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Old 03-27-2009, 10:17 PM   #61
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I haven't seen a single politician show an ounce of common sense or integrity on this one -- they are a pathetic bunch. I think I will have to switch my colors from Democratic to Libertarian.
Wow, this is an amazing statement coming from you. I had to go peek back in the soapbox to assure myself this is the donheff that I remembered.

I get the sense that you are not alone, but it's hard to get any real reading on the level. I suspect many people wouldn't admit it, even if they felt the same.

I'll just add that it seems to be much easier to see the problems more clearly w/o any allegiance to either one of the two major parties.

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Old 03-28-2009, 09:24 AM   #62
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I think people keep ignoring the large sums of money that athletes and entertainers get. They seem to be some of the most highly paid people to me.

And what do they "create" when they move a ball from one side of a field to the other, or throw it through a hoop or into a net? Or cause the air to vibrate in a pattern?

Why aren't we taxing them at 90% After all, many sports stadiums received a govt bailout (subsidy), didn't they?

-ERD50
You’ve mentioned this before, in that case the context was CEOs. I’ve been trying to figure it out. I’ve got a few thoughts about CEOs in particular.

Control -

I have complete control of whether or not I buy a Garth Brooks CD. If I enjoy it, I buy it. If I think the price is too high, I don’t buy it. I know that GB gets some portion of the price. If GB earns a lot of money, that must mean lots of other people enjoy it enough to pay the price.

It’s not so clear when the subject is teams. I may be a Yankees fan who thinks A-Rod is grossly overpaid. Now it’s harder for me to vote with my dollars. I think people are more likely to complain about high pay in these cases that involve teams. But at least I know that Yankees tickets are discretionary entertainment I can drop if it really bothers me.

CEOs and other corporate execs are way out on the spectrum in terms of “I can’t control whether or not I buy their services”. Their salaries are buried in everything I buy, I have trouble buying anything without paying some CEO. And, unlike GB or A-Rod, I don’t see them working.

What’s good for the goose …..
No athlete or entertainer ever fired me. Most of us have worked for companies where the CEO said “Competition forces me to make the hard decision to [ fire people, freeze salaries, cut benefits, extend hours, whatever]." So we have the obvious questions of why competition allows the CEO to earn so much?

The CEO Cartel -
Some people (I’m one of them) suspect that CEOs don’t have to compete like the rest of us. Their compensation is set by the Board, and the CEO often picks Board members. Even if that’s not the case, many board members are CEOs themselves. They think that the “right” CEO can single-handedly make or break the company. (The rest of us think that we do almost all the work.) Imagine what plumbers would earn if all plumbers’ salaries were set by other plumbers.

Pay (halfway) for "results"
When CEOs get big pay from stock options, they say it's justified by "pay for performance". But when the stock goes down they still seem to walk away with lots of money. It's a funny way to pay for performance. We've just seen some really extreme cases in the financial sector.

When the subject is “executives”, most people just transfer their skepticism about CEOs to other execs.

Regarding the “create” perspective, pro athletes and entertainers actually do produce a consumer good – we call it “entertainment”. It’s not a necessity of life, but we value it enough to pay for it. People may complain about lawyers and traders because they perceive them as simply shuffling stuff that other people created. (From this perspective, I’m okay with CEO pay – I think that organizing big companies really is a “productive” job.)

You mention gov’t subsidies of sports stadiums. That one bugs me, too. I think my fellow citizens are being irrational on that topic, just as they are on many tax breaks.
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Old 03-28-2009, 09:25 AM   #63
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I'll just add that it seems to be much easier to see the problems more clearly w/o any allegiance to either one of the two major parties.
Word.
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Old 03-28-2009, 11:24 AM   #64
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I think people keep ignoring the large sums of money that athletes and entertainers get. They seem to be some of the most highly paid people to me.

And what do they "create" when they move a ball from one side of a field to the other, or throw it through a hoop or into a net? Or cause the air to vibrate in a pattern?

Why aren't we taxing them at 90% After all, many sports stadiums received a govt bailout (subsidy), didn't they?

-ERD50
You misunderstand me. I'm not advocating a 90% tax on anyone. Elsewhere on these boards I'm on record saying the House Bill was a stupid piece of legislation. It still is.

All I'm suggesting is that the "market" for labor (or at least certain types of labor) may not be particularly efficient. And we as a nation are poorer for that. Nowhere did I suggest any remedy for this inefficiency. Indeed, the currently inefficient market may still be better than any available alternative. But maybe not. It's at least worth considering.

