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On March 08 2013 13:25 JonnyBNoHo wrote:Show nested quote +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 blocksShow nested quote +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!
I guess what frustrates me about publicly traded companies is that the shareholders, the owners of the company, have so little say in the running of the company. The only real recourse they have is selling their stock. That's just my own personal gripe, I don't like the idea of publicly traded companies for a whole bunch of reasons.
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Well your voice should be proportional to the ownership stake you have. Makes no sense for your voice to carry weight when only a handful of shares are owned.
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On March 08 2013 13:53 ControlMonkey wrote:Show nested quote +On March 08 2013 13:25 JonnyBNoHo wrote: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 blocksWEST 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! I guess what frustrates me about publicly traded companies is that the shareholders, the owners of the company, have so little say in the running of the company. The only real recourse they have is selling their stock. That's just my own personal gripe, I don't like the idea of publicly traded companies for a whole bunch of reasons.
Actually, shareholders do have a lot of say of how a company should in the form of nominating, voting, and/or approving directors and executives. However, how much say you have depends how much ownership you have. It doesn't make sense that an investor that owns .0000001% of the company should have equal say against an investor that owns 1% of the company.
For the most part, most shareholders want their company to grow or maximize their position, and the company generally does indeed tries to do that. If it means hiring a CEO with millions of bonuses and a golden parachute for the sake of that drive for higher profits, then so be it. Any shareholder who's concerned about income inequality between the rank and file employees vs that of CEOs and top executives might as well just donate their stocks to the former.
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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.
I don't really want a state mandated overhaul, just more oversight of the entire thing. It's one of those instances where you see blatant problems, like CEO compensation being 300x+ more than average worker pay, and you KNOW it's wrong for it to be that way. There should be something that is actively and strongly looking to correct those problems that have societal consequences and not sitting back with a "the markets will fix it themselves!" attitude.
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On March 08 2013 14:20 aksfjh 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. I don't really want a state mandated overhaul, just more oversight of the entire thing. It's one of those instances where you see blatant problems, like CEO compensation being 300x+ more than average worker pay, and you KNOW it's wrong for it to be that way. There should be something that is actively and strongly looking to correct those problems that have societal consequences and not sitting back with a "the markets will fix it themselves!" attitude.
Switzerland just passed new (and enforceable) say on pay legislation. If it works well for them it may be worth copying.
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On March 08 2013 14:20 aksfjh 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. I don't really want a state mandated overhaul, just more oversight of the entire thing. It's one of those instances where you see blatant problems, like CEO compensation being 300x+ more than average worker pay, and you KNOW it's wrong for it to be that way. There should be something that is actively and strongly looking to correct those problems that have societal consequences and not sitting back with a "the markets will fix it themselves!" attitude.
I really don't see anything wrong with it. If cash flows are strong and the company is growing at a healthy rate then who cares if they are earning 300x the average worker.
Most companies that I have seen (basically the top half of the ASX 500) have a MAJOR component of their exec pay in equity which vests in tranches, usually 3 year vest with 5 year lock period. Most of the time half the tranches has relative TSR (50th percentile min 75th percentile stretch) as the KPI and the other half has absolute EPS as the KPI. STI has a whole set of different KPIs which usually involve EBIT, safety, and discretionary. Generally when times are good bonuses are big and when times are bad multiple years of bonuses have their current tranches nullified.
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On March 08 2013 14:36 JonnyBNoHo wrote:Show nested quote +On March 08 2013 14:20 aksfjh 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. I don't really want a state mandated overhaul, just more oversight of the entire thing. It's one of those instances where you see blatant problems, like CEO compensation being 300x+ more than average worker pay, and you KNOW it's wrong for it to be that way. There should be something that is actively and strongly looking to correct those problems that have societal consequences and not sitting back with a "the markets will fix it themselves!" attitude. Switzerland just passed new (and enforceable) say on pay legislation. If it works well for them it may be worth copying.
Curious on how their say on pay works underneath the hood. The Australian one sounds nice and all with that if 25% of shareholders vote no twice in a row then the board gets dissolved, but it kind of fails.
