Just remember the First Rule of Acquisiton: Once you’ve got their money, never give it back.
Think of it in these terms. Why pay so much for Michael Jordan? Ok, he was a great basketball player (I say tongue in cheek since I barely know who he is), but why pay so MUCH for him? After all, you could get 2 or 3 or even more players for the price of this one guy, no?
Really good CEO’s aren’t a dime a dozen. If you want to get the guys at the top of the talent heap then you pay through the nose for them. The fact that they ARE top talent doesn’t mean they can’t fuck up of course…happens all the time. But like with Jordan (or someone similar) if you want them you sign a contract with them…and they are in a position of having a sellers market.
-XT
Like I said, it’s a cost benefit analysis. In the OPs example it’s pretty cut and dried…it’s strictly a local issue so most likely it’s going to be handled locally (or at the county or state level). In the real situation things are a lot more…complex.
And you (and I and everyone else in this thread) benefited by the billions (possibly hundreds of billions) in tax revenue AIG generated over the past decade…not to mention all the other things we all benefited by (jobs they generated, spin off industries and revenue, etc etc).
Here is the thing…that $7 million (or even $68 million) is NOTHING. It’s not even a drop in the bucket of this problem. And WE aren’t being asked to pay that…those CEO’s had contracts that entitles them to those funds. Even if AIG went into bankruptcy (perish the thought!) they would STILL get that money, as it’s a legal contract AFAIK.
I think you are mixing a lot of things up here. AIG wasn’t the problem, nor did they build the house of cards. No one company is responsible for this mess…nor is any one PARTY (since the government and it’s policies had a LOT to do with the current fuckup). Also, we are at the point where this isn’t about paying off the CEO’s…it’s about whether our economy goes into free fall or not. Maybe you don’t want to be left holding the bag, but consider…if it all goes tits we’ll all WISH we had a bag to hold…
-XT
I’m with you 1000%. Not only should we take that money, but we should force the company to file criminal charges against the BofD for shirking their fiduciary responsibility to the company. There’s no way a board can justify payouts of XX million one day and the company go under a month or two later.
That explains why they get big salaries, not why they get big packages when they fuck up. I think the real reason is that search committees are so sure of their brilliance in finding the right CEO they are willing to pay plenty, and because they want to set the floor so that when they get booted they’d get the bucks also.
No? They were certainly part of the problem, selling insurance on these iffy instruments at a rate much higher than warranted, without really considering the risk adequately. The insurance encouraged the investment banks and others to keep buying them. As far as I can tell, AIGs mainstream insurance business is fine.
My guess is that it’s put into the contract when they signed those CEO’s on. To go back to the analogy I used earlier, if Michael Jordan gets hurt and can’t play anymore then the team doesn’t just cut him loose with no money…not unless he’s an idiot and didn’t put a provision for injury in his contract.
-XT
Are we playing six degrees of separation here?
In some fashion you benefit from my economic activity. I pay taxes supporting the roads you drive on, I buy stuff thus promoting jobs, I work providing you or people you know services that makes their life better and benefits you.
Now say I screw-up royally. My contract says I should get paid $50 million this year. Makes no difference if I screw up or not. However, my screw-up means my company cannot write me that check now. So, since I am clearly benefiting YOU I want YOU to make a check payable to Whack-a-Mole and send it forthwith. Nevermind that you had nothing to do with my screw-up…someone else made a $50 million commitment to me and I need your money so they can meet that obligation.
See, this is the problem with the “star” system, in any field, whether it’s show business or corporate America. There are undoubtedly dozens of executives who would do the job just as well for a couple hundred thousand a year, but because they’re not well known to the pundits, and there won’t be any buzz about them in the WSJ, hiring them won’t drive the stock prices up, so they aren’t hired. Similarly, there are probably hundreds of actresses who could play any role that Nicole Kidman could play every bit as well or better, but they wouldn’t sell tickets the way Kidman would. No one’s going to say “Let’s go see the new Martha Gorfrish movie this weekend” unless it’s based on a well-known book or has some other ‘hook,’ and even then, producers generally hedge their bets.
