By what right, by who's code?

[armor99]

pay-dirt-the-executive-pay-system-is-broken: Personal Finance News from Yahoo! Finance

This is the sort of thing that I guess I will never be able to understand. Why do some people have a problem with people that make more than they do? I see all of this talk about "exploitation of workers, preying on the weak, aggresiive negotiations, etc", and it all comes down to.... Wasn't it all voluntary? Are we a nation of children in adult bodies that can only cry and stamp their feet when we see someone with nicer "toys" than us?

It get me more than a bit irritated looking at it. I once talked to a man who sincerely believed that US citizens should get to vote for CEO's salaries. That way they would not become "too rich" (whatever that means, he never was able to define it for me). They seemed to believe that in some undefinable way that money was being taken from them. That for one man to get "richer" another is stolen from.

When I see someone that has a nicer car than me, higher salary, better home, I cheer for these people. I applaud their success and might try to learn more about how they did it, so in turn maybe I can learn something and do the same for myself.

 

[ziggy29]

I think the compensation model is largely broken because the old-boy network of corporate boardrooms that schmooze each other and large shareholding institutions enable and even encourage it.

I'd like to see some reforms there, and maybe stuff like executive pay would follow where it made economic sense to the business. I don't believe that any private company should have to answer to the government about their executive compensation. If they get government bailout money with strings attached the situation may change, but in general I don't think it should be anyone's business but the shareholders -- and by extension, individual consumers IF they choose to boycott products and services because they find the company's executive pay objectionable.

 

[Brat]

I can't find the article at the moment, but even actuaries agree that many executive compensation systems increase risk to the detriment of the long term success of the employer. In my opinion (and I have had some exposure to compensation decisions at the corporate level) executive compensation has gotten out of hand at some corporations. This is as much a study in behavior as it is finance.

If the economy had continued to do well this subject would not be a hot topic. Yes there is jealously out there but there is also anger at the fact that extremely well paid folks blew up the economy.

 

[ziggy29]

I can't find the article at the moment, but even actuaries agree that many executive compensation systems increase risk to the detriment of the long term success of the employer. In my opinion (and I have had some exposure to compensation decisions at the corporate level) executive compensation has gotten out of hand at some corporations. This is as much a study in behavior as it is finance.

Again, I go back to the boardrooms. There's a somewhat incestuous relationship going on in a lot of boardrooms. Company A puts Company B's executives on their board, and Company B puts Company A's execs on their board. Then they all vote to give each other a lot of perks and high compensation. They schmooze large institutional shareholders (collectively, usually the majority owners) to get them to continue to support the "recommended" slate of board members (usually the incumbents) and the small individual investors, who collectively can't move the needle with their proxies, can't do a thing about it (other than sell).

This is the toxic environment which enables CEO pay which is aligned neither with shareholders fiduciary interests nor with the long-term benefit of the business in mind.

 

[Brat]

I don't disagree with you on that. The challenge is to change the Board of Directors membership.

 

[Westernskies]

I think the compensation model is largely broken because the old-boy network of corporate boardrooms that schmooze each other and large shareholding institutions enable and even encourage it.

I'd like to see some reforms there, and maybe stuff like executive pay would follow where it made economic sense to the business. I don't believe that any private company should have to answer to the government about their executive compensation. If they get government bailout money with strings attached the situation may change, but in general I don't think it should be anyone's business but the shareholders -- and by extension, individual consumers IF they choose to boycott products and services because they find the company's executive pay objectionable.

+1
Ziggy, I agree with you 100% on this one.
Nothing more to add.

 

[unclemick]

Rat's double post.

 

[unclemick]

Yep - ten years - that's a good All American metric pulled out of you know where.

So - do I pull my index funds - buy individual shares - and vote my proxies over the internet?

Where are my dividends! Show me the money! Will the balance shift over the decade.

Will the top 100 management institutions feel the heat? Nobody's listened to Bogle up til now - is somebody starting to listen?

If you need capital - don't borrow stupid - issue equity - and prove yer worth yer salt by paying dividends.

Anyone care to pick the decade earnings growth set records while P/E fell and dividend growth did well as average yield climbed.

heh heh heh - firing the bums is too easy - gimme my divy's back and I may have mercy. Excused from jury duty today - I was ready.

Things are quiet in the suburbs.

 

[MichaelB]

What we have is a gigantic, in your face conflict of interest that is allowed by Delaware corporate law. Executive compensation practices are like pirates plundering shareholder wealth. The difference is that pirates plundered and then hid, while executives flaunt and cry for more. This is sinful and I believe history will not treat this generation kindly.

I don't disagree with you on that. The challenge is to change the Board of Directors membership.

Three things absolutely need to happen:

1. Separate the CEO and the Chairman of the Board and eliminate all CEO influence on the BOD

2. Implement simple BOD election processes

3. Allow more direct shareholder participation on governance matters.

I still can't believe that shareholders cannot directly approve executive comp.