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Then why not have the shareholders directly determine executive pay?
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Cayman Islands24199 Posts
^ if people were that simple.
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On March 08 2013 12:30 ControlMonkey wrote:
Then why not have the shareholders directly determine executive pay?
it's a matter of governance. In most forms of governance a large amount of people elect a small amount of people to make critical decisions. Most successful modern states operate in this way as well. It's also a matter of security. To make decisions on the CEO's performance and compensation, you would need to have access of sensitive data to make any kind of informed decision. If you allowed any shareholder to access a company's business methods and practices, what would stop a company from buying a few shares of the competition's stock and learning what their competition does well. It's not only a logistical problem, but a practical problem as well.
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On March 08 2013 12:26 Tewks44 wrote:Show nested quote +On March 08 2013 12:23 aksfjh wrote:On March 08 2013 12:06 Tewks44 wrote:On March 08 2013 11:54 ControlMonkey wrote:
Also, what is the marginal value of labour of a CEO?
For me the problem is that bigwigs are unlikely to create an environment where bigwigs aren't automatically paid huge amounts of money. It's not in their interests. You seem to be suggesting that board members have something to gain from overpaying their CEO. I would press you to explain further. Board member's pay is not effected by the CEO's pay, and in fact they only stand to lose if they over pay the company's CEO. The marginal value of a CEO varies and subject to subjective means of measurement, but to suggest there's no value in a CEO and that there is some kind of international agreement among bigwigs is purely speculative. How do they have anything to lose by overpaying the CEO? Aren't most boards partially or entirely appointed by the CEO? It's a symbiotic system if I'm not mistaken. Boards are elected by the shareholders, who's interest is maximizing profit. Therefore if the board is overpaying the CEO, the board is going to have some angry members to deal with, and they gain nothing. EDIT: by members I mean shareholders
From the wikipedia article:
http://en.wikipedia.org/wiki/Board_of_directors#Governance
In practice for publicly traded companies, the managers (inside directors) who are purportedly accountable to the board of directors have historically played a major role in selecting and nominating the directors who are voted on by the shareholders, in which case more "gray outsider directors" (independent directors with conflicts of interest) are nominated and elected.[16]
So, those that are voted to the board are generally nominated by those they are to oversee. Seems like a symbiotic system to me, even if it's not intended to be so.
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On March 08 2013 12:36 Tewks44 wrote:Show nested quote +On March 08 2013 12:30 ControlMonkey wrote:
Then why not have the shareholders directly determine executive pay? it's a matter of governance. In most forms of governance a large amount of people elect a small amount of people to make critical decisions. Most successful modern states operate in this way as well. It's also a matter of security. To make decisions on the CEO's performance and compensation, you would need to have access of sensitive data to make any kind of informed decision. If you allowed any shareholder to access a company's business methods and practices, what would stop a company from buying a few shares of the competition's stock and learning what their competition does well. It's not only a logistical problem, but a practical problem as well.
I wish I had logistical and practical reasons to hide KPI from my boss. That would be sweet.
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On March 08 2013 12:38 aksfjh wrote:Show nested quote +On March 08 2013 12:26 Tewks44 wrote:On March 08 2013 12:23 aksfjh wrote:On March 08 2013 12:06 Tewks44 wrote:On March 08 2013 11:54 ControlMonkey wrote:
Also, what is the marginal value of labour of a CEO?
For me the problem is that bigwigs are unlikely to create an environment where bigwigs aren't automatically paid huge amounts of money. It's not in their interests. You seem to be suggesting that board members have something to gain from overpaying their CEO. I would press you to explain further. Board member's pay is not effected by the CEO's pay, and in fact they only stand to lose if they over pay the company's CEO. The marginal value of a CEO varies and subject to subjective means of measurement, but to suggest there's no value in a CEO and that there is some kind of international agreement among bigwigs is purely speculative. How do they have anything to lose by overpaying the CEO? Aren't most boards partially or entirely appointed by the CEO? It's a symbiotic system if I'm not mistaken. Boards are elected by the shareholders, who's interest is maximizing profit. Therefore if the board is overpaying the CEO, the board is going to have some angry members to deal with, and they gain nothing. EDIT: by members I mean shareholders From the wikipedia article: http://en.wikipedia.org/wiki/Board_of_directors#GovernanceShow nested quote +In practice for publicly traded companies, the managers (inside directors) who are purportedly accountable to the board of directors have historically played a major role in selecting and nominating the directors who are voted on by the shareholders, in which case more "gray outsider directors" (independent directors with conflicts of interest) are nominated and elected.[16] So, those that are voted to the board are generally nominated by those they are to oversee. Seems like a symbiotic system to me, even if it's not intended to be so.
you bring up a good point in the difference between the nice, orderly picture I've described and the de facto nature of the situation. I admit, it's not a perfect system simply because people are the way they are. However, I would argue that it is a good system, and a state mandated overhaul to corporate structure would not only be highly disruptive, but a step backwards in corporate governance.
