The Obama Presidency - 2008 & 2012

[ISiddiqui]

Originally Posted by Autumn

The board of directors thing seems obvious to me. The people deciding executive salaries are often executives at other firms, or on a career path to becoming an executive. Their interest has little to do with saving company money and maximizing efficiency, but with creating a market where executives like themselves make money. What do you think athlete salaries would look like if the salaries were decided by a group of pro players or pro and college hopefuls? Would they be trying to make the club lean and mean or would they be looking forward to thier future payday?

How about instead of "group of pro players and pro and college hopefuls" it was, oh I dunno, people who own tons of shares in the pro team... kind of like how it is in the executive boardroom. That may include a pro player or two, but they have a direct financial interest in making the club tons of money.

[JPhillips]

Originally Posted by ISiddiqui

So why exactly where CEOs not getting paid so much in, say, the 1950s, with the SAME EXACT system in place?

I can't give you a researched version, but I'd start by looking at three areas.

1) Compensation consultants weren't common. The rise of firms that exist largely to justify outrageous salaries has, no surprise, justified outrageous salaries.

2) The tax code was much more punitive on high wage earners and there weren't as many loopholes. I'm not advocating a return to 70% plus top rates, but when compensation was so heavily taxed there was less incentive to pay out such exorbitant salaries.

3) It wasn't legitimized. As compensation ballooned in the eighties and nineties it was legitimized by the type of rhetoric we see in this thread. That sort of talk wouldn't have worked as well in an era when the wealthy were less revered.

[ISiddiqui]

Originally Posted by Autumn

You're suggesting that the business regulation environment is the same now as it was in the '50s?

Who do you think decided CEO salaries in the 1950s? If you answer is anything other than the Boards of Directors of the companies then you are sadly mistaken.

[Ronnie Dobbs2]

ISiddiqui, do you not agree that those deciding CEO salaries have a vested interest (beyond shares in that particular company) in keeping CEO salaries high?

[JPhillips]

Originally Posted by ISiddiqui

I mean, seriously, Boards of Directors are not going to pay their executive officers a ton of money because they like them. They are just in it for making insane amounts of money themselves. And one way to make insane amounts of money is to hire a really visionary and brilliant CEO. Hence they'll offer large amounts of money/stock options to hire the next Steve Jobs, etc.

I reviewed documents in the Dick Grasso case and I can assure you that there was very little discussion in print relating to performance. While they didn't go so far as to say, "I like him so he should get paid," there was literally no one who suggested that his compensation shouldn't be the maximum recommendation of the consulting firm.

[Autumn]

Originally Posted by ISiddiqui

Who do you think decided CEO salaries in the 1950s? If you answer is anything other than the Boards of Directors of the companies then you are sadly mistaken.

Business regulation entails a lot more than just that. There have been vast changes in the legal environment that corporations operate in, those are the changes that have allowed such a drastic change in the concentration of money, along with the economic success that's been mentioned elsewhere.

[Mizzou B-ball fan]

Originally Posted by flere-imsaho

Without Al-Sadr's cease-fire and the Sunnis in Anbar province deciding they had had enough of Al-Qaeda, the surge would not have been as successful as it was. Let's not re-write history here.

I'd agree. We should not re-write history here, and that includes ignoring any interventions and negotiations that the administration and the military did to further that process. The whole process not only involves brute force, but winning over the people. That includes both the good and the bad. It probably took longer than it should have, but no process is ever perfect. But implying that the adminstration and military leadership had no hand in Al-Sadr's cease-fire just doesn't wash any more than saying they were the sole reason it happened. Al-Sadr doesn't come to that decision without considering other factors.

Originally Posted by flere-imsaho

And so, post-surge, Obama announced a plan to drawn down troops and let Iraq govern itself. Exactly what part of his policy here do you have an issue?

I don't disagree with it at all. I think he gets far more credit than he deserves as we never would have reached that point so quickly had the U.S. done it his way, but I have no problem with the action itself.

[ISiddiqui]

Originally Posted by Ronnie Dobbs2

ISiddiqui, do you not agree that those deciding CEO salaries have a vested interest (beyond shares in that particular company) in keeping CEO salaries high?

I do not agree, unless of course the CEO is a member of the Board.

For example, this is Microsoft's Board of Directors:

http://www.microsoft.com/presspass/bod/bod.aspx

There are, out of 10 BoDs, 3 are currently executive officers (including Steve Ballmer, CEO of MS). 4 are former executive officers (what incentive would they have to keep the salaries high? - obviously they're not interested in another executive job or they'd have one). 2 are college professors. And one is the Chairman (Bill Gates).

[ISiddiqui]

Originally Posted by Autumn

Business regulation entails a lot more than just that. There have been vast changes in the legal environment that corporations operate in, those are the changes that have allowed such a drastic change in the concentration of money, along with the economic success that's been mentioned elsewhere.

So basically it doesn't have to do with a "monopoly" of BoD members who are just interested in increasing executive salary because they are executives or may become executives?

[ISiddiqui]

Forbes on CEO compensation for Fortune 500 companies:

What The Boss Makes - Forbes.com

In total, these 500 executives earned $5.7 billion in 2008, which averages out to $11.4 million apiece and computes to less than 1% of total revenues and 3% of total profits of their companies.

I don't think people really realize how much in revenues and profits these companies are making.

In addition, if you read further, you'll note a LOT of the money (and for the highest paid, most of it) comes from VESTED STOCK OPTIONS.

[JPhillips]

Originally Posted by ISiddiqui

I do not agree, unless of course the CEO is a member of the Board.

For example, this is Microsoft's Board of Directors:

http://www.microsoft.com/presspass/bod/bod.aspx

There are, out of 10 BoDs, 3 are currently executive officers (including Steve Ballmer, CEO of MS). 4 are former executive officers (what incentive would they have to keep the salaries high? - obviously they're not interested in another executive job or they'd have one). 2 are college professors. And one is the Chairman (Bill Gates).

It's not just about becoming a CEO. There are numerous other ways to make money due to decisions of the CEO. More importantly the naysayer is going to be kicked out of the club. No board is looking for people who are opposed to ever increasing CEO compensation. If you want on the team you have to play ball.

[flere-imsaho]

Originally Posted by ISiddiqui

So why exactly where CEOs not getting paid so much in, say, the 1950s, with the SAME EXACT system in place?

For one, I'd assume inflation-adjusted revenues are higher now than then.

[ISiddiqui]

Originally Posted by flere-imsaho

For one, I'd assume inflation-adjusted revenues are higher now than then.

Quite right.

[molson]

CEO is a sweet gig, no doubt. Most jobs that require that type of education and skill level are.

But are people just arguing that they're overpaid or that the government should decide how much they make? And nobody would be concerned about those kinds of decisions having political motivations? Or the impact on lobbyists? Or the quality of CEOs going downhill?

[Autumn]

I'm certainly not arguing for government intervention. But I think if people don't feel that there's *already* government intervention which acts in teh favor of corporate management and the very rich, then they're not looking very hard. I just don't want to hear highly paid executives praised as some paragon of the powers of the market, when they are just as much recipients of a weighted system as the "welfare mothers" everyone loves to grind axes about.

There's just as much work going on in Washington helping the rich hold on to more money as there is helping people who aren't working get more money. It's just ironic to me how much hatred towards "socialism" and "welfare states" I hear when it's directed towards the poor but people don't want to see that the rich get just as much of a helping hand.

[JPhillips]

Originally Posted by ISiddiqui

Forbes on CEO compensation for Fortune 500 companies:

What The Boss Makes - Forbes.com



I don't think people really realize how much in revenues and profits these companies are making.

In addition, if you read further, you'll note a LOT of the money (and for the highest paid, most of it) comes from VESTED STOCK OPTIONS.

That's a little skewed because it doesn't seem to count retirement package contributions. And this:

We count compensation when it turns into cash or marketable stock; we do not include the value of options until the executive exercises them.

muddies the water as they could eventually make huge sums of money off of agreements made now.

Either way, I think 3% of profits is really high, especially when the examples they give show no connection between compensation and performance.

[flere-imsaho]

Originally Posted by Mizzou B-ball fan

But implying that the adminstration and military leadership had no hand in Al-Sadr's cease-fire just doesn't wash any more than saying they were the sole reason it happened. Al-Sadr doesn't come to that decision without considering other factors.

Common wisdom (and a simple google) states the following:

1. Al-Sadr's ceasefire for the Mahdi Army was mostly driven by his desire to not de-legitimize the political alliances he had made. By all accounts there was very little U.S. involvement, military, diplomatic or otherwise, here.

2. The "Anbar Awakening" was mostly the result of AQ overplaying its hand in Sunni areas and alienating the local tribal leaders. The extent of U.S. involvement in this lies in lower-level commanders (later referenced by General Petraeus) positioning the use of U.S. forces in a way that encouraged local Sunnis to turn to the U.S. when they tired of AQ.


The surge "succeeded" (and to this day the measures of its success are debated, both from a violence and a political stability standpoint) mostly due to these factors, not the addition of the extra troops. In fact, I'd propose that the most direct success attributed to those extra troops was a reduction in violence in Baghdad, to where the majority of those troops were deployed. Still, even that was largely due to the cessation of violence perpetrated by the Mahdi Army.

[Autumn]

Originally Posted by ISiddiqui

Forbes on CEO compensation for Fortune 500 companies:

What The Boss Makes - Forbes.com.

Making 1% to 3% of the total profits of a gigantic multinational corporation is pretty staggering. Not to mention that compensation does not go down for CEOs that run a business into the ground.

You've got more enthusiasm for this than me, though, I'm afraid. I'm bored while working and able to make little comments, but don't have the time to look up stuff to back them up. I should just stop getting drawn into these things.

[molson]

Originally Posted by Autumn

It's just ironic to me how much hatred towards "socialism" and "welfare states" I hear when it's directed towards the poor but people don't want to see that the rich get just as much of a helping hand.

Are you talking about corporate bailouts?

[flere-imsaho]

Originally Posted by ISiddiqui

Quite right.

So why haven't wages for the rest of the working population risen at the same rate? (Or have they?)

[molson]

Originally Posted by flere-imsaho

So why haven't wages for the rest of the working population risen at the same rate? (Or have they?)

The market changes. Our priorities change. Why would everything change at the same rate unless it was controlled by a singular, outside force (like a government)? The salaries of baseball players and hollywood actors have increased far more since the 1950s than regular workers' salaries (and also far more than CEOs, I'd guess). Does that represent some kind of shadiness, or something unfair or wrong? Or something the government needs to fix?

[flere-imsaho]

Originally Posted by molson

Does that represent some kind of shadiness, or something unfair or wrong?

I never said it did. I'm just asking for a logical explanation. Surely there must be one.

[CamEdwards]

Originally Posted by SteveBollea

But, do I hint a bit of resentment those darn minorities haven't bought into the utopia of low taxes, no gun laws, and a lack of social services in right-wing dreamworld?

Not really. More frustration at people like you who want to divvy up the population of this country into ever-smaller identity groups. Oh, and people who refer to President Obama as the first black president annoy me as well. He's bi-racial, not black.

[Mizzou B-ball fan]

Originally Posted by flere-imsaho

The surge "succeeded" (and to this day the measures of its success are debated, both from a violence and a political stability standpoint) mostly due to these factors, not the addition of the extra troops. In fact, I'd propose that the most direct success attributed to those extra troops was a reduction in violence in Baghdad, to where the majority of those troops were deployed. Still, even that was largely due to the cessation of violence perpetrated by the Mahdi Army.

Yes, but then we're playing the 'shuffle the troops' game and making a lot of assumptions. Without the increase in troops, many of the troops in the outlying areas who facilitated much of the change in the Iraqi groups would have had to go back to Baghdad to quell those troubles, and we would have had major setbacks in the outlying areas as a result. By pushing troops into Baghdad as you correctly mention, they allow the work to continue in other areas AND they nail down the Baghdad issues.

As far as political stability goes, it's never going to be guaranteed in that country regardless of what our military does. There's far too many factors out of our control to try to guarantee any sort of political stability. Iraqi and its citizens will have to work that out as best they can.

[flere-imsaho]

Originally Posted by CamEdwards

More frustration at people like you who want to divvy up the population of this country into ever-smaller identity groups. Oh, and people who refer to President Obama as the first black president annoy me as well. He's bi-racial, not black.

Oh, the irony!

[flere-imsaho]

Originally Posted by Mizzou B-ball fan

Yes, but then we're playing the 'shuffle the troops' game and making a lot of assumptions. Without the increase in troops, many of the troops in the outlying areas who facilitated much of the change in the Iraqi groups would have had to go back to Baghdad to quell those troubles, and we would have had major setbacks in the outlying areas as a result. By pushing troops into Baghdad as you correctly mention, they allow the work to continue in other areas AND they nail down the Baghdad issues.

There's no evidence to suggest that troops would have been re-purposed from Anbar to Baghdad without the surge. Other parts of Iraq to Baghdad, sure, but not likely Anbar.

[Autumn]

I did take a couple minutes to try to find some data for what i"m talking about. I didn't have enough time but I did find one quote that spoke to it:

A February 2009 report, published by the Institute for Policy Studies notes the impact excessive executive compensation has on taxpayers:

U.S. taxpayers subsidize excessive executive compensation — by more than $20 billion per year — via a variety of tax and accounting loopholes. For example, there are no meaningful limits on how much companies can deduct from their taxes for the expense of executive compensation. The more they pay their CEO, the more they can deduct.

[Autumn]

Originally Posted by molson

Are you talking about corporate bailouts?

No. I'm talking about laws and regulations that exist for the purpose of providing tax loopholes and general assistance for those with a lot of money.

[ISiddiqui]

Originally Posted by flere-imsaho

I never said it did. I'm just asking for a logical explanation. Surely there must be one.

Most likely it is the result of increasing technology and the automation of a lot of the workforce. When robots can do the job that people used to do on assembly lines of making cars, those people on the line have to get lower paying jobs, while the guy that monitors and fixes the robots gets paid very well. The median amounts go down.

And FWIW, I don't think 3% of the profits to the CEO is that excessive.

[Mizzou B-ball fan]

Anyone else amazed at how quickly the health care issues have totally fallen off the radar in this discussion thread? I know that Obama is expected to make some comments where he presents what he thinks should be in the bill, but I think he's going down that path FAR too late. He should have never let Congress drive what was in the bills. He's realizing that, but I'm not sure that he'll be able to salvage anything at this point.

[SteveMax58]

So we should put bandaids on the right knee because the left knee is skinned?

Fix the tax code if the tax code is broken. We really need to stop trying to fix these problems via the wrong mechanisms like just raising the income tax across the board on all rich people because some rich people may not "deserve" their wealth.

[Autumn]

I for one have not proposed raising the taxes or any other way to "fix" this problem. Just pointing out that I don't think that the system works as well as people might think it does.

[SteveMax58]

For those that think CEO compensation is completely out of whack...do you really believe that you know what a CEO of a Fortune 500 company's life is like? Do you really believe "qualifications" are all on paper and that business is done because somebody googles "the best product for X business"? Or do the "non-paper" qualifications have to be something like "great leader" or "visionary" or "donates half his salary to charity" type of nontangible qualifications? That just isn't how it works...nor should it.

Every aspect of your life is part of being a CEO. Everything. You are the identity of the company. Everything from how you treated a waiter in a previous business setting to your hobbies and interests to your father was a brilliant scientist to you are a Harvard guy/gal, to your brother is a loser has relevancy to the position of a given corporation (though not all apply to all situatons). You have to be considered a thoroughbred in business...at least if your business is "selling" something to other businesses. You are also responsible for attracting and retaining top level execs to help you run your company...this also requires significant and dynamic attributes not all of which you can control.

But at the end of the day...you are trying to do business with people of wealth. People of wealth that run businesses (whether they be top level execs or CEO's themselves) have a totally different lifestyle required of them than the guy who does his thing for 8-10 hours and goes home to watch Sportscenter.

[CamEdwards]

Originally Posted by flere-imsaho

Oh, the irony!

I was wondering if someone would pick up on that. Hey, if you're going to sub-divide people into identity groups, at least get the identity groups correct.

[flere-imsaho]

Originally Posted by SteveMax58

For those that think CEO compensation is completely out of whack...do you really believe that you know what a CEO of a Fortune 500 company's life is like?

Depends. There's a big difference between what Alan Mulally does and what Stanley O'Neal did, for instance.

[flere-imsaho]

Originally Posted by CamEdwards

I was wondering if someone would pick up on that. Hey, if you're going to sub-divide people into identity groups, at least get the identity groups correct.

CamEdwards: Defender of Political Correctness?

Don't mind me, I'm just going to go check the temperature in hell currently....

[CamEdwards]

Originally Posted by flere-imsaho

CamEdwards: Defender of Political Correctness?

Don't mind me, I'm just going to go check the temperature in hell currently....

I thought the politically correct term was "person of color", which frankly I would never defend because it sounds too much like "colored person" to me.

[flere-imsaho]

I think we could use a ruling from Ben here....

[JPhillips]

Originally Posted by SteveMax58

For those that think CEO compensation is completely out of whack...do you really believe that you know what a CEO of a Fortune 500 company's life is like? Do you really believe "qualifications" are all on paper and that business is done because somebody googles "the best product for X business"? Or do the "non-paper" qualifications have to be something like "great leader" or "visionary" or "donates half his salary to charity" type of nontangible qualifications? That just isn't how it works...nor should it.

Every aspect of your life is part of being a CEO. Everything. You are the identity of the company. Everything from how you treated a waiter in a previous business setting to your hobbies and interests to your father was a brilliant scientist to you are a Harvard guy/gal, to your brother is a loser has relevancy to the position of a given corporation (though not all apply to all situatons). You have to be considered a thoroughbred in business...at least if your business is "selling" something to other businesses. You are also responsible for attracting and retaining top level execs to help you run your company...this also requires significant and dynamic attributes not all of which you can control.

But at the end of the day...you are trying to do business with people of wealth. People of wealth that run businesses (whether they be top level execs or CEO's themselves) have a totally different lifestyle required of them than the guy who does his thing for 8-10 hours and goes home to watch Sportscenter.

Nobody is saying they don't work hard. The argument is that they are paid at historically high levels and too often the compensation isn't related to performance. Just because they work hard doesn't entitle them to unlimited riches. Is it not fair to ask why they are being paid so much more than they were thirty years ago?

[molson]

Originally Posted by JPhillips

Is it not fair to ask why they are being paid so much more than they were thirty years ago?

There's obviously an implication there though, either that the increases are somehow "wrong", or that the government needs to fix it.

Let's say the answer is - "they've played the system well", and that they've managed to artifically increase their wages beyond the value they bring to the company? So what? Isn't that a story of success?

[JPhillips]

For them, yes, but not for shareholders and not for the rest of the employees. IMO it's very similar to some bloated union contracts in that compensation has little to do with shareholder value.

[Honolulu_Blue]

Originally Posted by CamEdwards

I thought the politically correct term was "person of color", which frankly I would never defend because it sounds too much like "colored person" to me.

This reminds me of one of my favorite exchanges from "The Office":

Michael: That would have really really showed him up, wouldn’t it, if I brought in some burritos, or, colored greens, or some, pad thai, love pad thai …
Stanley: It’s collard greens.
Michael: What?
Stanley: It’s collard greens.
Michael: Uh, doesn’t really make sense. Cuz you don’t call them collard people. That’s offensive.

[SteveMax58]

Originally Posted by Autumn

I for one have not proposed raising the taxes or any other way to "fix" this problem. Just pointing out that I don't think that the system works as well as people might think it does.

I think its broke in other ways. Tax loopholes are more easily exploited by the rich. So let's simplify the tax code and make it equally difficult or easy to exploit for everybody.

As far as compensation...I have not seen this yet pointed out (coulda missed it)...but one of the many reasons for disparity is of course globalization and outsourcing of US labor. I'd venture a guess that CEO's would be more closely in line with their workers if ALL or MOST of their workers were US labor. But when you remove jobs from the US labor pool...you also decrease the demand for the "average" worker.

[molson]

Originally Posted by JPhillips

For them, yes, but not for shareholders and not for the rest of the employees. IMO it's very similar to some bloated union contracts in that compensation has little to do with shareholder value.

That's their choice, and the shareholders choice whether to buy the stock.

Are companies that pay their CEOs less money wildly more successful, or are their stock prices higher by comparison? If they were, CEO's would make less money.

I would imagine highly paid CEOs also pay more income taxes than the corporation would pay in corporate taxes if it paid lower salaries.

