Cap Executive Pay

Great Debates
121

Your post quoted my list of 1. through 10. reasons how a rich, powerful person with concentrated wealth had power. I assumed that was what you were getting at.

So there are some mergers and acquisitions, which reduce the number of players.

Again…So? If they aren’t any good at providing customers with a product they want, they will still fail. Customers will go elsewhere. As they increasingly are for ‘news and information’. The nightly news on major broadcast TV is increasingly becoming irrelevant.

I’m not sure where you are going with this. Are you saying the government needs to get involved, somehow?

122

In a democracy, Politicians’ are supposed to derive authority from the consent of the governed. Based on the U.S. system of government, I am not advocating giving politicians more power. I am advocating that elected officials exercise power to draft laws that reflect the will of the people and, at the very least, serve the best interest of the people not the best interest of corporations and private wealth.

The neoliberal ideology of lower taxes and limited government translates into freedom to live one’s economic reality without government interference and public spending. It is freedom to choose that is limited to what one can afford. An individual’s economic reality is simply left to the mercy of private forces. It is a shifting of power from the public to the private sphere.

Of course, protect all speech. When speech is a luxury that is purchased, is it really free speech? You use bloggers as an example. I will agree that the internet has been a platform for marginalized voices and dissenting views, but bloggers are only as influential as their ability to mobilize change, and authentic grass roots blogging has been mimicked with PR strategies like astroturfingand co-opted by mainstream media.

A person is free to speak on a message board or with a bull horn on the street corner, but this speech doesn’t have the same power to inform and shape public opinion like the press or influence policy like lobbying and campaign contributions.

123

Today, some view it as confiscation of wealth; historically, it has been viewed as a fair distribution of the tax burden.

124

Okay, I freely admit the slippery slope and will rephrase. Concentrated wealth will likely threaten democracy and possibly lead to tyranny.

Fair enough. I concede to your point.

125

That’s fair enough - perhaps you could cite a few specific examples of how politicians sold their vote in return for campaign contributions, and how a large tax increase would have prevented this from happening.

Because I don’t see where you have addressed IdahoMauleMan’s point. You say that money is power, and that concentrating money in the hands of private individuals gives them too much power. But you deny that concentrating the same money in different hands - namely, those of government bureaucrats - constitutes a transfer of power.

A fair amount of lobbying, after all, is to shape tax policy and try to shift the burdens of taxation onto someone else. Why would increasing taxes cause this to disappear?

Regards,
Shodan

126

You’re begging the question just a tad, aren’t you? Why do you assume that your change will actually produce a net economic benefit? Why isn’t it possible it would retard economic growth in the long-term, for example? These are the unintended consequences that we risk when we speculate what motivated certain dangerous decisions. Why not just regulate the actual dangerous decision? You believe that exec comp led to the excess leverage. I may disagree. But we both would agree, I’d assume, that limiting the amount of debt a firm can assume will, amazingly, limit the amount of debt a firm will assume.

Government regulates risk all the time. That’s why insurance companies have statutory reserves–it ain’t because they’re great guys. It’s because regulators insist that if you guarantee certain payouts, that you actually have the means to honor said guarantees. I accept regulation only to the extent that the overbearing nature of any restriction is greatly outweighed by the benefit it produces, which obviously entails some unavoidable subjectivity. Ensuring that a major insurer doesn’t go out of business and leave millions in financial peril because their claims can’t be paid is one such situation. Restricting some of the excesses that occurred in this latest fiasco is also warranted. Social experiments to eliminate the “triggers” is beyond the pale for a democratic society. The government has no business saying how much anyone gets paid, frankly. They have a proud and proven track record of royally fucking up every system that they “fix” by tweaking the perceived indirect root causes of a perceived evil.

Again, because the government should not be in the position of dictating compensation programs for private companies. That is not just distasteful, it is a dangerous precedent. Government does get to set reasonable restrictions on the activity that directly impacts people who enjoy no benefit from the profits that firm earns. I did not invest in Lehman or AIG, but I have a real interest in the amount of risk they assume (or assumed), since they are market breakers. The Feds should get to say, within reason, that a given roll of the dice is not permitted. They do NOT get to say (or shouldn’t) what comp that private firm wants to pay. Let 'em pay the CEO a bazillion dollars, it’s their nickel. Last time I checked, we didn’t live in a command economy, and private entities were permitted to make such decisions for themselves. Should the government approve all their sales goals and every aspect of their product mix, should they decide if they outsource or relocate?