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On March 08 2013 14:40 yandere991 wrote:Show nested quote +On March 08 2013 14:36 JonnyBNoHo wrote:On March 08 2013 14:20 aksfjh 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. I don't really want a state mandated overhaul, just more oversight of the entire thing. It's one of those instances where you see blatant problems, like CEO compensation being 300x+ more than average worker pay, and you KNOW it's wrong for it to be that way. There should be something that is actively and strongly looking to correct those problems that have societal consequences and not sitting back with a "the markets will fix it themselves!" attitude. Switzerland just passed new (and enforceable) say on pay legislation. If it works well for them it may be worth copying. Curious on how their say on pay works underneath the hood. The Australian one sounds nice and all with that if 25% of shareholders vote no twice in a row then the board gets dissolved, but it kind of fails.
I don't think they have the under the hood stuff figured out yet.
The proposal gives shareholders an annual ballot on managers’ pay. It eliminates sign-on bonuses, as well as severance packages and extra incentives for completing merger transactions. The initiative also includes rules punishing executives who violate the terms with as long as three years in jail. ...
In theory, the initiative takes immediate effect, though the government could need time to issue ordinances and adapt national law. There is no set time frame for it to do so.
Link
If ultimately it doesn't drive businesses or talented CEO's away I'd feel pretty comfortable with a similar law in the US.
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On March 08 2013 14:37 yandere991 wrote:Show nested quote +On March 08 2013 14:20 aksfjh 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. I don't really want a state mandated overhaul, just more oversight of the entire thing. It's one of those instances where you see blatant problems, like CEO compensation being 300x+ more than average worker pay, and you KNOW it's wrong for it to be that way. There should be something that is actively and strongly looking to correct those problems that have societal consequences and not sitting back with a "the markets will fix it themselves!" attitude. I really don't see anything wrong with it. If cash flows are strong and the company is growing at a healthy rate then who cares if they are earning 300x the average worker. Most companies that I have seen (basically the top half of the ASX 500) have a MAJOR component of their exec pay in equity which vests in tranches, usually 3 year vest with 5 year lock period. Most of the time half the tranches has relative TSR (50th percentile min 75th percentile stretch) as the KPI and the other half has absolute EPS as the KPI. STI has a whole set of different KPIs which usually involve EBIT, safety, and discretionary. Generally when times are good bonuses are big and when times are bad multiple years of bonuses have their current tranches nullified.
you forget the popular graph, which shows corporate pay at 300x, productivity going up, but employee pay actually decreasing slightly if not just stagnating. Now, you're going to have a hell of a case trying to prove CEOs are working 300x as much as their workers. This is the problem with corporate style business. The money isn't proportional to who worked for the revenue.
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Occupy wallstreet should look into the fed qe program buying 85b of treasurys and mortgages every month.
The bund market is interesting, interest has been dropping since the 80,s from 10%+ to now like 2%
The people who have been buying bunds all thoose years (banks,hedgefunds,rich individuals) are sitting on a huge pile of paper profits. The expectations now are that interest will rise coming years wich would obviously crrush bunds, so all the people holding bunds are now wanting to sell them.
There is a problem however, Everyone wants to sell and cash in on their profits, and no big investor wants to buy into the bund market at record low rates when the rate is expected to go up.
So how do these bund holders unload their huge stock of bunds without crashing the market?
Simple realy, they call the fed and the fed is buying the bunds market price with freshly printed dollars.
Instead of having to sell their bunds on the street, crashing the price, they can simply sell to the fed without the price dropping.
This in the end is a 1000 billion dollar/year theft from the american public and an 1000 billion dollar/year gift to the bund holders.
Well not entirely as the bunds do still have some value,but what remains is that bund holders are able to sell their bunds at record high prices to the fed, prices they would never have gotten if they would have to sell such a huge amount on the street. This huge gift to the rich is largely unnoticed by the general public.
Most important event this year are the german elections.
The germans need to be kept satisfied to stay in the euro, thats why we now have all that austerity.
The day after the german elections europe will start printing monney and employ the same economic policy wich is done by japan,china and the usa.
The endgame can then begin, leading to one world currency in say 50 years after wich we will see if marx was right.
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On March 08 2013 14:37 yandere991 wrote:Show nested quote +On March 08 2013 14:20 aksfjh 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. I don't really want a state mandated overhaul, just more oversight of the entire thing. It's one of those instances where you see blatant problems, like CEO compensation being 300x+ more than average worker pay, and you KNOW it's wrong for it to be that way. There should be something that is actively and strongly looking to correct those problems that have societal consequences and not sitting back with a "the markets will fix it themselves!" attitude. I really don't see anything wrong with it. If cash flows are strong and the company is growing at a healthy rate then who cares if they are earning 300x the average worker. Most companies that I have seen (basically the top half of the ASX 500) have a MAJOR component of their exec pay in equity which vests in tranches, usually 3 year vest with 5 year lock period. Most of the time half the tranches has relative TSR (50th percentile min 75th percentile stretch) as the KPI and the other half has absolute EPS as the KPI. STI has a whole set of different KPIs which usually involve EBIT, safety, and discretionary. Generally when times are good bonuses are big and when times are bad multiple years of bonuses have their current tranches nullified.
It doesn't really matter how you calculate a number when the result doesn't sensibly line up. We have mountains of statistics that tell us the same thing: workers have gotten much more productive and yet are paid roughly the same real wages as 30 years ago. Hell, right now we have figures that show full-time workers working longer hours for smaller raises, more people that are unemployed/underemployed, and company profits and cash reserves at all time highs. You don't need to through around a bunch of bullshit analysis to see that the average worker is being swindled while the top executives line their pockets.
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Those #OcCuPy kids didn't even know why they were loitering about. I for one was glad when these mobs died a couple of years ago.
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On March 09 2013 01:24 Roe wrote:Show nested quote +On March 08 2013 14:37 yandere991 wrote:On March 08 2013 14:20 aksfjh 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. I don't really want a state mandated overhaul, just more oversight of the entire thing. It's one of those instances where you see blatant problems, like CEO compensation being 300x+ more than average worker pay, and you KNOW it's wrong for it to be that way. There should be something that is actively and strongly looking to correct those problems that have societal consequences and not sitting back with a "the markets will fix it themselves!" attitude. I really don't see anything wrong with it. If cash flows are strong and the company is growing at a healthy rate then who cares if they are earning 300x the average worker. Most companies that I have seen (basically the top half of the ASX 500) have a MAJOR component of their exec pay in equity which vests in tranches, usually 3 year vest with 5 year lock period. Most of the time half the tranches has relative TSR (50th percentile min 75th percentile stretch) as the KPI and the other half has absolute EPS as the KPI. STI has a whole set of different KPIs which usually involve EBIT, safety, and discretionary. Generally when times are good bonuses are big and when times are bad multiple years of bonuses have their current tranches nullified. you forget the popular graph, which shows corporate pay at 300x, productivity going up, but employee pay actually decreasing slightly if not just stagnating. Now, you're going to have a hell of a case trying to prove CEOs are working 300x as much as their workers. This is the problem with corporate style business. The money isn't proportional to who worked for the revenue.
CEO to average worker pay has been declining in the US, though you can still argue that it is still excessively high. It's also a somewhat misleading stat - generally it's computed by looking at CEO pay at the largest companies where the ratio would naturally be higher. In those cases it's possible that the CEO really does do more for the company that 300 workers (or the reverse, a bad CEO could cause more damage than 300 bad workers though he'll still get a nice paycheck).
As for the productivity / compensation gap, I'd recommend reading this from the BLS. A good chunk of the gap is explained by technical differences in the way that wages and productivity are calculated in the indexes. Post 2000 is where labor really took a hit though I'm not sure that there's a quick and easy explanation for that.
On March 09 2013 02:31 aksfjh wrote:Show nested quote +On March 08 2013 14:37 yandere991 wrote:On March 08 2013 14:20 aksfjh 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. I don't really want a state mandated overhaul, just more oversight of the entire thing. It's one of those instances where you see blatant problems, like CEO compensation being 300x+ more than average worker pay, and you KNOW it's wrong for it to be that way. There should be something that is actively and strongly looking to correct those problems that have societal consequences and not sitting back with a "the markets will fix it themselves!" attitude. I really don't see anything wrong with it. If cash flows are strong and the company is growing at a healthy rate then who cares if they are earning 300x the average worker. Most companies that I have seen (basically the top half of the ASX 500) have a MAJOR component of their exec pay in equity which vests in tranches, usually 3 year vest with 5 year lock period. Most of the time half the tranches has relative TSR (50th percentile min 75th percentile stretch) as the KPI and the other half has absolute EPS as the KPI. STI has a whole set of different KPIs which usually involve EBIT, safety, and discretionary. Generally when times are good bonuses are big and when times are bad multiple years of bonuses have their current tranches nullified. It doesn't really matter how you calculate a number when the result doesn't sensibly line up. We have mountains of statistics that tell us the same thing: workers have gotten much more productive and yet are paid roughly the same real wages as 30 years ago. Hell, right now we have figures that show full-time workers working longer hours for smaller raises, more people that are unemployed/underemployed, and company profits and cash reserves at all time highs. You don't need to through around a bunch of bullshit analysis to see that the average worker is being swindled while the top executives line their pockets.
Worker's are not getting paid the same as 30 years ago.
On March 09 2013 01:50 Rassy wrote:
So how do these bund holders unload their huge stock of bunds without crashing the market? Hold to maturity :p
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On March 09 2013 01:50 Rassy wrote:
So how do these bund holders unload their huge stock of bunds without crashing the market?
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Hold to maturity
Hmm that actually is a decent option wich i overlooked lol.
@below
Yes that was the word i was looking for,thx
And nvm this, i cant even be angry about it annymore:s
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On March 09 2013 03:13 Rassy wrote:
On March 09 2013 01:50 Rassy wrote:
So how do these bund holders unload their huge stock of bunds without crashing the market?
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Hold to maturity
Hmm that actually is a decent option wich i overlooked lol.
Still maturity is only 100%, and the bunds wich have a 4% coupon now trade way above 100%.
And you dont want to be holding bonds with a 2% coupon either,when the market rate goes to 4%. then getting 100% back in the end is only a small comfort for the interest loss you will have in the coming years.
My theory is a bit farfetched maybe but i do think what i said is true, just follow the monney and see where it ends up.
The things wich happen in plain sight are incredible lately.
For example a major dutch bank got nationalised a few weeks ago, the sns bank.
The bank was basicly bankrupted and to stabelise the system the government took over,confiscating all outstanding shares and all outstanding debt wich was last in line incase of bankrupcy (not sure how to call this type of debt)
All the normal bond holders got their monney back though.
But this is not the most incredibly thing, what realy is incredible that 2 months before beeing nationalised, SNS paid of some of its debt wich was last inline incase of bankrupcy, they paid off ~ 200m on debt wich was going for like 60% in the market at the time. Debt wich got worth nothing when sns got nationalised (it was confiscated).
To do this they had to get permission from dutch national bank, who at that time well knew the desperate position the sns was in and who should never have given permission for this pay off.
This pay off ended up in the hands of some bund holders who should have lost everything,and the cost for this pay off is shared by the public who has to pay the bill for nationalising sns.
The dutch national bank knew 2 months before that thoose debts would become worthless yet they still allowed the bank to pay out 200m more and the full 100% on thoose debts to a few selected holders and give them the option to bail the sinking ship without anny losses (this was eternal debt wich was going for like 50% of nominal value, but the bank had the option to pay down from a certain date and they paid down a part of this debt after getting admission from the dutch national bank)
Now isnt this theft and corruption? The netherlands is nothing better then anny 3rd world country in this regards.
You mean http://en.wikipedia.org/wiki/Subordinated_debt? Achtergestelde lening in Dutch.
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On March 09 2013 01:24 Roe wrote:Show nested quote +On March 08 2013 14:37 yandere991 wrote:On March 08 2013 14:20 aksfjh 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. I don't really want a state mandated overhaul, just more oversight of the entire thing. It's one of those instances where you see blatant problems, like CEO compensation being 300x+ more than average worker pay, and you KNOW it's wrong for it to be that way. There should be something that is actively and strongly looking to correct those problems that have societal consequences and not sitting back with a "the markets will fix it themselves!" attitude. I really don't see anything wrong with it. If cash flows are strong and the company is growing at a healthy rate then who cares if they are earning 300x the average worker. Most companies that I have seen (basically the top half of the ASX 500) have a MAJOR component of their exec pay in equity which vests in tranches, usually 3 year vest with 5 year lock period. Most of the time half the tranches has relative TSR (50th percentile min 75th percentile stretch) as the KPI and the other half has absolute EPS as the KPI. STI has a whole set of different KPIs which usually involve EBIT, safety, and discretionary. Generally when times are good bonuses are big and when times are bad multiple years of bonuses have their current tranches nullified. you forget the popular graph, which shows corporate pay at 300x, productivity going up, but employee pay actually decreasing slightly if not just stagnating. Now, you're going to have a hell of a case trying to prove CEOs are working 300x as much as their workers. This is the problem with corporate style business. The money isn't proportional to who worked for the revenue.
Revenue bringers will always earn massive amounts more than revenue workers. At my old firm I probably spend 3 times as long on a project than the supervising director but he gets probably 10 times as much in pay on that project compared to me. Makes sense as well, you could probably get any uni grad to crunch numbers but the ability to foster client relationships and pull business your way is so much more valuable as an asset. So if you are working as long as hard as a CEO but you spend your time working on revenue and he is spending his time pulling clients and keeping regulators off the company's back then the massive pay difference is really justified.
Anyways that study I think was the Harvard one? All the analysts at Mercer exec comp had to read that in their first week. The market median has jumped massively over the past 20ish years, but if that is what the market dictates then I don't see the problem, like I said before people should only be bitching about the correlation between firm performance and executive pay not the amount.
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Cayman Islands24199 Posts
the 'rain makers' always make the most. but does this have negative cultural impact? the singular focus on bringing in clients, as well as the intense competition for those clients, has to come at the cost of a sense of professional role for the job.
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On March 09 2013 02:45 JonnyBNoHo wrote:CEO to average worker pay has been declining in the US, though you can still argue that it is still excessively high. It's also a somewhat misleading stat - generally it's computed by looking at CEO pay at the largest companies where the ratio would naturally be higher. In those cases it's possible that the CEO really does do more for the company that 300 workers (or the reverse, a bad CEO could cause more damage than 300 bad workers though he'll still get a nice paycheck). As for the productivity / compensation gap, I'd recommend reading this from the BLS. A good chunk of the gap is explained by technical differences in the way that wages and productivity are calculated in the indexes. Post 2000 is where labor really took a hit though I'm not sure that there's a quick and easy explanation for that.
The first graph doesn't show that CEO pay is declining overall, it shows that CEO pay falls during recessions...which makes sense for obvious reasons. Note the recovery in CEO:worker compensation, which is the point of the article.
The graph in page 59 of the linked article is log-adjusted, and shows a divergence in productivity to compensation starting in...1979, from page 60. Not the 2000s. 1979-1990 was even more divergent in productivity:compensation than the 2000s...
One big disclaimer should be put on this; this is all data from the United States, not international data.
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On March 09 2013 02:45 JonnyBNoHo wrote:Show nested quote +On March 09 2013 01:24 Roe wrote:On March 08 2013 14:37 yandere991 wrote:On March 08 2013 14:20 aksfjh 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. I don't really want a state mandated overhaul, just more oversight of the entire thing. It's one of those instances where you see blatant problems, like CEO compensation being 300x+ more than average worker pay, and you KNOW it's wrong for it to be that way. There should be something that is actively and strongly looking to correct those problems that have societal consequences and not sitting back with a "the markets will fix it themselves!" attitude. I really don't see anything wrong with it. If cash flows are strong and the company is growing at a healthy rate then who cares if they are earning 300x the average worker. Most companies that I have seen (basically the top half of the ASX 500) have a MAJOR component of their exec pay in equity which vests in tranches, usually 3 year vest with 5 year lock period. Most of the time half the tranches has relative TSR (50th percentile min 75th percentile stretch) as the KPI and the other half has absolute EPS as the KPI. STI has a whole set of different KPIs which usually involve EBIT, safety, and discretionary. Generally when times are good bonuses are big and when times are bad multiple years of bonuses have their current tranches nullified. you forget the popular graph, which shows corporate pay at 300x, productivity going up, but employee pay actually decreasing slightly if not just stagnating. Now, you're going to have a hell of a case trying to prove CEOs are working 300x as much as their workers. This is the problem with corporate style business. The money isn't proportional to who worked for the revenue. CEO to average worker pay has been declining in the US, though you can still argue that it is still excessively high. It's also a somewhat misleading stat - generally it's computed by looking at CEO pay at the largest companies where the ratio would naturally be higher. In those cases it's possible that the CEO really does do more for the company that 300 workers (or the reverse, a bad CEO could cause more damage than 300 bad workers though he'll still get a nice paycheck). As for the productivity / compensation gap, I'd recommend reading this from the BLS. A good chunk of the gap is explained by technical differences in the way that wages and productivity are calculated in the indexes. Post 2000 is where labor really took a hit though I'm not sure that there's a quick and easy explanation for that. Show nested quote +On March 09 2013 02:31 aksfjh wrote:On March 08 2013 14:37 yandere991 wrote:On March 08 2013 14:20 aksfjh 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. I don't really want a state mandated overhaul, just more oversight of the entire thing. It's one of those instances where you see blatant problems, like CEO compensation being 300x+ more than average worker pay, and you KNOW it's wrong for it to be that way. There should be something that is actively and strongly looking to correct those problems that have societal consequences and not sitting back with a "the markets will fix it themselves!" attitude. I really don't see anything wrong with it. If cash flows are strong and the company is growing at a healthy rate then who cares if they are earning 300x the average worker. Most companies that I have seen (basically the top half of the ASX 500) have a MAJOR component of their exec pay in equity which vests in tranches, usually 3 year vest with 5 year lock period. Most of the time half the tranches has relative TSR (50th percentile min 75th percentile stretch) as the KPI and the other half has absolute EPS as the KPI. STI has a whole set of different KPIs which usually involve EBIT, safety, and discretionary. Generally when times are good bonuses are big and when times are bad multiple years of bonuses have their current tranches nullified. It doesn't really matter how you calculate a number when the result doesn't sensibly line up. We have mountains of statistics that tell us the same thing: workers have gotten much more productive and yet are paid roughly the same real wages as 30 years ago. Hell, right now we have figures that show full-time workers working longer hours for smaller raises, more people that are unemployed/underemployed, and company profits and cash reserves at all time highs. You don't need to through around a bunch of bullshit analysis to see that the average worker is being swindled while the top executives line their pockets. Worker's are not getting paid the same as 30 years ago. Show nested quote +On March 09 2013 01:50 Rassy wrote:
So how do these bund holders unload their huge stock of bunds without crashing the market? Hold to maturity :p
I apologize again for rounding and you not understanding what I mean by "roughly." A real increase of 10% of income (about $45k to $50k in 30 years) and a productive output increase of 200-250%. That's just a finer detail, though, but still paints the same picture.
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On March 10 2013 04:05 acker wrote:Show nested quote +On March 09 2013 02:45 JonnyBNoHo wrote:CEO to average worker pay has been declining in the US, though you can still argue that it is still excessively high. It's also a somewhat misleading stat - generally it's computed by looking at CEO pay at the largest companies where the ratio would naturally be higher. In those cases it's possible that the CEO really does do more for the company that 300 workers (or the reverse, a bad CEO could cause more damage than 300 bad workers though he'll still get a nice paycheck). As for the productivity / compensation gap, I'd recommend reading this from the BLS. A good chunk of the gap is explained by technical differences in the way that wages and productivity are calculated in the indexes. Post 2000 is where labor really took a hit though I'm not sure that there's a quick and easy explanation for that. The first graph doesn't show that CEO pay is declining overall, it shows that CEO pay falls during recessions...which makes sense for obvious reasons. Note the recovery in CEO:worker compensation, which is the point of the article. The graph in page 59 of the linked article is log-adjusted, and shows a divergence in productivity to compensation starting in...1979, from page 60. Not the 2000s. 1979-1990 was even more divergent in productivity:compensation than the 2000s... One big disclaimer should be put on this; this is all data from the United States, not international data.
The CEO to average worker pay graph shows a secular decline. If you look at the cyclical aspect the high of the mid 2000's was lower than the high of the late 90's and the recent low was lower than the post dot-com low. Lower highs / lower lows - that's a decline.
As to the BLS article please see page 61. From '79 to 2000 the bulk of the divergence between productivity and compensation was due to technical differences in how productivity and compensation are calculated over time.
•There are two components that account for the gap between real hourly compensation growth and productivity growth. The first is the difference between the price indexes used to account for inflation in the BLS productivity and hourly compensation measures. The second is the change in “labor share,” which, as explained earlier, is the share of output that is accounted for by workers’ wages, salaries, and benefits.