Average workers are a dime a dozen, and good CEOs are tough to find.

[Autumn]

Originally Posted by molson

I would imagine highly paid CEOs also pay more income taxes than the corporation would pay in corporate taxes if it paid lower salaries.

Average workers are a dime a dozen, and good CEOs are tough to find.

I would not imagine that at all. I'm quite sure their compensation is given in a way to reduce their income tax as much as possible.

And apparently good CEOs are very tough to find, since you can make 50 million while tanking your company. ;-)

[JPhillips]

Originally Posted by SteveMax58

I think its broke in other ways. Tax loopholes are more easily exploited by the rich. So let's simplify the tax code and make it equally difficult or easy to exploit for everybody.

As far as compensation...I have not seen this yet pointed out (coulda missed it)...but one of the many reasons for disparity is of course globalization and outsourcing of US labor. I'd venture a guess that CEO's would be more closely in line with their workers if ALL or MOST of their workers were US labor. But when you remove jobs from the US labor pool...you also decrease the demand for the "average" worker.

That's especially true for manufacturing jobs that had the power of collective bargaining. The decline in unions for blue collar workers has given the average employee much less ability to get wage increases that come close to those of management.

[JPhillips]

Originally Posted by molson

That's their choice, and the shareholders choice whether to buy the stock.

Are companies that pay their CEOs less money wildly more successful, or are their stock prices higher by comparison? If they were, CEO's would make less money.

I would imagine highly paid CEOs also pay more income taxes than the corporation would pay in corporate taxes if it paid lower salaries.

Average workers are a dime a dozen, and good CEOs are tough to find.

I would imagine, though I have no proof, that CEO compensation isn't at all correlated to share price, which is the whole point. There's no good reason why CEO salries have skyrocketed other than they can get away with it. Personally, I'd like to make it tougher to get away with.

[SteveMax58]

Originally Posted by JPhillips

Nobody is saying they don't work hard. The argument is that they are paid at historically high levels and too often the compensation isn't related to performance. Just because they work hard doesn't entitle them to unlimited riches. Is it not fair to ask why they are being paid so much more than they were thirty years ago?

Saw this after I posted...see my last post for some (most IMO) of the reason for this disparity.

On the brighter side (tongue in cheek)...the more we keep deflating the dollar and outsourcing, theoretically, the more attractive US labor becomes.

Seriously, I don't see how we close this gap or do more good than harm by creating laws/taxes, etc. to take more money from wealthy Americans so we can make the improvement in lifestyle of the middle class and the poor live equal in value to the wealthier.

Rather than "taking" wealth from these people, we should be encouraging the "investment" of wealth. You have to allow greed to motivate the greedy...just as we allow complacency to the complacent. Not all people want the same things in life. EDIT to add: And most Americans have a limit on how much wealth (with all it's side pro's/cons) they care to adapt their life goals to...myself included. Sure, some get lucky (lotto, inheritance) but that wealth was created by "somebody" with talent...it isn't anybody's business if that talented person decided to give it all to their lazy ass stupid son or to charity. In any event...the lazy stupid son blows the wealth created (which ends up in "somebody" else's talented hands) or he creates more wealth and jobs by employing smart, talented people. They have demands for their talent...rinse and repeat.

[Autumn]

I don't think we need to "take" any wealth, but there are laws already that govern how corporations function, how they choose their leadership, how they can award compensation, how they are taxed. It's not like we are not already intrinsically involved in this. So there should always be the possibility of improving the laws. That is what those executives and their lobbyists have been doing for decades. They possess the amount of wealth they do in part because of the way our laws function. There is nothing natural or intrinsic about it, it's the result of choices of lawmakers and regulators over hundreds of years.

[JPhillips]

If I were emperor I'd:

Go back to the Clinton era tax rates for everyone.

Add(bring back) a top rate at 2 percent higher than the Clinton top rate

Radically reduce the number of exemptions/deductions/credits

Give shareholders the right to hold a binding vote on executive compensation packages(with 2/3 required to cancel a package)

Bar anyone from serving on the board of a company who's executives sit on the their board for 3 to 5 years

Further enhance disclosure rules for public companies so compensation is more difficult to disguise

If possible(I'm not a tax attorney) look at ways to reduce the tax disparity between differing types of compensation.