127

The whole point of buying up the competition is to remove the need to develop, innovate and compete.It is not a plus for the consumer. They make so they can not fail. take what we give you and like it.

128

A remarkably stupid argument. Illicit drugs are purchased and consumed in secret. How do you suggest that a billion dollar company do financial shenanigans on the down low? Please think before you type. Just because it seems like a zinger doesn’t mean it makes any sense.

Regards,
Lobohan

Ontopic: Limiting executive pay to some multiple is silly. In my offhand opinion I could see limiting it to some absolute number, say 1 million + some percentage of the quarter’s profits. Business does well, executive rolling in dough. Business do poorly, executive still gets his base pay.

This would actually be pro-capitalism. The system now where a CEO chooses his board and they vote on his compensation is a subversion of the capitalist system.

129

You mean like Enron, and so forth?

Or do you mean that there is no possible way to get around a law, or a tax increase? And tax attorneys don’t earn their living figuring it out?

Regards,
Shodan

130

Kind of like General Motors, or IBM? The latter was a target for a US government antitrust case a few decades ago for computer manufacturing. I’ll pause to let you stop and laugh at how ridiculous that sounds today.

If consumers don’t want the product they won’t buy it. Yet again, you are painting yourself as a hapless victim, subject to the powerful forces of corporate America who are forcing you to do their bidding. You’re powerless. You must do what they tell you to do. You have no other choice. You’re a leaf blowing and twisting in the wind, getting batted this-way-and-that by corporations bending you to their will.

You have all the power, dude. That’s why it’s called a ‘voluntary transaction’. It can’t happen without your consent. Unless of course you enjoy voluntarily backing yourself into a corner and bestowing victim status upon yourself. Which I suspect is close to the truth. Because if you do so, you can rationalize how you are absolved of responsibility for your own decisions.

Do you listen on a regular basis to, and believe, the NBC nightly news? Is that your only source for news and information? It must be…otherwise I assume you wouldn’t give a rat’s ass about whether GE owns NBC affiliates or not. It wouldn’t matter.

But you seem very worried about it. It must be because that is your sole source for news and commentary.

131

I get SO tired of people who know absolutely nothing about business making sweeping statements like this.

The company I worked for was bought out by a bigger company. Working for that company, I have been involved in discussions of acquisitions of other companies. It has NOTHING to do with trying to limit competition or corner the market. It’s more about strategically placing your company in a certain market.

For example, let’s say you make automation controls for factories. You have very good hardware, but you have a gap in your product line - you don’t have good management or HMI software. Your competitors may have inferior hardware, but their combination of hardware and software is causing customers to choose them.

So you know you have to come up with your own software solution. You do an analysis of what it will take to make your own, how long it will take, how much sales you will lose while it’s being built, and you compare that against the cost of acquiring a company that already makes the kind of software you need, or perhaps entering into a strategic partnership with them.

It’s all about strengthening your product line and filling gaps. And if you think it through, you’ll see that this can be a good thing for the economy as a whole. For example, if the company decides to make their own product, then they are going to be competing against the existing company for the same market, and suddenly you have an oversupply of capacity.

Companies that do acquisitions will often, and at the same time, divest themselves of other branches of their company. It’s not about ‘taking over’, it’s about maintaining the alignment between the needs of the market and the strengths of your company. GM will acquire part of Subaru, then divest itself of SAAB. GE tries to get rid of appliances, but buys a company that makes wind turbines. Companies are dynamic, evolving entities. Or if they aren’t, they go out of business.

I find it amazing that so many people are willing to invoke all kinds of conspiracy theories, weak correlations, or outright fictions to paint a picture of corporate America as somehow controlling their lives, and then using that to justify giving more power to the government, which has as its sole purpose the ability to directly control people’s lives, including a sanction on the use of force if need be.