•Before 2000, the difference between the growth rates of the CPI and the IPD—that is, the difference in inflation rates—explained most of the gap
Edit:On March 10 2013 04:20 aksfjh wrote:Show nested quote +On March 09 2013 02:45 JonnyBNoHo wrote:On March 09 2013 01:24 Roe wrote:On March 08 2013 14:37 yandere991 wrote:On March 08 2013 14:20 aksfjh 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. I don't really want a state mandated overhaul, just more oversight of the entire thing. It's one of those instances where you see blatant problems, like CEO compensation being 300x+ more than average worker pay, and you KNOW it's wrong for it to be that way. There should be something that is actively and strongly looking to correct those problems that have societal consequences and not sitting back with a "the markets will fix it themselves!" attitude. I really don't see anything wrong with it. If cash flows are strong and the company is growing at a healthy rate then who cares if they are earning 300x the average worker. Most companies that I have seen (basically the top half of the ASX 500) have a MAJOR component of their exec pay in equity which vests in tranches, usually 3 year vest with 5 year lock period. Most of the time half the tranches has relative TSR (50th percentile min 75th percentile stretch) as the KPI and the other half has absolute EPS as the KPI. STI has a whole set of different KPIs which usually involve EBIT, safety, and discretionary. Generally when times are good bonuses are big and when times are bad multiple years of bonuses have their current tranches nullified. you forget the popular graph, which shows corporate pay at 300x, productivity going up, but employee pay actually decreasing slightly if not just stagnating. Now, you're going to have a hell of a case trying to prove CEOs are working 300x as much as their workers. This is the problem with corporate style business. The money isn't proportional to who worked for the revenue. CEO to average worker pay has been declining in the US, though you can still argue that it is still excessively high. It's also a somewhat misleading stat - generally it's computed by looking at CEO pay at the largest companies where the ratio would naturally be higher. In those cases it's possible that the CEO really does do more for the company that 300 workers (or the reverse, a bad CEO could cause more damage than 300 bad workers though he'll still get a nice paycheck). As for the productivity / compensation gap, I'd recommend reading this from the BLS. A good chunk of the gap is explained by technical differences in the way that wages and productivity are calculated in the indexes. Post 2000 is where labor really took a hit though I'm not sure that there's a quick and easy explanation for that. On March 09 2013 02:31 aksfjh wrote:On March 08 2013 14:37 yandere991 wrote:On March 08 2013 14:20 aksfjh 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. I don't really want a state mandated overhaul, just more oversight of the entire thing. It's one of those instances where you see blatant problems, like CEO compensation being 300x+ more than average worker pay, and you KNOW it's wrong for it to be that way. There should be something that is actively and strongly looking to correct those problems that have societal consequences and not sitting back with a "the markets will fix it themselves!" attitude. I really don't see anything wrong with it. If cash flows are strong and the company is growing at a healthy rate then who cares if they are earning 300x the average worker. Most companies that I have seen (basically the top half of the ASX 500) have a MAJOR component of their exec pay in equity which vests in tranches, usually 3 year vest with 5 year lock period. Most of the time half the tranches has relative TSR (50th percentile min 75th percentile stretch) as the KPI and the other half has absolute EPS as the KPI. STI has a whole set of different KPIs which usually involve EBIT, safety, and discretionary. Generally when times are good bonuses are big and when times are bad multiple years of bonuses have their current tranches nullified. It doesn't really matter how you calculate a number when the result doesn't sensibly line up. We have mountains of statistics that tell us the same thing: workers have gotten much more productive and yet are paid roughly the same real wages as 30 years ago. Hell, right now we have figures that show full-time workers working longer hours for smaller raises, more people that are unemployed/underemployed, and company profits and cash reserves at all time highs. You don't need to through around a bunch of bullshit analysis to see that the average worker is being swindled while the top executives line their pockets. Worker's are not getting paid the same as 30 years ago. On March 09 2013 01:50 Rassy wrote:
So how do these bund holders unload their huge stock of bunds without crashing the market? Hold to maturity :p I apologize again for rounding and you not understanding what I mean by "roughly." A real increase of 10% of income (about $45k to $50k in 30 years) and a productive output increase of 200-250%. That's just a finer detail, though, but still paints the same picture.
Where are you getting the $45K to $50K figure from?
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EPT
