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Say on Pay
Old 01-31-2011, 10:48 PM   #1
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Say on Pay

It is here. Now investors have a say on executive pay. Do you plan to vote no? How would you judge a pay package worth voting yes for?

I have already voted no at on the pay at one small company I own. The CEO's pay was nearly as large as the firms net income. I also voted to vote yearly on pay.

How have you voted? If enough investors don't bother to vote it will be a huge wasted opportunity.
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Old 01-31-2011, 10:50 PM   #2
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Old 01-31-2011, 11:03 PM   #3
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SEC Adopts Rules for Say-on-Pay and Golden Parachute Compensation as Required Under Dodd-Frank Act; 2011-25; Jan. 25, 2011
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Old 02-01-2011, 07:24 AM   #4
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First, let me say that I only have small (miniscule) positions in Q, SWY, & BKH.

I would have a difficult time overrulling the Board Members. For the most part (wholly, actually), they are much more knowledgeable about the operation of their respective Companies and much more qualified to make those kind of decisions. If I were more emotionally attached to these companies or had a significant portion of my Portfolio invested in their future, I might feel different but, I suppose, that wouldn't be a good decision-making position either.
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Old 02-01-2011, 07:30 AM   #5
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There has never been a compensation rule that companies could not run rings around. No doubt this will be the same. But if it makes you feel good to stamp your foot in your mom's basement and vote no with your 2 shares, have at it.
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Old 02-01-2011, 07:52 AM   #6
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"Say on Pay" is non-binding. This isn't even a first step.
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Old 02-01-2011, 07:54 AM   #7
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Is Warren Buffett still getting paid $100,000? If so I'd say give him at least a 3% raise.
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Old 02-01-2011, 11:23 AM   #8
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Is Warren Buffett still getting paid $100,000? If so I'd say give him at least a 3% raise.
Heck, I'd give him an equity kicker too...

As Brewer pointed out, even Buffett isn't getting paid "just" $100K. He's also reimbursed for his home/office/travel security and he has a NetJets card. IIRC he's just finished resigning from all his corporate board seats, but at one point his board "fees" were putting more in his checking account than his Berkshire salary.

Of course the guy also managed to receive something like $47M last year just in dividend income from the stocks in his personal (not Berkshire) portfolio.

I think the only way "Say on Pay" would be more than a PR gimmick would be if a CEO managed to simultaneously piss off Fidelity, Vanguard, and Schwab. And maybe the TSP too.
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Old 02-01-2011, 12:59 PM   #9
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I think the only way "Say on Pay" would be more than a PR gimmick would be if a CEO managed to simultaneously piss off Fidelity, Vanguard, and Schwab. And maybe the TSP too.
I would say "especially the TSP" because it's a government sponsored entity, and politicians are a lot more likely to seek a ban on investment in companies with practices they consider "unacceptable" than private entities are.
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Old 02-01-2011, 06:18 PM   #10
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There has never been a compensation rule that companies could not run rings around. No doubt this will be the same. But if it makes you feel good to stamp your foot in your mom's basement and vote no with your 2 shares, have at it.
So I take it your solution is do nothing. I don't see that fueling many changes. Take a look at what changes proxy advisory firms have made with non binding recommendations.
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Old 02-01-2011, 07:55 PM   #11
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So I take it your solution is do nothing. I don't see that fueling many changes. Take a look at what changes proxy advisory firms have made with non binding recommendations.
I am merely pointing out that getting worked up about this sort of thing is most likely a waste of time. Its like the tax code: you can carry on all you want, but anything other than simply minimizing its impact on you as much as you can is a waste of time and energy.

Personally, I often find that the most compelling investments are ones in which management owns a really sizable stake in a profitable concern. PPD is the poster boy for this, although I sold a bit too soon. Management knew that the business generated a ton of cashflow day in, day out (and they put their money where ther mouth was) even though they could not get analyst attention for love or money, let alone a halfway decent valuation. Yet the company just puked up cash to beat the band and is finally getting taken private at a very nice price.
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Old 02-01-2011, 11:11 PM   #12
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I am merely pointing out that getting worked up about this sort of thing is most likely a waste of time. Its like the tax code: you can carry on all you want, but anything other than simply minimizing its impact on you as much as you can is a waste of time and energy.