Stories of political corruption are ignored or dismissed as the problem of bad individual politicians (or hyped if it’s the party you don’t like being caught). Demonstrated governmental failures like Fannie Mae and Freddie Mac are ignored. 55 trillion dollars in pension shortfalls by government managers are swept under the rug while a much smaller loss of capital in the heavily controlled financial sector is used to ‘prove’ that capitalism is an utter failure.

People still advocate price controls and trade tariffs, despite their being almost universal agreement among economists that these are destructive policies. In the 70’s, the government’s answer to high gasoline prices was a price control on gasoline - which immediately led to shortages and lines at gas pumps. Government’s response to high rental rates in New York was rent controls - which has done tremendous damage to New York real estate and affordability. And now you want to control CEO wages with price controls. Will you ever learn?

132

Yeah, but I still can’t understand why in any other job, poor performance results in you being fired with NO compensation whatsoever. Is it a contractual thing?

If it is, perhaps the contracts need to reflect reality and have language in them that basically says “meet these metrics or your fired”…or something.

133

Why you keep hand-waving away a problem is why I (and others I suppose) persist.

How is executive pay ok as is? Justify how paying these guys gobs of money only to have them drive their corporations into the ground makes sense? Where is their risk? Where is their incentive? You may well say that is between them, their Board and their investors. I’d go with that except now they have made it MY problem! They are dipping into MY wallet when I had no intention of investing with them. They have collapsed a global economy. You think it is not my place to rail at paying those guys MORE money?

It’d be one thing if you could show that the market corrects itself and is what most diehard capitalists would have us believe. Except that is provably not the case is it? The link in the OP is to an article two years ago where executives themselves were pointing out the very real problem of executive pay. So, some of them recognized the problem yet what changed? Nothing of any substance.

If the market refuses to correct itself and there remain egregious excesses then how do you suppose it will get fixed? Just keep the status quo because it has worked so well for us?

These businesses had their chance at a free market, do it their way, these things have a way of sorting themselves out. They failed and failed colossally. They made it the American public’s problem which, by extension, makes it an issue for the government.

134

It is indeed amazing. But that’s because it’s not rational.

As I’ve said many times before, Sam, when we (inevitably) circle back to your central argument above - over and over and over and over again - repeated many different times, in many different ways, across many different SDMB threads, I can only come to one conclusion.

They. Don’t. WANT. A. Choice. They don’t want control over these types of decisions. They want someone…a savior in Washington, D.C. that they believe and trust…telling them what to do.

135

How did it become the American public’s problem? If a CEO fails, and takes down his shareholders with him, how does that become the American public’s problem? Why isn’t it just confined to the company itself, as is the case with many other bankruptcies?

Hint: For banks, it does become our problem. For nearly any other company, it’s confined to the company itself.

Another hint: How are banks different, and special from other companies…like manufacturing companies, for example?

Final hint: It has something to do with your last 7 words above.

136

You can not limit all exec pay, but if the governments takes it over ,you certainly can. We own 80% of AIG. I believe that gives us a right to prevent the bank robbers from their dirty deeds. We oversaw the elimination of thousands of jobs. You have no problems with that. But, if we chose to prevent the thieves from outrageously rewarding them selves again we are overstepping our bounds.

137

Are you serious?

Hint: Read a newspaper.

138

I still fail to understand a corporate culture that rewards failure at doing one’s job. Middle managers of these companies are cut out like swaths of ditchweed with maybe a severance package, why are these CEO’s being rewarded for poor performance to go away, instead of just being told to go away?

Again: is it a contractual obligation on the part of the board/company to pay these yahoos a ridiculous amount of money/options just to make them go away, and if so, why aren’t these contracts being restructured in favor of the long-term health of the corporation?

139

I’m not debating whether it is the American public’s problem, I’m asking you HOW it became the American public’s problem. You sort of quickly blew through that point above, and then concluded that the government must get involved. Because the free-market guys failed us all, somehow.

I’ll ask again: How are the bank failures’ the American public’s problem? Why isn’t a bankruptcy of a bank just confined to its shareholders?

140

I may be incredibly naive, but isn’t it because regular people that have money in said bank will lose that money if that happens?

I understand you’re probably talking about “why are we propping up these insolvent banking institutions with tax money” and the answer to me is probably because the tax money was being used to propagate the problem to begin with.

We’re getting our payback, is all.
:wink: