Can wild CEO Pay Be Tamed? Probably Not

Discussion in 'Economy' started by sealybobo, Oct 1, 2008.

  1. sealybobo
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    sealybobo Diamond Member

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    Lehman Bros.’ Richard Fuld, $40 million.
    Merrill Lynch’s Stanley O’Neal, $46 million.
    Bear Stearns' James Cayne, $40 million.
    Freddie Mac’s Richard Syron, just shy of $20 million.
    Fannie Mae’s Daniel Mudd, $12.2 million.

    As the nation’s financial system was crumbling, the CEOs who were in charge of the most troubled financial firms pocketed fat paychecks during their final full year on the job — and that doesn’t include the golden parachutes they got when they walked away.
    Public outrage over this disconnect has caused Congress to step in and try to do something about skyrocketing executive compensation. But history shows that government attempts have been weak, at best, when it comes to curtailing CEO riches.
    Why? Because regulators never go far enough in giving shareholders a true voice. It’s difficult to break up entrenched boards of directors that make the decisions on executive compensation.
    Even the $700 billion bailout package that is fighting for life on Capitol Hill doesn’t have the teeth to put a lid on these financial windfalls, experts say.
    Over the past two decades, efforts by government officials to rein in the big payouts, including changes to the tax code and calls for more oversight, have actually contributed to the growth in CEO pay — now 275 times the salary of the average working stiff, according to the Economic Policy Institute.
    “Government regulators are notoriously ineffective at reining in pay, and oftentimes the unintended consequences caused greater problems,” says Charles Elson, an expert on corporate governance at the University of Delaware.
    Let’s go back to the mid-1980s when the public also was outraged about executives getting huge payouts as a result of the merger mania at the time. The government and investors wanted to make sure managers were selling companies because it was financially prudent, not because they would walk away with huge severance packages.
    These concerns resulted in a 1986 change in the tax code creating a penalty tax on excessive golden parachute payments more than three times an executive's base pay.
    What happened after that, says Steve Van Putten, a senior executive pay consultant for Watson Wyatt in Boston, was that companies started paying this penalty tax for executives, a process called grossing up. And the three-times base pay limit became the standard for many parachutes that were once well below that.
    In 1992, the Securities and Exchange Commission introduced proxy disclosure rules taking information about executive compensation that was once narrative and thin on numerical values, and putting actual numbers out there for all to see.
    “It became very transparent, and a CEO at one company could see what another was making so they’d say, ‘Hey, I want to be making that,’ ” says Van Putten.
    The big change — one that many compensation experts and shareholder advocates point to as a turning point that led to the obscene CEO paychecks we’re dealing with today — came in 1993 with tax code provision 162(m) that limited tax deductibility for executive pay at $1 million. The exception to the rule was for pay that was considered “performance-based” compensation, like, you guessed it, stock options.
    “As a result, stock options have gone crazy,” says Mel Fugate, assistant management professor at the Cox School of Business at Southern Methodist University. Under the rule, for example, a CEO could get $1 million in base pay and $400 million in stock options.
    This focus on stock options created a volatile mix, boosting incentives for executives to make risky business moves in order to boost a company’s stock price.
    That’s exactly what has happened with the subprime mess that led to the downfall of so many old and established Wall Street firms.
    “Certainly, compensation practices at these companies have been a major contributor to the financial crisis,” says Paul Hodgson, a senior analyst at the Corporate Library, an independent governance research organization.
    Alas, government intervention thus far has been “an unmitigated disaster,” adds Alan Johnson, a compensation consultant. “I would think if you went back 20 years or so, you’d see it’s enriched consultants like me, lawyers, accountants. It was wasted time and money and didn’t reduce pay. It was so poorly designed, so full of loopholes, and so silly.”
    So, what needs to be done to finally clamp down on CEO pay and incentives that encourage short-term gains, but do little for the long-term health of the nation’s corporations?

    Can wild CEO pay be tamed? Probably not - Economy in Turmoil - MSNBC.com
     
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  2. sealybobo
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    sealybobo Diamond Member

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    Average Fortune 500 CEO Now Paid 380 Times As Much As The Average Worker | ThinkProgress

    Today. 4 years later, the number is 380 times the average worker. At what point will middle class Republicans wake up and be outraged at this instead of hating on the factory worker that use to make $35 hr? Jealous? Don't realize those high paying union jobs brought up all of our wages? Don't see this gap between rich and poor as being a problem? Wake up!
     
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  3. CrusaderFrank
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    CrusaderFrank Diamond Member

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    Average workers are nothing special, who the fuck cares what they earn?
     
  4. CrusaderFrank
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    CrusaderFrank Diamond Member

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    Average baseball players don't make the Hall of Fame

    Average Internet posters bore me
     
  5. rdean
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    rdean rddean

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    A true Republican through and through. Believe it or not, I love it when you are honest. I especially love your signature line. ****** this and ****** that. Even quoting hearsay is OK because it gives you the opportunity to say "******" multiple times. You are a very, very good member of the Republican Party in very, very good standing. Congrats.
     
    Last edited: Apr 22, 2012
  6. CrusaderFrank
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    CrusaderFrank Diamond Member

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    Deany, you're well below average

    And I have one LBJ "******" quote in my sig

    “Son, when I appoint a ****** to the court, I want everyone to know he’s a ******.” -- Dem Civil Rights "Hero" LBJ on Thurgood Marshall
     
  7. Dont Taz Me Bro
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    Dont Taz Me Bro USMB Mod Staff Member Gold Supporting Member Supporting Member

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    Do you have a problem with the pay that Hollywood celebrities make for acting in just one movie?

    Tom Cruise $30 million
    Matt Damon $29 million
    Brad Pitt $20 million
    Leonardo di Caprio $20 million

    The list goes on

    Highest Paid Actors in Hollywood | BOQ Film
     
  8. sealybobo
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    sealybobo Diamond Member

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    They are in unions idiot! :lol: Employees making a lot. You think I have a problem with that? :cuckoo: Screen Actors Guild. Thank a union! :clap2:

    But I bet you did have a problem with NBA players making too much, right?

    See, in a union, the CEO wouldn't make as much because the employees would get profit sharing. It wouldn't be "passed on to the consumer" either. That's just a lie they tell you.
     
  9. CrusaderFrank
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    CrusaderFrank Diamond Member

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    Do you know how much the average actor makes? Yeah, neither do I and nobody gives a fuck
     
  10. eflatminor
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    eflatminor Classical Liberal

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    Spoken like a true central planner.

    How about this: Let the market determine a CEO's pay...and that of the janitor as well. If they screw up, don't bail them out with taxpayer money. Problem solved.
     
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