With respect to entertainers, they certainly do create. I don't think you'd argue that Mozart or Shakespeare have added immeasurably to the wealth of society. Britney Spears is not of that caliber, but she creates something unique that only she can provide. A bond salesman, not so much.
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Old 03-28-2009, 11:33 AM   #65
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It’s not so clear when the subject is teams. I may be a Yankees fan who thinks A-Rod is grossly overpaid. Now it’s harder for me to vote with my dollars. I think people are more likely to complain about high pay in these cases that involve teams. But at least I know that Yankees tickets are discretionary entertainment I can drop if it really bothers me.
And even this is distorted by the fact that the Yankees are getting outrageous subsidies from the taxpayers to build their new ballpark. To the extent that the subsidies allow the Yankees to use more of their own money on player salaries, the taxpayers are (indirectly) footing the bill for part of the salary of A-Rod and other Yankees players. So in that sense, this example can't be used as a breakdown of the "free market" valuing various types of labor.
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Old 03-28-2009, 11:39 AM   #66
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You misunderstand me. I'm not advocating a 90% tax on anyone. Elsewhere on these boards I'm on record saying the House Bill was a stupid piece of legislation. It still is.

All I'm suggesting is that the "market" for labor (or at least certain types of labor) may not be particularly efficient. And we as a nation are poorer for that. Nowhere did I suggest any remedy for this inefficiency. Indeed, the currently inefficient market may still be better than any available alternative. But maybe not. It's at least worth considering.

With respect to entertainers, they certainly do create. I don't think you'd argue that Mozart or Shakespeare have added immeasurably to the wealth of society. Britney Spears is not of that caliber, but she creates something unique that only she can provide. A bond salesman, not so much.
OK, those 90% tax comments were more general comments to the thread and the article rather than meant to be specific towards you.

But as far as whether someone is "creating" something or not - I just look at it as - if someone is willing to pay them, well then they must be "creating" *something* worth paying for. Or extorting it somehow.

I'll refer back to Independent's post - I pretty much agree that some CEO/BOD are distorting the free market - it's too buddy-buddy. At some point, shareholders need to organize to do something - I'd prefer that to the govt, but I do think there is a reasonable case to be made for some "price fixing" in these CEO packages.

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Old 03-28-2009, 11:42 AM   #67
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I'll refer back to Independent's post - I pretty much agree that some CEO/BOD are distorting the free market - it's too buddy-buddy. At some point, shareholders need to organize to do something - I'd prefer that to the govt, but I do think there is a reasonable case to be made for some "price fixing" in these CEO packages.
The thing is, the "shareholders" are usually composed of a majority of large institutions that can schmooze with the BOD and create some kind of toxic and incestuous relationship with each other. This, IMO, often comes at the expense of the individual investor. And usually, even if every individual investor voted all of his/her shares against the BOD, if the board could woo the institutions holding their shares, the board would keep their seats in a landslide.
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Old 03-28-2009, 12:13 PM   #68
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But as far as whether someone is "creating" something or not - I just look at it as - if someone is willing to pay them, well then they must be "creating" *something* worth paying for. Or extorting it somehow.
I generally agree. But this gets to the heart of the question I started with . . .

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For example, a corporate bond salesman can make a couple million dollars or more per year. Corporate bonds aren't a particularly difficult product to understand. I can't imagine that selling them is all that different than selling other things. So why are they paid so much better than other sales people?
I understand why A-Rod gets paid the way he does. Because he fills stadiums, sells TV rights and sneakers (or at least is perceived to do so).

But what does your average bond salesman bring to the table that any other reasonably good salesperson couldn't if given the same job?
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Old 03-28-2009, 08:05 PM   #69
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I generally agree. But this gets to the heart of the question I started with . . .



I understand why A-Rod gets paid the way he does. Because he fills stadiums, sells TV rights and sneakers (or at least is perceived to do so).

But what does your average bond salesman bring to the table that any other reasonably good salesperson couldn't if given the same job?
I don't know specifically. But generally, it must be *something*, right? I mean, why would people pay that if they were not getting something for it. And if "any other reasonably good salesperson" could do it, I really, really think they would hire them for less money. Unless.... like the possible CEO/BOD thing, there is a buddy-buddy system going on and they are keeping the goods in the clique.

