Part of the problem.....

[Sauron]

with the economy:

Execs make bank while stocks tank

Overall executive compensation was little changed last year, despite generally poor stock performance, research firm says.

By Ben Rooney, CNNMoney.com staff reporter
Last Updated: September 24, 2009: 5:55 PM ET

NEW YORK (CNNMoney.com) -- Compensation for top executives at many of the nation's largest publicly traded firms was essentially unchanged last year, even as the stock market plummeted, according to a study released Thursday.

The Corporate Library, a corporate governance research firm that focuses on executive compensation, said the median change in total compensation for chief executives was a decline of less than 0.1%.
The drop was small considering the dramatic declines in the stock market last year, and suggests "that the link between CEO pay and firm performance remains very weak," the report said.

Oh, and a disclaimer for California Tanker: the excerpt above is not the whole article. That is what the link is for.

[Garnet]

What's the solution to this problem? I'm not being snarky; it's something that I've thought about and I don't know what the answer is. Should executive salaries be capped? Regulated? Tied to company performance? What would the most ethical solution be?

[Jug Pilot]

Didn't the government under FDR tax them at 90% in 1939?

[The Lone Ranger]

Tax rates (at least the top rates) have certainly been much higher in the past, it seems.

[godfry n. glad]

I'd suggest that there be steep tax disincentives for extending managerial and executive pay beyond given proportions of the lowest earners of the company. Unless all corporate non-managerials employees receive a wage increase, no manager does; and managerial and executive bonus be awarded only then. However, I'd like to see executives sacked for executive decisions which hurt employees, profits, and the company image. All too often, when a company tanks, those who made the decisions (the executives) are rewarded with golden parachutes so they can repeat their fuck-ups at another corporation, emiserating both employees and stockholders.

[JamesBannon]

Here's a tip: shit always rolls downhill. If there exists such a thing as an Economic "law", then that is the top contender.

[naturalist.atheist]

Maybe what is needed is a definition of thievery to include paying yourself a salary you can't justify earning from the point of view of the performance of the company as stealing. This of course would only apply to public corporations.

[godfry n. glad]

Originally Posted by JamesBannon

Here's a tip: shit always rolls downhill. If there exists such a thing as an Economic "law", then that is the top contender.

Funny...I'd heard the biggest turds floated to the top.

[Qingdai]

We have a minimum wage, how about a maximum wage? We can tie it to a percentage of what the lowest paid person in the company makes.

I bet we'd all see some higher wages then.

[Sauron]

Originally Posted by Garnet

What's the solution to this problem? I'm not being snarky; it's something that I've thought about and I don't know what the answer is. Should executive salaries be capped? Regulated? Tied to company performance? What would the most ethical solution be?

Salary packages for executives should come under stockholder voting. As it is now, the Board of Directors in most major companies sets executive compensation, with shareholders having only a nonbinding vote. Yet the shareholders are, at least in theory, the owners (or co-owners) of the company.

Additionally - and more generally - I like the suggestions in this article by Fiscal Therapy, by David Cay Johnston. Johnston is a Pulitzer-prize winning writer who was also the tax writer for the New York Times. The short list of things to fix the current system.

1. Quit Cooking the Books

2. Make the Superrich Pay Their Share -
We may never get back to the pre-Reagan tax rate for the top earners (70 percent), but we should at least nudge it back to the Clinton-era rate of 39.6 percent, as Obama has proposed, and for simplicity's sake round to 40 percent. To motivate executives, publicly traded companies could still be allowed to give out unlimited stock bonuses, provided that the execs pay taxes on the shares, cannot sell them for three years after leaving a company, and then must spread sales over at least five years. This would create a powerful incentive to manage companies for long-term success, which is good for jobs—and a smart ceo could still get fabulously rich.


3. End Legal Tax Cheating
4. Invade the Caymans
5. Wean Wal-Mart (and the Yankees)
6. Cut Off the Utility Scam
7. Ground the Private Jet Exemption
8. Demolish the Mansion Deduction
9. Defang the Loan Sharks
10. Save Our Savings
11. Protect Pensions
12. End the Burglar-Alarm Subsidy
13. Stop Indenturing Students
14. Drag the IRS into the 21st Century

[The Man]

The people mentioned in the OP are a bunch of mindless jerks who'll be the first against the wall when the revolution comes.

Also, I've yet to read anything written by David Cay Johnston that I didn't agree with. I'll check that article out later.

[Jug Pilot]

When you think about it, the political structure of a corporation is a dictatorship. Maybe that is the root of the problem? Are we really living in a democracy/republic if a majority of our waking time is spent under the control of a dictatorship and it cronies?

Somehow I think if employees set the wages of their manager (and managers set the wages of their upper managers and so on) we wouldn’t see these gross over the top compensation packages we see now. They (the employees) know better than anyone if a manger is competent. They are the ones with the most to gain/lose with an incompetent manager. And at times it seems like they are the only ones that want a company to succeed long term.

[The Man]

Originally Posted by Jug Pilot

When you think about it, the political structure of a corporation is a dictatorship. Maybe that is the root of the problem? Are we really living in a democracy/republic if a majority of our waking time is spent under the control of a dictatorship and it cronies?

Somehow I think if employees set the wages of their manager (and managers set the wages of their upper managers and so on) we wouldn’t see these gross over the top compensation packages we see now. They (the employees) know better than anyone if a manger is competent. They are the ones with the most to gain/lose with an incompetent manager. And at times it seems like they are the only ones that want a company to succeed long term.

That would definitely be a step in the right direction (full disclosure: I'm basically anarcho-syndicalist). One problem in implementing this would be that many companies are far too large for workers to be able to evaluate the performances of those at the top, as they never have any personal contact with them. I have contact with the store managers every time I work, and they generally do a pretty good job (they could do a better job with employee training but given how starved the economy is right now I can't say I'm entirely surprised they don't), but I have absolutely no idea how the district managers perform because I've maybe met one of them for five minutes and even less idea how the CEO performs because I'll probably never meet him. I suppose this would be a good argument for splitting up large companies as well.

[godfry n. glad]

Originally Posted by Jug Pilot

When you think about it, the political structure of a corporation is a dictatorship. Maybe that is the root of the problem? Are we really living in a democracy/republic if a majority of our waking time is spent under the control of a dictatorship and it cronies?

Yeah.

Has anyone else noticed how one's civil rights as a citizen disappear once you walk through the doors of your employer? Even if, or particularly if, one is a public employee?

[Jug Pilot]

Originally Posted by The Man

That would definitely be a step in the right direction (full disclosure: I'm basically anarcho-syndicalist). One problem in implementing this would be that many companies are far too large for workers to be able to evaluate the performances of those at the top, as they never have any personal contact with them. I have contact with the store managers every time I work, and they generally do a pretty good job (they could do a better job with employee training but given how starved the economy is right now I can't say I'm entirely surprised they don't), but I have absolutely no idea how the district managers perform because I've maybe met one of them for five minutes and even less idea how the CEO performs because I'll probably never meet him. I suppose this would be a good argument for splitting up large companies as well.

I think it would be enough for just the immediate person above you. They would do their boss and so on.

Last company I worked for it was obvious the CEO and his crony friends he hired and all were beyond incompetent with bloated salaries. But hey the CEO was good buddies with guys on the board, that’s why he got the job. And they ran it right into the ground. We worked 14 hours a day, 7 days a week trying to save the company, they partied and ran up their expense accounts (explain why its ok to buy a $1000 bottle of wine on the company card). When the company failed, they all got massive parachutes, we got 2 weeks. Oh, and they blamed us for the failure.

[godfry n. glad]

That sounds ever so typical.

I've seen it happen in the public sector, too. Elected officials and their cronies decide who gets the plum contracts (for whatever). The contractor gets a cheap sub and the job is done half assed, with contract extensions and cost overruns the line the pockets of the 'contractor' who often hasn't done shit. These numbnuts bilk the taxpayer through the public institution and all their friends and family prosper and invest their earnings somewhere trendy. We foot the bill and bitch at the government, and government employees who didn't even have a fuckin' hand in the scam, for the sky-high property tax bills we get.

I suspect that here we will find out about investment of public money in private real estate scams that are in the process of financially imploding due to the whole inbred scheme and the narcissistic 'connected' (i.e., pals with your CEO, probably Jug) politicos making multiple arrogant bad decisions at the behest of the state's most overpaid public executives and their private sector pals.

This is how we get a publicly owned tram connecting two parts of the campus which, bid and sold to the public as a $12.5 million 'transportation' project, became a $57 million boondoogle for doctors and nurses ride free, while the general public pays $4 a pop to ride for three minutes (top to bottom, or vice versa, big whoop)....from a hospital to a health clinic. The lower portion is in the aforementioned imploding real estate scam, subsidized by the city with special tax privileges (tax increment financing) guaranteed by the city's good credit. The upper portion is a huge overblown medical complex. Big whoop.

In the wake of this monumental failure, the CEO of my employer was rewarded with a lavish retirement and having the new wing of the hospital named after him. He is a 'tier-one' PERSS retiree and his retirement will be determined upon the basis of the last three years....when he was the highest paid public official in the state, making way more than the governor. That's one 24K golden parachute for fucking up the institution big time. Shortly thereafter, the executive team members received outrageous bonuses and the following week, they announced budget and staff cuts, which didn't go over so well that the bonuses were 'returned'. The usual suspects are fleeing now like rats. Vice presidents of the old regime leave "to pursue other opportunities, as yet undetermined". They are all protected with severance packages while the grunts are terminated at will and with their pittance of an unemployment check, if they're lucky.

I will note here that most of the politico players in this scenario are Democrats, even though several are masquerading as nominal non-partisan elected officials.

