Y'all are a bunch of wankers!

Let's get cynical, cynical...

I was in the car driving home from work today listening to public radio's MarketPlace when they interviewed a woman who runs the website http://www.footnoted.org/

She was a business journalist who has a knack for delving into the muddy waters of financial statements and pulling out nuggets of interesting information. (She said she started doing this after losing $5000 on an investment in HealthSouth.)

Reading through her blog entries you find evidence of corporate greed everywhere. Like this item on HP:

Earlier today, Hewlett-Packard(HPQ) announced that it plans to &#8220;streamline&#8221; its operations and cut up to 15,000 jobs in the process.... [But incoming executive Randall Mott], who had been chief information officer at Dell (DELL) since 2000 will get a $2.2 million signing bonus &#8220;in order to replace benefits that Mr. Mott is forfeiting by leaving his current employment.&#8221; That&#8217;s in addition to a whole host of other goodies, including 285,000 shares of restricted stock that vest 20% a year, a $7 million targeted long-term performance bonus for 2005-2008, a guaranteed bonus of nearly $700K for 2005, even though he&#8217;s only working half of the year, and a $1 million relocation allowance."

Permalink Yoey 
August 3rd, 2005
HP make great printers. What's to learn from Dell :-)
Permalink 15,056,727th in line 
August 3rd, 2005
I keep toying with ideas about this kind of thing. I don't want to cap executive compensation, since some CEO's really do earn what they make. A few things I'm thinking about that could ease the abuse:

If I were a stockholder, executive stock would not vest for at least five years after grant; bonuses would be based on actual performance, etc, etc.

I think the one way that would help would be a law that requires all executive compensation to be approved by shareholder vote.

Permalink Philo 
August 4th, 2005
"J.P. Morgan himself once said no chief executive should earn more than 20 times an average worker's pay."

"According to Business Week, the average CEO of a major corporation made 42 times the average hourly worker's pay in 1980. By 1990 that had almost doubled to 85 times. In 2000, the average CEO salary reached an unbelievable 531 times that of the average hourly worker."

"When Warren Buffett launched his latest campaign against excessive CEO pay, he first anticipated an inevitable question: how has Buffett's own record been on this issue? 'Not so good,' was his answer."

"The Greeks (see Plato and Aristotle) thought that a spread of five times was about right between the highest and lowest paid workers. By the end of the 19th century, J.P. Morgan had boosted this to 20 times. Now in the 21st century, it's many times more."
Permalink Tayssir John Gabbour 
August 4th, 2005
its about added value, isn't it? kinda like if a movie star or pro athlete gets millions of dollars... if they increase product marketability by the amount of the salary or more, then they're worth their price...
Permalink Kenny 
August 4th, 2005
In fact, the highly respected management guru Peter Drucker explained:

DRUCKER: J. P. Morgan, who certainly cannot be accused of not liking money, gave an order to his investment people never to invest in a company in which a CEO earned more than 30 percent more than the next layer. That CEO, he said, can't build a team, and the company is mismanaged. He also once said that the proper ratio for salaries for employed people, between the top people and the rank and file should be twentyfold, posttax. That's the highest. Beyond that, you create social tension.

WIRED: What should be done about it?

DRUCKER: I am not a believer in regulation, and I sure am not a believer in taxation. But I don't see any way out. The only thing I possibly can see would be stockholder pressure, and I'm not terribly happy about this either. These are remedies with substantial side effects. But what can be done? I think nothing can be done except a moral revulsion, so to speak. This is not acceptable behavior.

I first wrote about the unconscionable greed of CEOs in 1974 - 22 years ago - and nobody paid any attention. It's amazing how long things take. Now it's beginning to be a topic. Give it another 10 years. I've learned that these things have a long lead time.
Permalink Tayssir John Gabbour 
August 4th, 2005
>> If I were a stockholder, executive stock would not vest for at least five years after grant; bonuses would be based on actual performance, etc, etc. <<

I agree, but when you're competing for a small pool of talent, there's no way that a CEO candidate would choose your company over one that will make him an instant multi-millionaire.

Sooner or later, boards of directors will realize that most of these guys aren't adding as much value as they thought, and that many of them are hopping from executive job to executive job, picking up large signing bonuses each time.

Only then will some sanity set in.
Permalink example 
August 4th, 2005
Wall St. Journal: "Pay for performance? Forget it. These days, CEOs are assured of getting rich -- however the company does."
Permalink Tayssir John Gabbour 
August 4th, 2005
"I agree, but when you're competing for a small pool of talent, there's no way that a CEO candidate would choose your company over one that will make him an instant multi-millionaire."

that's why you need some regulation somewhere to level the playing field. I think the requirement that executive compensation be voted on by shareholders annually is the least dangerous one.

And also firming up the conflict of interest laws that indicate that holding a large quantity of shares and voting yourself a pay raise is a breach of fiduciary responsibility. :)

Permalink Philo 
August 4th, 2005
I agree with Philo. The factual situation regarding large public companies is a joke -- the shareholders who, you know, are the ACTUAL OWNERS of the company have virtually nothing to say, while a homogenous caste of top managers hand out liberal benefits to each other.

Legislation is needed to fix this. Unfortunately, those executives are also notoriously chummy with governments -- even in Europe. They have no trouble complying with insane taxation and regulations that kill smaller businesses, loopholes are easy to find for the big guys and it's not THEIR money after all! Besides, governments want to keep them reasonably happy so that the jobs stay in the country.

So the chances of legislators doing anything that would directly hurt top executives are very slim...
Permalink Chris Nahr 
August 4th, 2005
It's my opinion that very, very few CEOs are worth their salaries and benefits.

In fact, I would wager a guess that many good people who make less than $100,000/year could be a decent CEO and achieve at least the results of their multi-million dollar predecessors. Moreover, what if Joel Spolsky was installed as CEO at HP? I'm sure he would do at least as good as Carly Fiorina. How many times have we, during our professional lives, worked for great people who knew how to manager duties and keep up morale, sell people on things and get the job done?

(Of course, the argument can be made that when Fiorina was hired she wasn't just brought in because of her skills, but also because of her reputation; "we don't sell the steak, we sell the sizzle." This makes shareholders and Wall Street happy -- which makes me wonder about the collective intelligence of these people.)

I'm against legislation on this issue simply because it's the shareholders' responsibility to reign in these guaranteed golden eggs.

I'm curious if there are any really valid arguments that could be made in defense of these ridiculous payouts?
Permalink Yoey 
August 4th, 2005
There's sane-sounding legislative plans in this area.
Permalink Tayssir John Gabbour 
August 4th, 2005

This topic was orginally posted to the off-topic forum of the
Joel on Software discussion board.

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