Stupid as the star system is in entertainment (and sports, where you see it a lot, as shown in your example, child), it is ten times as stupid in the corporate world. Maybe if we went back to valuing companies for their earnings rather than their stock price, and if we looked at their actual profits rather than at annual growth as a sine qua non, things might be better. Every company I’ve worked for has had to “make its numbers” every years. It was never good enough to make a profit. If it wasn’t bigger than last year, then the company was a miserable failure, and they would cut their employees and drive the people left harder, crying about economic hard times.
ETA: As I recall, Galbraith discussed this trend back in the 60s.
Are you saying that you DON’T directly benefit by those hundreds of billions of dollars in tax benefits?
Well…yeah. And when you lose your job part of my taxes go to your unemployment, no?
Yes? And so? I don’t see your point here to be honest. You just agreed that it’s to your benefit. That $50 million is less than a drop in the bucket…it’s spit on the griddle when we are talking about 10’s of billions of dollars (if not hundreds). The company has legal obligations.
Oh yeah…and afaik that $50 million is taxable income. Some percentage of that is just going to come right back to me, care of Whack-a-Mole when he writes his check to the IRS.
-XT
In the grand scheme of things that may not be a lot of money but why are we REWARDING them when they royally screwed the proverbial pooch?
More to the point is a seriously out of whack incentive system. Clearly shareholders will not enforce compensation packages that would hold the CEO fiscally accountable. No CEO would take that job when another place would lure him/her with a package that has no strings and a platinum parachute. Further, shareholders WANT the CEOs to increase the stock value and generally that means short term house of card building than long term, more sedate but sustainable growth. The severance packages are there to ENCOURAGE risk taking.
Hence some regulation should be in place to do what shareholders cannot. If someone tanks a publicly traded company they should NOT benefit from it. All the Executives and Board of Directors should be on the hook for it and then perhaps they will take a longer, healthier view of running their companies.
And while we’re at it, let’s disallow some of the risks themselves, as we did before the late eighties onward got their hands on it.
ETA: Sorry, libertarians, but I don’t want to go through this again. The market works better with some regulation, because people (gasp!) actually lie and cheat and behave really stupidly sometimes, and it doesn’t take a lot to screw it up for everyone.
Well, a couple of things. First of all, these Evil CEOs™ aren’t the root cause of what happened. THEY didn’t, by and large, make this situation. It was made by a combination of factors including government regulations that made this business favorable. Sure, in retrospect it seems stupid…but then the DOT COM bubble seems stupid now too.
The flip side of this is that we aren’t holding the politicians responsible for this messes feet to the fire. We aren’t requiring THEM to pay extra to fix their fuckup either. Hell, we even ‘rewarded’ several of the most egregious by re-electing them.
I don’t think such regulation would be productive. I think fixing the root cause problem should be the focus…the golden parachutes are a boondoggle, a bread and circuses issue to distract from the real problems. YMMV of course but looking at the scale of things I’m willing to write off a few hundred million dollars when contrast to a few hundred BILLION…
-XT
First, I think you want Evil CEOs [ sup ]TM[ /sup ] without the spaces.
If you consider these lawmakers egregious, I suggest you not vote for McCain or any of the other self-described “deregulators.” I will continue to vote for my regulators, thank you very much.
The point of the hundreds of millions is not the impact that they will have on us, but rather the impact they will have on the people who are now getting them - the individuals who are getting them as rewards. That being said, I agree that they themselves were not necessarily at fault. But they were supervising those who were, and in that sense they were at fault. The buck stops here, and all that. Not that our president believes in that, so I guess it doesn’t apply in the US anymore.
Who do you think was paying the lobbyists to get government to loosen regulations and oversight? The CEO’s were ultimately the drivers behind that. The very people who benefited MASSIVELY while most everyone else got the shaft. As has been noted in other threads this state of affairs was spotted long ago. These CEOs are not stupid. Unfortunately they were incented to ignore the long term and focus on short term gains.