[The Man]

I suspect that kind of thing happens a lot more than any of us hear about. The problem with representative democracy is that it isn't really all that representative, simply because the power gap between elected officials and constituents is too massive for there to be any real accountability. The first-past-the-post method of electing representatives also definitely doesn't help matters much, since it furthers the existence of a two-party system (two parties, I might add, who do everything in their power to make sure other parties don't have a realistic chance of getting elected).

A pox on both their houses.

[godfry n. glad]

Plutocratic kleptocrats is what we have come to, in my estimation.

[Garnet]

Originally Posted by JamesBannon

Here's a tip: shit always rolls downhill. If there exists such a thing as an Economic "law", then that is the top contender.

I think you just succinctly described the theory of "Trickle Down" economics.

[JamesBannon]

Originally Posted by Garnet

I think you just succinctly described the theory of "Trickle Down" economics.

Here's how economics works. I have a theory, now how can I manipulate the data to support that theory.

[Jug Pilot]

Originally Posted by godfry n. glad

Yeah.

Has anyone else noticed how one's civil rights as a citizen disappear once you walk through the doors of your employer? Even if, or particularly if, one is a public employee?

Exactly.

It seems like corporations and those high up in them have more rights and protection than individuals.

[Jug Pilot]

Originally Posted by godfry n. glad

That sounds ever so typical.

I've seen it happen in the public sector, too. Elected officials and their cronies decide who gets the plum contracts (for whatever). The contractor gets a cheap sub and the job is done half assed, with contract extensions and cost overruns the line the pockets of the 'contractor' who often hasn't done shit. These numbnuts bilk the taxpayer through the public institution and all their friends and family prosper and invest their earnings somewhere trendy. We foot the bill and bitch at the government, and government employees who didn't even have a fuckin' hand in the scam, for the sky-high property tax bills we get.

I suspect that here we will find out about investment of public money in private real estate scams that are in the process of financially imploding due to the whole inbred scheme and the narcissistic 'connected' (i.e., pals with your CEO, probably Jug) politicos making multiple arrogant bad decisions at the behest of the state's most overpaid public executives and their private sector pals.

This is how we get a publicly owned tram connecting two parts of the campus which, bid and sold to the public as a $12.5 million 'transportation' project, became a $57 million boondoogle for doctors and nurses ride free, while the general public pays $4 a pop to ride for three minutes (top to bottom, or vice versa, big whoop)....from a hospital to a health clinic. The lower portion is in the aforementioned imploding real estate scam, subsidized by the city with special tax privileges (tax increment financing) guaranteed by the city's good credit. The upper portion is a huge overblown medical complex. Big whoop.

In the wake of this monumental failure, the CEO of my employer was rewarded with a lavish retirement and having the new wing of the hospital named after him. He is a 'tier-one' PERSS retiree and his retirement will be determined upon the basis of the last three years....when he was the highest paid public official in the state, making way more than the governor. That's one 24K golden parachute for fucking up the institution big time. Shortly thereafter, the executive team members received outrageous bonuses and the following week, they announced budget and staff cuts, which didn't go over so well that the bonuses were 'returned'. The usual suspects are fleeing now like rats. Vice presidents of the old regime leave "to pursue other opportunities, as yet undetermined". They are all protected with severance packages while the grunts are terminated at will and with their pittance of an unemployment check, if they're lucky.

I will note here that most of the politico players in this scenario are Democrats, even though several are masquerading as nominal non-partisan elected officials.

Since it was a public project would the GAO be an option?

[California Tanker]

Oh, and a disclaimer for California Tanker: the excerpt above is not the whole article. That is what the link is for.

Thank you.

NTM

[godfry n. glad]

Originally Posted by Jug Pilot

Since it was a public project would the GAO be an option?

If there were federal monies, it might work. However, it was all put on the tab of the 'urban renewal funds' for the development area, which is funded through increased value and subsequent payments of property taxes (levied by local governments through the county tax mechanism), so the subsidy is footed by the local property tax payers, not federal taxes.

We'd just love to have the federal prosecutors initiate a RICO investigation and several reasonably visible locals (including a tax professor at a local law school) have publicly requested it. We'd love to see an investigation by the state's Attorney General, too. But they, for some reason, fail to ever come into being....I suppose it could be because the 'linchpin' is a former mayor/governor/federal cabinet member/kingmaker (now disgraced, but not neutered), and the movers are all highly placed politicos and controllers of the taps of campaign financing (aka 'big money' people). The 'linchpin' is adept at sitting on evidence and silencing witnesses until the crimes are beyond the statues of limitations.

[The Lone Ranger]

Originally Posted by godfry n. glad

Plutocratic kleptocrats is what we have come to, in my estimation.

I read an article recently that said that if current trends continue, the U.S. is in serious danger of becoming a plutocracy.

My immediate reaction was, "What do you mean becoming? In what way, exactly, is it not already a plutocracy -- in practice, if not yet in name?"