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On March 08 2013 12:44 ControlMonkey wrote:Show nested quote +On March 08 2013 12:36 Tewks44 wrote:On March 08 2013 12:30 ControlMonkey wrote:
Then why not have the shareholders directly determine executive pay? it's a matter of governance. In most forms of governance a large amount of people elect a small amount of people to make critical decisions. Most successful modern states operate in this way as well. It's also a matter of security. To make decisions on the CEO's performance and compensation, you would need to have access of sensitive data to make any kind of informed decision. If you allowed any shareholder to access a company's business methods and practices, what would stop a company from buying a few shares of the competition's stock and learning what their competition does well. It's not only a logistical problem, but a practical problem as well. I wish I had logistical and practical reasons to hide KPI from my boss. That would be sweet.
This obviously happens, and it's referred to as fraud. It's illegal. I don't really know what point you're trying to prove, however. I admit a weakness in the current corporate structure is fraud, and it could lead to a CEO being overpaid. There are procedures to help prevent fraud such as internal audit departments, and government mandated external audits from independent accounting firms, but yes, fraud does happen.
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Cayman Islands24199 Posts
On March 08 2013 12:44 Tewks44 wrote:Show nested quote +On March 08 2013 12:38 aksfjh wrote:On March 08 2013 12:26 Tewks44 wrote:On March 08 2013 12:23 aksfjh wrote:On March 08 2013 12:06 Tewks44 wrote:On March 08 2013 11:54 ControlMonkey wrote:
Also, what is the marginal value of labour of a CEO?
For me the problem is that bigwigs are unlikely to create an environment where bigwigs aren't automatically paid huge amounts of money. It's not in their interests. You seem to be suggesting that board members have something to gain from overpaying their CEO. I would press you to explain further. Board member's pay is not effected by the CEO's pay, and in fact they only stand to lose if they over pay the company's CEO. The marginal value of a CEO varies and subject to subjective means of measurement, but to suggest there's no value in a CEO and that there is some kind of international agreement among bigwigs is purely speculative. How do they have anything to lose by overpaying the CEO? Aren't most boards partially or entirely appointed by the CEO? It's a symbiotic system if I'm not mistaken. Boards are elected by the shareholders, who's interest is maximizing profit. Therefore if the board is overpaying the CEO, the board is going to have some angry members to deal with, and they gain nothing. EDIT: by members I mean shareholders From the wikipedia article: http://en.wikipedia.org/wiki/Board_of_directors#GovernanceIn practice for publicly traded companies, the managers (inside directors) who are purportedly accountable to the board of directors have historically played a major role in selecting and nominating the directors who are voted on by the shareholders, in which case more "gray outsider directors" (independent directors with conflicts of interest) are nominated and elected.[16] So, those that are voted to the board are generally nominated by those they are to oversee. Seems like a symbiotic system to me, even if it's not intended to be so. you bring up a good point in the difference between the nice, orderly picture I've described and the de facto nature of the situation. I admit, it's not a perfect system simply because people are the way they are. However, I would argue that it is a good system, and a state mandated overhaul to corporate structure would not only be highly disruptive, but a step backwards in corporate governance.
state mandated or not is a meaningless distinction here, what matters is the proper structure.
your way of deducing how these systems work from some axiomatic assumptions about human behavior is quite harmful if you genuinely believe it. it also obscures the constant political contingency of these structures.
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On March 08 2013 13:00 oneofthem wrote:Show nested quote +On March 08 2013 12:44 Tewks44 wrote:On March 08 2013 12:38 aksfjh wrote:On March 08 2013 12:26 Tewks44 wrote:On March 08 2013 12:23 aksfjh wrote:On March 08 2013 12:06 Tewks44 wrote:On March 08 2013 11:54 ControlMonkey wrote:
Also, what is the marginal value of labour of a CEO?
For me the problem is that bigwigs are unlikely to create an environment where bigwigs aren't automatically paid huge amounts of money. It's not in their interests. You seem to be suggesting that board members have something to gain from overpaying their CEO. I would press you to explain further. Board member's pay is not effected by the CEO's pay, and in fact they only stand to lose if they over pay the company's CEO. The marginal value of a CEO varies and subject to subjective means of measurement, but to suggest there's no value in a CEO and that there is some kind of international agreement among bigwigs is purely speculative. How do they have anything to lose by overpaying the CEO? Aren't most boards partially or entirely appointed by the CEO? It's a symbiotic system if I'm not mistaken. Boards are elected by the shareholders, who's interest is maximizing profit. Therefore if the board is overpaying the CEO, the board is going to have some angry members to deal with, and they gain nothing. EDIT: by members I mean shareholders From the wikipedia article: http://en.wikipedia.org/wiki/Board_of_directors#GovernanceIn practice for publicly traded companies, the managers (inside directors) who are purportedly accountable to the board of directors have historically played a major role in selecting and nominating the directors who are voted on by the shareholders, in which case more "gray outsider directors" (independent directors with conflicts of interest) are nominated and elected.[16] So, those that are voted to the board are generally nominated by those they are to oversee. Seems like a symbiotic system to me, even if it's not intended to be so. you bring up a good point in the difference between the nice, orderly picture I've described and the de facto nature of the situation. I admit, it's not a perfect system simply because people are the way they are. However, I would argue that it is a good system, and a state mandated overhaul to corporate structure would not only be highly disruptive, but a step backwards in corporate governance. state mandated or not is a meaningless distinction here, what matters is the proper structure.
I think there's a huge distinction. State mandated means the government is deciding what is the best way for corporations to be operated, and changes in corporate governance have the backing of the law. A reformation that occurs without intervention would be applied with the consent of the owners, because people would flock to purchase stock in an entity that was run more efficiently than the competition. It's a matter of who decides what the proper structure is.
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On March 08 2013 13:00 oneofthem wrote:Show nested quote +On March 08 2013 12:44 Tewks44 wrote:On March 08 2013 12:38 aksfjh wrote:On March 08 2013 12:26 Tewks44 wrote:On March 08 2013 12:23 aksfjh wrote:On March 08 2013 12:06 Tewks44 wrote:On March 08 2013 11:54 ControlMonkey wrote:
Also, what is the marginal value of labour of a CEO?
For me the problem is that bigwigs are unlikely to create an environment where bigwigs aren't automatically paid huge amounts of money. It's not in their interests. You seem to be suggesting that board members have something to gain from overpaying their CEO. I would press you to explain further. Board member's pay is not effected by the CEO's pay, and in fact they only stand to lose if they over pay the company's CEO. The marginal value of a CEO varies and subject to subjective means of measurement, but to suggest there's no value in a CEO and that there is some kind of international agreement among bigwigs is purely speculative. How do they have anything to lose by overpaying the CEO? Aren't most boards partially or entirely appointed by the CEO? It's a symbiotic system if I'm not mistaken. Boards are elected by the shareholders, who's interest is maximizing profit. Therefore if the board is overpaying the CEO, the board is going to have some angry members to deal with, and they gain nothing. EDIT: by members I mean shareholders From the wikipedia article: http://en.wikipedia.org/wiki/Board_of_directors#GovernanceIn practice for publicly traded companies, the managers (inside directors) who are purportedly accountable to the board of directors have historically played a major role in selecting and nominating the directors who are voted on by the shareholders, in which case more "gray outsider directors" (independent directors with conflicts of interest) are nominated and elected.[16] So, those that are voted to the board are generally nominated by those they are to oversee. Seems like a symbiotic system to me, even if it's not intended to be so. you bring up a good point in the difference between the nice, orderly picture I've described and the de facto nature of the situation. I admit, it's not a perfect system simply because people are the way they are. However, I would argue that it is a good system, and a state mandated overhaul to corporate structure would not only be highly disruptive, but a step backwards in corporate governance. state mandated or not is a meaningless distinction here, what matters is the proper structure. your way of deducing how these systems work from some axiomatic assumptions about human behavior is quite harmful if you genuinely believe it. it also obscures the constant political contingency of these structures.
I'm not trying to make axiomatic claims other than people respond to incentives. Of course, this response to incentives leads to conflicts of interest like management deciding who is on the board that will determine their salary. All I am supporting is a system that eliminates these natural conflicts of interest. A board elected by the shareholders to determine compensation being the central component. This is the way it is "suppose to be" whatever that means, and while I admit that it is not necessarily the way it is, the current system of corporate governance is designed to prevent conflicts where the management of a company can set their own salary. Obviously, management will try to circumnavigate these controls, because they have the incentive to do so. However, the fact that these controls are circumnavigated should not be a basis for an argument against the controls themselves.
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On March 08 2013 12:30 ControlMonkey wrote:
Then why not have the shareholders directly determine executive pay?
The government here in Australia introduced something that gave the shareholders a lot of power in blocking exec rem, it was say on pay. The legislation was a colossal joke.
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Cayman Islands24199 Posts
On March 08 2013 13:05 Tewks44 wrote:Show nested quote +On March 08 2013 13:00 oneofthem wrote:On March 08 2013 12:44 Tewks44 wrote:On March 08 2013 12:38 aksfjh wrote:On March 08 2013 12:26 Tewks44 wrote:On March 08 2013 12:23 aksfjh wrote:On March 08 2013 12:06 Tewks44 wrote:On March 08 2013 11:54 ControlMonkey wrote:
Also, what is the marginal value of labour of a CEO?