Personally, I often find that the most compelling investments are ones in which management owns a really sizable stake in a profitable concern. PPD is the poster boy for this, although I sold a bit too soon. Management knew that the business generated a ton of cashflow day in, day out (and they put their money where ther mouth was) even though they could not get analyst attention for love or money, let alone a halfway decent valuation. Yet the company just puked up cash to beat the band and is finally getting taken private at a very nice price.
The tax code changes dramatically each year. Much of the change is driven by lobbyists. Things like 403(b) retirement plans to placate insurance companies. Or tax credits for hybrid cars.

Many feel CEO pay is out of control. Investors now have a chance to let companies know on a company by company basis how they about the pay package at their company. I own companies that I think that the pay is inline with managements performance. And I have those that verge on obscene. What good does it do was small opportunity that is now presented. So nobody votes on say on pay and then continues to whine about excessive CEO pay? That has no credibility. Is it going to fix the problem overnight...no. That doesn't mean that its meaningless.

I have a number of companies that I plan on voting no. I also talk with a number of public company CEO's and know first hand they are concerned. Even those that have no reason to be concerned.
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Old 02-02-2011, 12:07 AM   #13
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I believe that corporate democracy (i.e. the owners of the companies actually having a vote on how things work) is one of the most broken things in company.

The rules is so weak that it is gross exaggeration to call this a step, but it is a nudge in the right direction.

I own about 1/1,000,000 of Berkshire Hathaway so my share of Buffett's salary is about $.10 even if I include the perks that Nord's talks about and my share raises to a buck, I think it is a pretty great deal for intelligently managing a $200K worth of my assets.

On the other hand during the 2008, crisis I bought Country Wide Financial (well after it collapsed in price) and I owned a similar size chunk of the company (a millionth of the company). In 2005, the CEO Angelo Mozilo made $57 million. Even in 2008, he was still pulling in around 20 million, and my share of his paycheck was roughly $20. If I had been in Pasadena during the shareholder, I fully intended to ask Mr. Mozilo why he was worth multiple times Buffett's pay. I suspect it would have been a very popular question.
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Old 02-02-2011, 07:40 AM   #14
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The tax code changes dramatically each year. Much of the change is driven by lobbyists. Things like 403(b) retirement plans to placate insurance companies. Or tax credits for hybrid cars.

Many feel CEO pay is out of control. Investors now have a chance to let companies know on a company by company basis how they about the pay package at their company. I own companies that I think that the pay is inline with managements performance. And I have those that verge on obscene. What good does it do was small opportunity that is now presented. So nobody votes on say on pay and then continues to whine about excessive CEO pay? That has no credibility. Is it going to fix the problem overnight...no. That doesn't mean that its meaningless.

I have a number of companies that I plan on voting no. I also talk with a number of public company CEO's and know first hand they are concerned. Even those that have no reason to be concerned.
I am reminded of a gnat lying on its back with an erection, floating down the river, and shouting "raise the drawbridge!"
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Old 02-02-2011, 08:32 AM   #15
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I believe that corporate democracy (i.e. the owners of the companies actually having a vote on how things work) is one of the most broken things in company.
Agreed. There is a (for lack of a better term) incestuous relationship in the boards of so many major corporations. An executive from Megacorp A may be on the board for Megacorp B and vice versa. That's a recipe for a quid pro quo compensation deal -- you vote for my huge package and I'll support yours. And institutional investors (those who hold most of the shares) either don't care or seem to be somehow benefiting from the arrangement as well.
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Old 02-02-2011, 09:15 AM   #16
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I am reminded of a gnat lying on its back with an erection, floating down the river, and shouting "raise the drawbridge!"
Have you ever considered art classes? You would be an amazing editorial cartoonist.
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Old 02-02-2011, 09:16 AM   #17
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I think The New Yorker has already published that one...
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Old 02-02-2011, 09:27 AM   #18
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I read that Bogle made some efforts in the past to mobilize money managers of mutual funds and pensions to apply pressure for better corporate governance. Sadly, not too many people cared. I don't know if he is still pushing it.
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