There's lots of things I don't understand, but that does not mean there isn't a good reason for them. I don't understand why someone would pay big bucks for a Brittany Spears concert, or a Football game for that matter. But they do, so who am I to argue? If a bond salesman can earn a big salary (w/o coercion or illegal/immoral stunts) I say good for him/her.

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Old 03-28-2009, 08:48 PM   #70
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I am as much a capitalist as anyone here, but the overpay of CEOs bothers me to no end. I read all the posts above, and see good points being made. I think we can agree on the problem; that's the easy part. Coming up with a solution is the hard part.

Anyway, about bond salesmen, I read "Liar's Poker" by Michael Lewis many years ago, when he was a salesman at Salomon Brothers in the 80s. He described how, when a bond salesman was successful in unloading a stinkin' bond that all insiders knew would default onto some naive institutional bankers - such as a small bank in the Midwest, or a banker in Europe - the boss would announce the sales on the PA.

If it was a really big bad putrid bond, the boss would come down to the trading desk to "knight" the salesman, and to declare that he now joined the rank of "the big swinging dicks" !

A very good read. Highly recommended.
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Old 03-28-2009, 09:19 PM   #71
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Let's not confuse rights with convienience here in this discussion. There was a comment made a few back (sorry I did not quote it) about not neccessarily knowing who the CEO is of each company that you want to buy or not buy a product from. You are right... the CEO's name is not clearly printed on each product they sell. Maybe it should be. But the point is this information is easily available if you choose to do some internet searching.

It is not convienient, nor is it easy, but as a consumer, if you really have a serious issue with a particular CEO that runs a certain company, it would be easy enough to find out. Unfortunately, as it looks from my point of view, far too often government legislation is in the business of allowing the rest of us to be lazy.

If anyone is truely "outraged" at a particular CEO, company, etc. You can always vote with you wallet. Other than utilities in certain areas, I am fairly sure there is enough variety in most products, that you can find alternative companies if you really want to. Many people are upset that Immelt, the CEO of GE was doing business with Iran. So... I urge those that are, to look up all of the holdings of that company and no longer buy those products. Not easy to do.... but to me if someone is pissed enough about it... that can easily do that sort of thing.
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Old 03-28-2009, 09:23 PM   #72
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He described how, when a bond salesman was successful in unloading a stinkin' bond that all insiders knew would default onto some naive institutional bankers - such as a small bank in the Midwest, or a banker in Europe - the boss would announce the sales on the PA.
As has been clearly established with ample support in this thread, bankers are bankers are bankers. Fungible people all the same. Doesn't matter whether you pay them $50,000 a year or $50,000,000. Anyone can bank equally as well as anyone else, so it is impossible to say that one banker is naive and another is skillful at his craft.

Or perhaps some people are worth more based on their unique sets of skills and abilities... Perhaps skills and abilities that might save small banks in the Midwest or European banks hundreds of millions of dollars in bond default losses? Nah, all bankers are the same!
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Old 03-29-2009, 12:43 AM   #73
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As has been clearly established with ample support in this thread, bankers are bankers are bankers. Fungible people all the same. Doesn't matter whether you pay them $50,000 a year or $50,000,000. Anyone can bank equally as well as anyone else, so it is impossible to say that one banker is naive and another is skillful at his craft.

Or perhaps some people are worth more based on their unique sets of skills and abilities... Perhaps skills and abilities that might save small banks in the Midwest or European banks hundreds of millions of dollars in bond default losses? Nah, all bankers are the same!
I would claim that no matter how skilled you are as a banker (or any job really), that negotiating your salary and terms of employment, is a skill, just like any other you might use in your profession. Some people are better in that area than others. Many people that I know are intimidated trying to negotiate a better salary, and subscribe to the "keep your head down" approach to working. Many managers that I have had, really tended to respect people that drove a hard bargain. There is certainly a line between assertive and being at PITA thought...

If someone can get a better salary with less skills than someone else because they were a better negotiator... then I say BRAVO!!!
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Old 03-29-2009, 01:17 AM   #74
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As has been clearly established with ample support in this thread, bankers are bankers are bankers. Fungible people all the same. ... Nah, all bankers are the same!
Your comment reminded me of the movie "Trading Places", where a street con artist could, in a short time, learn to become a successful commodity trader. Sure, there is some truth in that. I could also say "a politician is a politician is a politician". But then, why does one get to the national scene, while another is stuck at a state capital? There is some chance involved, but surely other factors are at play too.