For me the problem is that bigwigs are unlikely to create an environment where bigwigs aren't automatically paid huge amounts of money. It's not in their interests. You seem to be suggesting that board members have something to gain from overpaying their CEO. I would press you to explain further. Board member's pay is not effected by the CEO's pay, and in fact they only stand to lose if they over pay the company's CEO. The marginal value of a CEO varies and subject to subjective means of measurement, but to suggest there's no value in a CEO and that there is some kind of international agreement among bigwigs is purely speculative. How do they have anything to lose by overpaying the CEO? Aren't most boards partially or entirely appointed by the CEO? It's a symbiotic system if I'm not mistaken. Boards are elected by the shareholders, who's interest is maximizing profit. Therefore if the board is overpaying the CEO, the board is going to have some angry members to deal with, and they gain nothing. EDIT: by members I mean shareholders From the wikipedia article: http://en.wikipedia.org/wiki/Board_of_directors#GovernanceIn practice for publicly traded companies, the managers (inside directors) who are purportedly accountable to the board of directors have historically played a major role in selecting and nominating the directors who are voted on by the shareholders, in which case more "gray outsider directors" (independent directors with conflicts of interest) are nominated and elected.[16] So, those that are voted to the board are generally nominated by those they are to oversee. Seems like a symbiotic system to me, even if it's not intended to be so. you bring up a good point in the difference between the nice, orderly picture I've described and the de facto nature of the situation. I admit, it's not a perfect system simply because people are the way they are. However, I would argue that it is a good system, and a state mandated overhaul to corporate structure would not only be highly disruptive, but a step backwards in corporate governance. state mandated or not is a meaningless distinction here, what matters is the proper structure. I think there's a huge distinction. State mandated means the government is deciding what is the best way for corporations to be operated, and changes in corporate governance have the backing of the law. A reformation that occurs without intervention would be applied with the consent of the owners, because people would flock to purchase stock in an entity that was run more efficiently than the competition. It's a matter of who decides what the proper structure is.
the state could act by empowering stockholders though. there is not much distinct state interest that needs to be served here, so when some people talk about government needing to take action, it's just another way of saying the state needs to step in to protect and regulate on behalf of some party in the game. usually the shareholders, or even society at large.
although obviously the execution of this will probably lead to a big mess
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On March 08 2013 12:30 ControlMonkey wrote:
Then why not have the shareholders directly determine executive pay?
I imagine that in most cases shareholders would just rubber stamp the pay package just like board nominees get rubber stamped.
For most investors if they don't like the management they'll just sell the stock. Actual proxy fights / corporate governance issues are generally left to institutional investors (mutual funds like CALPERS) and activist investors (Carl Ichan).
I can't remember the name but there's some websites out there trying to help small investors pool their proxy votes on various issues.
Edit: Moxy Vote! That's what I was thinking of!
Done in by regulatory stumbing blocks
WEST CHESTER — Moxy Vote, the Web-based company started three years ago to facilitate proxy voting by individual investors, said it will be closing by the end of the month due to regulatory impediments to fulfilling its mission.
Thanks government!
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On March 08 2013 13:23 oneofthem wrote:Show nested quote +On March 08 2013 13:05 Tewks44 wrote:On March 08 2013 13:00 oneofthem wrote:On March 08 2013 12:44 Tewks44 wrote:On March 08 2013 12:38 aksfjh wrote:On March 08 2013 12:26 Tewks44 wrote:On March 08 2013 12:23 aksfjh wrote:On March 08 2013 12:06 Tewks44 wrote:On March 08 2013 11:54 ControlMonkey wrote:
Also, what is the marginal value of labour of a CEO?
For me the problem is that bigwigs are unlikely to create an environment where bigwigs aren't automatically paid huge amounts of money. It's not in their interests. You seem to be suggesting that board members have something to gain from overpaying their CEO. I would press you to explain further. Board member's pay is not effected by the CEO's pay, and in fact they only stand to lose if they over pay the company's CEO. The marginal value of a CEO varies and subject to subjective means of measurement, but to suggest there's no value in a CEO and that there is some kind of international agreement among bigwigs is purely speculative. How do they have anything to lose by overpaying the CEO? Aren't most boards partially or entirely appointed by the CEO? It's a symbiotic system if I'm not mistaken. Boards are elected by the shareholders, who's interest is maximizing profit. Therefore if the board is overpaying the CEO, the board is going to have some angry members to deal with, and they gain nothing. EDIT: by members I mean shareholders From the wikipedia article: http://en.wikipedia.org/wiki/Board_of_directors#GovernanceIn practice for publicly traded companies, the managers (inside directors) who are purportedly accountable to the board of directors have historically played a major role in selecting and nominating the directors who are voted on by the shareholders, in which case more "gray outsider directors" (independent directors with conflicts of interest) are nominated and elected.[16] So, those that are voted to the board are generally nominated by those they are to oversee. Seems like a symbiotic system to me, even if it's not intended to be so. you bring up a good point in the difference between the nice, orderly picture I've described and the de facto nature of the situation. I admit, it's not a perfect system simply because people are the way they are. However, I would argue that it is a good system, and a state mandated overhaul to corporate structure would not only be highly disruptive, but a step backwards in corporate governance. state mandated or not is a meaningless distinction here, what matters is the proper structure. I think there's a huge distinction. State mandated means the government is deciding what is the best way for corporations to be operated, and changes in corporate governance have the backing of the law. A reformation that occurs without intervention would be applied with the consent of the owners, because people would flock to purchase stock in an entity that was run more efficiently than the competition. It's a matter of who decides what the proper structure is. the state could act by empowering stockholders though.
The question is how can the state empower shareholders? How can you give more power to owners of a company that purchase into ownership willingly, and can freely sell their interest whenever they want. The shareholders have the power of capital. If they don't like the way a company is being run, they can sell their stock, which decreases the value of ownership. If someone likes the way a company is run, they can purchase stock, which increases the value of ownership. It's a self regulating system and in my opinion shareholders are already empowered via their price setting power.
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Cayman Islands24199 Posts
On March 08 2013 13:26 Tewks44 wrote:Show nested quote +On March 08 2013 13:23 oneofthem wrote:On March 08 2013 13:05 Tewks44 wrote:On March 08 2013 13:00 oneofthem wrote:On March 08 2013 12:44 Tewks44 wrote:On March 08 2013 12:38 aksfjh wrote:On March 08 2013 12:26 Tewks44 wrote:On March 08 2013 12:23 aksfjh wrote:On March 08 2013 12:06 Tewks44 wrote:On March 08 2013 11:54 ControlMonkey wrote:
Also, what is the marginal value of labour of a CEO?
For me the problem is that bigwigs are unlikely to create an environment where bigwigs aren't automatically paid huge amounts of money. It's not in their interests. You seem to be suggesting that board members have something to gain from overpaying their CEO. I would press you to explain further. Board member's pay is not effected by the CEO's pay, and in fact they only stand to lose if they over pay the company's CEO. The marginal value of a CEO varies and subject to subjective means of measurement, but to suggest there's no value in a CEO and that there is some kind of international agreement among bigwigs is purely speculative. How do they have anything to lose by overpaying the CEO? Aren't most boards partially or entirely appointed by the CEO? It's a symbiotic system if I'm not mistaken. Boards are elected by the shareholders, who's interest is maximizing profit. Therefore if the board is overpaying the CEO, the board is going to have some angry members to deal with, and they gain nothing. EDIT: by members I mean shareholders From the wikipedia article: http://en.wikipedia.org/wiki/Board_of_directors#GovernanceIn practice for publicly traded companies, the managers (inside directors) who are purportedly accountable to the board of directors have historically played a major role in selecting and nominating the directors who are voted on by the shareholders, in which case more "gray outsider directors" (independent directors with conflicts of interest) are nominated and elected.[16] So, those that are voted to the board are generally nominated by those they are to oversee. Seems like a symbiotic system to me, even if it's not intended to be so. you bring up a good point in the difference between the nice, orderly picture I've described and the de facto nature of the situation. I admit, it's not a perfect system simply because people are the way they are. However, I would argue that it is a good system, and a state mandated overhaul to corporate structure would not only be highly disruptive, but a step backwards in corporate governance. state mandated or not is a meaningless distinction here, what matters is the proper structure. I think there's a huge distinction. State mandated means the government is deciding what is the best way for corporations to be operated, and changes in corporate governance have the backing of the law. A reformation that occurs without intervention would be applied with the consent of the owners, because people would flock to purchase stock in an entity that was run more efficiently than the competition. It's a matter of who decides what the proper structure is. the state could act by empowering stockholders though. The question is how can the state empower shareholders? How can you give more power to owners of a company that purchase into ownership willingly, and can freely sell their interest whenever they want. The shareholders have the power of capital. If they don't like the way a company is being run, they can sell their stock, which decreases the value of ownership. If someone likes the way a company is run, they can purchase stock, which increases the value of ownership. It's a self regulating system and in my opinion shareholders are already empowered via their price setting power.
the small fish have no price setting power to speak of. the cost of taking action is too big, so to speak.