I agree completely. Some politicians saw and warned of this but no way any of them could be a killjoy and put regulations on any of it when everyone would scream they were screwing the community and were anti-business and anti-job. I blame liberals and conservatives…basically I blame politicians. But they are a well known creature and it is hardly surprising. Greenspan should have been putting the brakes on instead of being a cheerleader. Barring that it really needed to come from the business community to push congress but of course why would they want to…they were making fabulous money. So it goes till boom.
Again, it is not about writing off a mere few hundred million. It is about rewarding those who did a bad job. I don’t know where you work but I guarantee every job I had did not pay me handsomely to fuck up.
Nope…I wanted it exactly as listed. But thanks. 
:rolleyes: I’m sorry, but this shows astounding levels of either ignorance or double standards on your part. This situation was brewing at least since Clinton’s reign, and it was the Dems who initially put in place the ‘regulations’ that are biting us in the ass today. And the 'Pubs? Just as responsible since Bush thought these things were a wonderful idea too and continued to run with them…until the bottom fell out. Congress was ALSO responsible for both starting this situation up and letting it continue.
McCain? Not sure. I seem to recall that he was actually against this in 2005 and tried to get some legislation passed to modify the situation…but that’s from memory and could be mixing things up. Suffice it to say that McCain (or the Repubican party) isn’t solely to blame for this…or even wholly to blame for it. No one comes out smelling like a rose in this one, despite the attempt to put partisan spin on things. But hey…keep voting for the regulators. I’m sure that will work out for you.
Reward, ehe? Let’s see. If I’m a major CEO I can expect millions of dollars A YEAR as my base salary…with lots of good bonuses for performance and such, as well as nice stock options. Instead, I’m given a severance of, say (because it was used in the example earlier) $7 million or $68 million. Sure, that SOUNDS like a lot…but it’s a pittance. It’s no reward…it’s a severance.
And it’s a side issue. $68 million? That’s like the interest on this problem for about an hour (maybe)…it’s something to get the faithful all riled up about and divert attention from the plague victim behind the curtain…
-XT
It’s called the “Fleecing of America.” The Republicans do it to us every so often. Some of us are ready to bend over again for the McSame group:smack:.
You are right this has been slowly building for years. Regulations WERE in place. Business kept neverending pressure on the government to remove regulations. Often business failed in this regard but slowly but surely they chipped away at it over the decades. Eventually there was precious little regulation and now we see the result.
Regulation is NOT a four-letter word in business. Sure it is nice to wave the free-markets-are-best flag but the reality is that unregulated markets ultimately devolve, one way or another, into a serious mess. Panic of 1873, Great Depression, S&L scandal, sub prime debacle. Of course there is a balance to strike…too much regulation is bad too but there must be some.
Semantics. I got a severance from my last company but I had been with them for 13 years and was “right-sized” out of the company. If they fired me for not doing my job or screwing up badly I would NOT have gotten a severance. Being fired for cause is not something they write you checks for where I worked. Pretty sure most people do not get a severance when they colossally screw up.
The question is why the board allows it to be in the contract. Injury problems are fine - but what would you think about a contract that gave Michael $100 million if he gets canned after a season of two points a game? That’s what the problem is here.
Fair enough.
Where did I say Republicans? McCain himself described himself as fundamentally a deregulator; I didn’t until he did. He voted for Gramm-Leach-Bliley, he’s the one with Gramm as his top economic advisor. Last night on 60 Minutes, he was still saying how great deregulation is.
However, I used this little phrase “or the other degregulators” and I very specifically did not say Republicans, because while this trend began in the late Reagan years, it very definitely continued in the Clinton years. Of course, it really got its legs under Bush, especially with Gramm-Leach-Bliley. So next time you decide to call me ignorant or holding a double standard, read me a little more carefully, K?
Again, what it does to the debt is irrelevant. And such severances should be required to be contingent on decent performance. But see my post on the star system; the whole thing is ridiculous.
ETA: wrt what McCain did in 2005, virtually everything he did that was any good before, he changed in order to get the approval of the right wing base, so you can’t go by that anymore.