's the point? There are of course, no easy answers if you do the math (economics). And both Pres candidates conveniently stay away from doing the math, as they always have.
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Old 11-01-2008, 10:37 AM   #5
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Quote:
Originally Posted by Helen View Post
I think we as a nation spend way too much time talking about taxes and not enough time talking about what is happening in corporate America.

I have a choice where I spend my money. I have no choice in paying taxes. About all I *can* do is talk. Esp since my vote does not count.

Quote:
Pensions are a thing of the past. More and more health care for retirees is a thing of the past and in some cases even for full time employees.
If you look at this a different way - it is a GOOD thing. We would be better off not having our health care or pensions tied to a company promise. I've said it many times, I feel better about the money that I know I have in my 401K/IRA than I do about that "promise" from my company.

Quote:
There is something really wrong here. How do we change this? I would not want to see the Government regulate salaries. Shareholders need to revolt, but most of us hold a lot of company stock in mutual funds. How did this shift happen?
Independent was discussing this in another thread. It does seem that CEO/BOD have been able to get their pay structured to short term results, while shareholders want long term results. There is a disconnect, but I don't know how we would change it short of a shareholder revolt.

But here's an idea: Some mega-corps and/or major pension plans get together and write up a "good governance" score card. The scorecard would have objective measures of items meant to drive the long term results of the company. Maybe some guidelines regarding CEO/BOD pay tied to long term results, rather than short term. Maybe something about real competition in CEO searches. I dunno. Something along those lines.

Then independent groups would rate the corps on the scorecard. A good rating should encourage people to buy that stock, so companies should want to do well. So it really becomes a transparency thing, with no govt regulation required at all. All voluntary, and geared towards maximizing profit by doing good for both the company and the shareholders.

-ERD50
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Old 11-01-2008, 12:08 PM   #6
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complain about wall street all you want, but i-banks had the best benefits short of Google. subsidized child care, the best medical benefits including infertility coverage, nice cafeterias, excellent bonuses for everyone, etc. if you look at the financials something like 65% of revenues went back to the employees as pay and benefits. they were just giant money funneling machines that sucked up money from the economy and gave it to their employees.

the winners of the lehman BK were the employees. Lehman borrowed $600 billion to buy assets. a huge amount of that money went to employees and bond holders got stuck
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