i don't think executive compensation is the big problem btw, it's rather management culture/behavior
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On March 08 2013 13:32 oneofthem wrote:Show nested quote +On March 08 2013 13:26 Tewks44 wrote:On March 08 2013 13:23 oneofthem wrote:On March 08 2013 13:05 Tewks44 wrote:On March 08 2013 13:00 oneofthem wrote:On March 08 2013 12:44 Tewks44 wrote:On March 08 2013 12:38 aksfjh wrote:On March 08 2013 12:26 Tewks44 wrote:On March 08 2013 12:23 aksfjh wrote:On March 08 2013 12:06 Tewks44 wrote:
[quote]
You seem to be suggesting that board members have something to gain from overpaying their CEO. I would press you to explain further. Board member's pay is not effected by the CEO's pay, and in fact they only stand to lose if they over pay the company's CEO. The marginal value of a CEO varies and subject to subjective means of measurement, but to suggest there's no value in a CEO and that there is some kind of international agreement among bigwigs is purely speculative. How do they have anything to lose by overpaying the CEO? Aren't most boards partially or entirely appointed by the CEO? It's a symbiotic system if I'm not mistaken. Boards are elected by the shareholders, who's interest is maximizing profit. Therefore if the board is overpaying the CEO, the board is going to have some angry members to deal with, and they gain nothing. EDIT: by members I mean shareholders From the wikipedia article: http://en.wikipedia.org/wiki/Board_of_directors#GovernanceIn practice for publicly traded companies, the managers (inside directors) who are purportedly accountable to the board of directors have historically played a major role in selecting and nominating the directors who are voted on by the shareholders, in which case more "gray outsider directors" (independent directors with conflicts of interest) are nominated and elected.[16] So, those that are voted to the board are generally nominated by those they are to oversee. Seems like a symbiotic system to me, even if it's not intended to be so. you bring up a good point in the difference between the nice, orderly picture I've described and the de facto nature of the situation. I admit, it's not a perfect system simply because people are the way they are. However, I would argue that it is a good system, and a state mandated overhaul to corporate structure would not only be highly disruptive, but a step backwards in corporate governance. state mandated or not is a meaningless distinction here, what matters is the proper structure. I think there's a huge distinction. State mandated means the government is deciding what is the best way for corporations to be operated, and changes in corporate governance have the backing of the law. A reformation that occurs without intervention would be applied with the consent of the owners, because people would flock to purchase stock in an entity that was run more efficiently than the competition. It's a matter of who decides what the proper structure is. the state could act by empowering stockholders though. The question is how can the state empower shareholders? How can you give more power to owners of a company that purchase into ownership willingly, and can freely sell their interest whenever they want. The shareholders have the power of capital. If they don't like the way a company is being run, they can sell their stock, which decreases the value of ownership. If someone likes the way a company is run, they can purchase stock, which increases the value of ownership. It's a self regulating system and in my opinion shareholders are already empowered via their price setting power. the small fish have no price setting power to speak of. the cost of taking action is too big, so to speak. i don't think executive compensation is the big problem btw, it's rather management culture/behavior
Yeah, I agree with you on that count. However, if we're going to empower shareholders the best way to do it would be to introduce more democratic measures, I'd think. Therefore the shareholders that don't have price setting power also wouldn't have any real democratic power. Either way, the small average joe investors won't really have much of a say.
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On March 08 2013 13:34 Tewks44 wrote:Show nested quote +On March 08 2013 13:32 oneofthem wrote:On March 08 2013 13:26 Tewks44 wrote:On March 08 2013 13:23 oneofthem wrote:On March 08 2013 13:05 Tewks44 wrote:On March 08 2013 13:00 oneofthem wrote:On March 08 2013 12:44 Tewks44 wrote:On March 08 2013 12:38 aksfjh wrote:On March 08 2013 12:26 Tewks44 wrote:On March 08 2013 12:23 aksfjh wrote:
[quote]
How do they have anything to lose by overpaying the CEO? Aren't most boards partially or entirely appointed by the CEO? It's a symbiotic system if I'm not mistaken. Boards are elected by the shareholders, who's interest is maximizing profit. Therefore if the board is overpaying the CEO, the board is going to have some angry members to deal with, and they gain nothing. EDIT: by members I mean shareholders From the wikipedia article: http://en.wikipedia.org/wiki/Board_of_directors#GovernanceIn practice for publicly traded companies, the managers (inside directors) who are purportedly accountable to the board of directors have historically played a major role in selecting and nominating the directors who are voted on by the shareholders, in which case more "gray outsider directors" (independent directors with conflicts of interest) are nominated and elected.[16] So, those that are voted to the board are generally nominated by those they are to oversee. Seems like a symbiotic system to me, even if it's not intended to be so. you bring up a good point in the difference between the nice, orderly picture I've described and the de facto nature of the situation. I admit, it's not a perfect system simply because people are the way they are. However, I would argue that it is a good system, and a state mandated overhaul to corporate structure would not only be highly disruptive, but a step backwards in corporate governance. state mandated or not is a meaningless distinction here, what matters is the proper structure. I think there's a huge distinction. State mandated means the government is deciding what is the best way for corporations to be operated, and changes in corporate governance have the backing of the law. A reformation that occurs without intervention would be applied with the consent of the owners, because people would flock to purchase stock in an entity that was run more efficiently than the competition. It's a matter of who decides what the proper structure is. the state could act by empowering stockholders though. The question is how can the state empower shareholders? How can you give more power to owners of a company that purchase into ownership willingly, and can freely sell their interest whenever they want. The shareholders have the power of capital. If they don't like the way a company is being run, they can sell their stock, which decreases the value of ownership. If someone likes the way a company is run, they can purchase stock, which increases the value of ownership. It's a self regulating system and in my opinion shareholders are already empowered via their price setting power. the small fish have no price setting power to speak of. the cost of taking action is too big, so to speak. i don't think executive compensation is the big problem btw, it's rather management culture/behavior Yeah, I agree with you on that count. However, if we're going to empower shareholders the best way to do it would be to introduce more democratic measures, I'd think. Therefore the shareholders that don't have price setting power also wouldn't have any real democratic power. Either way, the small average joe investors won't really have much of a say.
I feel like this is the problem in that there is a disconnect between corporate and the people. I just wish there was more control of consumers over producers, and of workers over management somehow.