Back on our bond salesman, the book "Liar's Poker" is a non-fictional book, and tells what was going on behind the scene at Salomon Brothers, at the time perhaps as large and influential as Lehman that collapsed recently.

It is a very interesting book. Again, I highly recommend it. I wonder if another book like this will come out to tell what happened at Lehman and AIG trading floors that handled CDOs and CDSs.

From Wikipedia:

... the book gives a first-person account of how bond traders and salesmen truly work, their personalities, and their cultture. The book captures well an important period in the history of Wall Street.

Lewis was an art history student at Princeton University who nonetheless wanted to break into Wall Street to make money. He describes his almost pathetic attempts to find a finance job, only to be roundly rejected by every firm to which he applied. He then enrolled in the London School of Economics to gain a Master's degree in economics. While in England, Lewis was invited to a banquet hosted by the Queen Mother, where he was accidentally seated next to the wives of two Salomon Brothers managers. While the managers and their wives proved to be extremely uncouth and rude, especially in the presence of royalty, Lewis managed to get a job interview through them and land his first job.

For his job, Lewis moved to New York City for Salomon's training program. Here, he was appalled at the sheer bravado of most of his fellow trainees, and indoctrinated into the money culture of Salomon and Wall Street in general.

After New York, Lewis was shipped to the London office of Salomon Brothers as a bond salesman. Despite his lack of knowledge, he was soon handling millions of dollars in investment accounts... However, growing disillusioned with his work, he eventually quit to write this book and become a financial journalist.

The book's main contribution to literature and history is its unflattering, but accurate, portrayal of Wall Street traders and salesmen, their personalities, their beliefs, and their work practices.

During the training sessions, Lewis was struck by the infantilism of most of his fellow trainees. ... Lewis attributed their behavior to the fact that the trading pit required neither finesse nor advanced financial knowledge, but rather, the ability and desire to exploit others' weaknesses, intimidate other people into listening to you, and generally the ability to spend hours a day screaming orders under high pressure situations. He referred to their worldview as "The Law of the Jungle."

He also noted that, although most arrivals on Wall Street studied economics, this knowledge was never used—in fact, any academic knowledge was frowned on by traders.

Lewis also attributed the Savings and Loans Scandal to the inability of small-time, provincial bank managers to compete with Wall Street. He noted that people on Wall Street are experts at fleecing and taking advantage of ignorant people, which the Savings and Loan banks provided in abundance.
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Old 03-29-2009, 10:55 AM   #75
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Anyway, about bond salesmen, I read "Liar's Poker" by Michael Lewis many years ago, when he was a salesman at Salomon Brothers in the 80s. He described how, when a bond salesman was successful in unloading a stinkin' bond that all insiders knew would default onto some naive institutional bankers - such as a small bank in the Midwest, or a banker in Europe - the boss would announce the sales on the PA.
Michael Lewis' experience was pre-"TRACE" (Trade Reporting And Compliance Engine) which now requires the reporting of price & volume data on most bond trades within 15 minutes or so. Gone are the days when brokers could "rip people's f-n faces off" because only they knew where the market was. These days the naive midwest bank can look up where the bond "everyone new would default" last traded and get a market price.
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Old 03-29-2009, 11:00 AM   #76
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During the training sessions, Lewis was struck by the infantilism of most of his fellow trainees. ... Lewis attributed their behavior to the fact that the trading pit required neither finesse nor advanced financial knowledge, but rather, the ability and desire to exploit others' weaknesses, intimidate other people into listening to you, and generally the ability to spend hours a day screaming orders under high pressure situations. He referred to their worldview as "The Law of the Jungle."
I look forward to fully electronic trading replacing this unnecessary layer.

The descriptions maybe are not that surprising considering the job - it all comes down to trying to squeak out a penny here and there on a trade, and there really is nothing else. It's one-dimensional. So you get focused on that beyond all else. I can see where being good at it could bring out an unattractive side of most people.

It does not sound too different from many pro athletes to me. Focus on that slight advantage, and act boorishly, rude and stupid in most other areas of your life. So maybe pro sports needs to be replaced with computer simulations


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Old 03-30-2009, 09:53 PM   #77
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I read "Liar's Poker" nearly 20 years ago. I just pulled the book off the shelf, and will read it again.

Something never changes. Thumbing through the book just now, I ran across this passage on page 136. Keep in mind that Lewis worked in trading offices that handled institutional accounts with one single trade in the tens of millions to hundred of milllions, not the little retail trades like you and I do. A "good" single trade could net Salomon $100K or more. Hence, the successful traders were treated as princes.
... the collateralized mortgage obligation (CMO) was invented in June 1983, but not until 1986 did it dominate the mortgage market... The CMO burst the dam between several trillion investable dollars looking for a home and nearly two trillion dollars for home mortgages looking for an investor... CMO also opened the way for international investors who thought American homeowners were a good bet...
Ah! So, sometimes after the S&L fiasco, CMOs got renamed to CDOs, Salomon Brothers faded away to be replaced by Lehman Brothers and others, and the game continued.

But for any seller of a product, there must be a buyer. Yes? Here comes the keeper of our Norwegian widow's money.
... though there was still no theoretical basis for pricing the homeowner's option to repay his mortgage, the market was growing large enough to impose its own sense of fairness...

The biggest shoppers, the thrifts, often had a very particular need. They wanted to grow beyond the limits imposed by the Federal Loan Bank Board in Washington. It was a constant struggle to stay one step ahead of thrift regulators in Washington. Many "new products" invented by Salomon Brothers were outside the rules of the regulatory game; they were not required to be listed on thrift balance sheets and therefore offered a way for thrifts to grow.
Well, perhaps our Norwegian banker was still smarting from the CMOs of years past, so he demanded some form of protection this time. No problemo! AIG invented some "perfect" CDS's to sell them as insurance.

As I said, I am still waiting for an insider's account of the current financial debacle. I would like to know what was happening inside Lehman and AIG, to see if things were any different than when Lewis witnessed it first-hand at Salomon Brothers.
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Old 04-01-2009, 09:29 AM   #78
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I'm supportive of the idea of "enlightened self-interest", but I'm still waiting for the "enlightened" part...
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Old 04-05-2009, 02:01 AM   #79
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I think this is a key point. I think the market for high-level executives at a lot of companies is completely broken.

Does anyone think that Home Depot is better off for paying Bob Nardelli several hundred million to do his best to run the company into the ground?

I think there is a basic problem with how the Board of Directors works at most companies. These people often do not have any meaningful stake in the companies that they are running, so they are often not very concerned with keeping executive salaries sane.

Nepotism and the good-old-boy network are often more important than the rational self-interest of the shareholders. Imagine a system where you and your best friend got to set each others' salaries. Many CEO types are living that dream.

The system currently makes it very difficult for shareholders to remove the Board of Directors.

I think we need to look seriously at how the BoD gets chosen, and make it easier for shareholders to remove the current board. I would like to see a system where the BoD gets chosen from large shareholders. I think that that would help align their interests with the rest of the shareholders.


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All I'm suggesting is that the "market" for labor (or at least certain types of labor) may not be particularly efficient. And we as a nation are poorer for that. Nowhere did I suggest any remedy for this inefficiency. Indeed, the currently inefficient market may still be better than any available alternative. But maybe not. It's at least worth considering.

With respect to entertainers, they certainly do create. I don't think you'd argue that Mozart or Shakespeare have added immeasurably to the wealth of society. Britney Spears is not of that caliber, but she creates something unique that only she can provide. A bond salesman, not so much.
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Old 04-05-2009, 08:53 AM   #80
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I think this is a key point. I think the market for high-level executives at a lot of companies is completely broken.

Does anyone think that Home Depot is better off for paying Bob Nardelli several hundred million to do his best to run the company into the ground?

I think there is a basic problem with how the Board of Directors works at most companies. These people often do not have any meaningful stake in the companies that they are running, so they are often not very concerned with keeping executive salaries sane.

Nepotism and the good-old-boy network are often more important than the rational self-interest of the shareholders. Imagine a system where you and your best friend got to set each others' salaries. Many CEO types are living that dream.

The system currently makes it very difficult for shareholders to remove the Board of Directors.

I think we need to look seriously at how the BoD gets chosen, and make it easier for shareholders to remove the current board. I would like to see a system where the BoD gets chosen from large shareholders. I think that that would help align their interests with the rest of the shareholders.


You should see how the Norwegian widow has been voting her proxy's of late.

Did I mention she's a John C. Bogle fan?

heh heh heh -
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