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Cayman Islands24199 Posts
On March 08 2013 13:34 Tewks44 wrote:Show nested quote +On March 08 2013 13:32 oneofthem wrote:On March 08 2013 13:26 Tewks44 wrote:On March 08 2013 13:23 oneofthem wrote:On March 08 2013 13:05 Tewks44 wrote:On March 08 2013 13:00 oneofthem wrote:On March 08 2013 12:44 Tewks44 wrote:On March 08 2013 12:38 aksfjh wrote:On March 08 2013 12:26 Tewks44 wrote:On March 08 2013 12:23 aksfjh wrote:
[quote]
How do they have anything to lose by overpaying the CEO? Aren't most boards partially or entirely appointed by the CEO? It's a symbiotic system if I'm not mistaken. Boards are elected by the shareholders, who's interest is maximizing profit. Therefore if the board is overpaying the CEO, the board is going to have some angry members to deal with, and they gain nothing. EDIT: by members I mean shareholders From the wikipedia article: http://en.wikipedia.org/wiki/Board_of_directors#GovernanceIn practice for publicly traded companies, the managers (inside directors) who are purportedly accountable to the board of directors have historically played a major role in selecting and nominating the directors who are voted on by the shareholders, in which case more "gray outsider directors" (independent directors with conflicts of interest) are nominated and elected.[16] So, those that are voted to the board are generally nominated by those they are to oversee. Seems like a symbiotic system to me, even if it's not intended to be so. you bring up a good point in the difference between the nice, orderly picture I've described and the de facto nature of the situation. I admit, it's not a perfect system simply because people are the way they are. However, I would argue that it is a good system, and a state mandated overhaul to corporate structure would not only be highly disruptive, but a step backwards in corporate governance. state mandated or not is a meaningless distinction here, what matters is the proper structure. I think there's a huge distinction. State mandated means the government is deciding what is the best way for corporations to be operated, and changes in corporate governance have the backing of the law. A reformation that occurs without intervention would be applied with the consent of the owners, because people would flock to purchase stock in an entity that was run more efficiently than the competition. It's a matter of who decides what the proper structure is. the state could act by empowering stockholders though. The question is how can the state empower shareholders? How can you give more power to owners of a company that purchase into ownership willingly, and can freely sell their interest whenever they want. The shareholders have the power of capital. If they don't like the way a company is being run, they can sell their stock, which decreases the value of ownership. If someone likes the way a company is run, they can purchase stock, which increases the value of ownership. It's a self regulating system and in my opinion shareholders are already empowered via their price setting power. the small fish have no price setting power to speak of. the cost of taking action is too big, so to speak. i don't think executive compensation is the big problem btw, it's rather management culture/behavior Yeah, I agree with you on that count. However, if we're going to empower shareholders the best way to do it would be to introduce more democratic measures, I'd think. Therefore the shareholders that don't have price setting power also wouldn't have any real democratic power. Either way, the small average joe investors won't really have much of a say.
corporate governance structure can be quite a bit more varied than just a representation of the stockholders. there are instances of worker represnetation, social representation etc.
point is, free market is but one particular creek up the politics river. it only seems logical or natural because that particular representation of what a corporation is (gathering of shareholders) seems natural. but if we were to recognize the social impact and historic roots of such an institution, then calls for more socially attached management seems very reasonable, at least for those corporations with quasi monopolistic power
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On March 08 2013 13:38 Roe wrote:Show nested quote +On March 08 2013 13:34 Tewks44 wrote:On March 08 2013 13:32 oneofthem wrote:On March 08 2013 13:26 Tewks44 wrote:On March 08 2013 13:23 oneofthem wrote:On March 08 2013 13:05 Tewks44 wrote:On March 08 2013 13:00 oneofthem wrote:On March 08 2013 12:44 Tewks44 wrote:On March 08 2013 12:38 aksfjh wrote:On March 08 2013 12:26 Tewks44 wrote:
[quote]
Boards are elected by the shareholders, who's interest is maximizing profit. Therefore if the board is overpaying the CEO, the board is going to have some angry members to deal with, and they gain nothing.
EDIT: by members I mean shareholders From the wikipedia article: http://en.wikipedia.org/wiki/Board_of_directors#GovernanceIn practice for publicly traded companies, the managers (inside directors) who are purportedly accountable to the board of directors have historically played a major role in selecting and nominating the directors who are voted on by the shareholders, in which case more "gray outsider directors" (independent directors with conflicts of interest) are nominated and elected.[16] So, those that are voted to the board are generally nominated by those they are to oversee. Seems like a symbiotic system to me, even if it's not intended to be so. you bring up a good point in the difference between the nice, orderly picture I've described and the de facto nature of the situation. I admit, it's not a perfect system simply because people are the way they are. However, I would argue that it is a good system, and a state mandated overhaul to corporate structure would not only be highly disruptive, but a step backwards in corporate governance. state mandated or not is a meaningless distinction here, what matters is the proper structure. I think there's a huge distinction. State mandated means the government is deciding what is the best way for corporations to be operated, and changes in corporate governance have the backing of the law. A reformation that occurs without intervention would be applied with the consent of the owners, because people would flock to purchase stock in an entity that was run more efficiently than the competition. It's a matter of who decides what the proper structure is. the state could act by empowering stockholders though. The question is how can the state empower shareholders? How can you give more power to owners of a company that purchase into ownership willingly, and can freely sell their interest whenever they want. The shareholders have the power of capital. If they don't like the way a company is being run, they can sell their stock, which decreases the value of ownership. If someone likes the way a company is run, they can purchase stock, which increases the value of ownership. It's a self regulating system and in my opinion shareholders are already empowered via their price setting power. the small fish have no price setting power to speak of. the cost of taking action is too big, so to speak. i don't think executive compensation is the big problem btw, it's rather management culture/behavior Yeah, I agree with you on that count. However, if we're going to empower shareholders the best way to do it would be to introduce more democratic measures, I'd think. Therefore the shareholders that don't have price setting power also wouldn't have any real democratic power. Either way, the small average joe investors won't really have much of a say. I feel like this is the problem in that there is a disconnect between corporate and the people. I just wish there was more control of consumers over producers, and of workers over management somehow.
I agree that there are inherent conflicts of interest. For example a manager wants a higher salary, a shareholder wants to maximize his/her ownership value, whereas a consumer wants an inexpensive and reliable product. That being said, I think the best checks and balances are those that naturally occur. If you provide a reliable product that consumers want to use, you can increase demand for your product, making consumers happy. If you make consumers happy, more people are buying your product, increasing profit and making shareholders happy. With more capital the company can afford better skilled management that can further increase profits by introducing more efficient practices. This raises the average management salary, making management happy. Of course this is a very rosy, and not necessarily realistic picture. Conflicts can arise where poor quality products are sold to increase profits or worse engage in price fixing, management inflates their salaries through dishonest accounting practices, and sometimes consumers will resort to theft. However, I think the natural system that arises in a free market is the most efficient way to dictate this interaction between the consumer, the management, and the owners. Laws are in place to prevent conflicts. False advertising, price fixing, accounting fraud, and theft are all illegal for good reason, but still these events do happen.
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On March 08 2013 13:43 oneofthem wrote:Show nested quote +On March 08 2013 13:34 Tewks44 wrote:On March 08 2013 13:32 oneofthem wrote:On March 08 2013 13:26 Tewks44 wrote:On March 08 2013 13:23 oneofthem wrote:On March 08 2013 13:05 Tewks44 wrote:On March 08 2013 13:00 oneofthem wrote:On March 08 2013 12:44 Tewks44 wrote:On March 08 2013 12:38 aksfjh wrote:On March 08 2013 12:26 Tewks44 wrote:
[quote]
Boards are elected by the shareholders, who's interest is maximizing profit. Therefore if the board is overpaying the CEO, the board is going to have some angry members to deal with, and they gain nothing.
EDIT: by members I mean shareholders From the wikipedia article: http://en.wikipedia.org/wiki/Board_of_directors#GovernanceIn practice for publicly traded companies, the managers (inside directors) who are purportedly accountable to the board of directors have historically played a major role in selecting and nominating the directors who are voted on by the shareholders, in which case more "gray outsider directors" (independent directors with conflicts of interest) are nominated and elected.[16] So, those that are voted to the board are generally nominated by those they are to oversee. Seems like a symbiotic system to me, even if it's not intended to be so. you bring up a good point in the difference between the nice, orderly picture I've described and the de facto nature of the situation. I admit, it's not a perfect system simply because people are the way they are. However, I would argue that it is a good system, and a state mandated overhaul to corporate structure would not only be highly disruptive, but a step backwards in corporate governance. state mandated or not is a meaningless distinction here, what matters is the proper structure. I think there's a huge distinction. State mandated means the government is deciding what is the best way for corporations to be operated, and changes in corporate governance have the backing of the law. A reformation that occurs without intervention would be applied with the consent of the owners, because people would flock to purchase stock in an entity that was run more efficiently than the competition. It's a matter of who decides what the proper structure is. the state could act by empowering stockholders though. The question is how can the state empower shareholders? How can you give more power to owners of a company that purchase into ownership willingly, and can freely sell their interest whenever they want. The shareholders have the power of capital. If they don't like the way a company is being run, they can sell their stock, which decreases the value of ownership. If someone likes the way a company is run, they can purchase stock, which increases the value of ownership. It's a self regulating system and in my opinion shareholders are already empowered via their price setting power. the small fish have no price setting power to speak of. the cost of taking action is too big, so to speak. i don't think executive compensation is the big problem btw, it's rather management culture/behavior Yeah, I agree with you on that count. However, if we're going to empower shareholders the best way to do it would be to introduce more democratic measures, I'd think. Therefore the shareholders that don't have price setting power also wouldn't have any real democratic power. Either way, the small average joe investors won't really have much of a say. corporate governance structure can be quite a bit more varied than just a representation of the stockholders. there are instances of worker represnetation, social representation etc. point is, free market is but one particular creek up the politics river.
Sure, and people are generally free to organize how they wish.
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EPT
