Economics: Golden Parachute Myth

[DBTrek]

As I pointed out, they are usually free to divorce themselves from the company economically after a short period. In my specific case, that period is only three years after they stop working here.

That's not a feeling, that is a fact. The incentives are remarkably short-term, when you actually look into it.

Professional reputations and egos can be maintained even through massive failures. Every time my company reports bad results, it's not the managers' fault. It's interest rates that are to blame, or the forex headwinds. Managers across the company do it. Just as corrupt politicians defend other corrupt politicians, just as nukedog defends violent white nationalists, so managers defend the excuses for other managers' failures. Of course they have an incentive to do so. Don't play dumb.

I’m not playing dumb, I’m simply asking why the corporate world doesn’t reflect the pirate tale of short term raiding and looting you claim is endemic to the culture. You make a lot of baseless assertions that echo popular sentiments among anti corporate folks, but none of them are grounded in reality.

If the structure of a corporation is such that it incentivizes short term looting over long term growth, how do they persist for generations? How do stock markets steadily rise? How does Amazon go profitless for seven years before becoming what it is today?

It’s not dumb to ask why your version of reality doesn’t correspond with the empirical world we inhabit.

[Calculus Man]

If the structure of a corporation is such that it incentivizes short term looting over long term growth, how do they persist for generations? How do stock markets steadily rise? How does Amazon go profitless for seven years before becoming what it is today?

It’s not dumb to ask why your version of reality doesn’t correspond with the empirical world we inhabit.

1. They persist for generations because they have enormous accumulated competitive advantages. There are usually huge barriers to entry for new competition. In a completely free market, many more of them WOULD go out of business.

2. Stock markets steadily rise for many reasons, and I doubt you can prove that prudent management is a major contributor. However--

3. Management WILL be more prudent when they have a greater economic and spiritual stake in the company.
The situation StA and I are describing is created by the diffusion of responsibility that occurs when one person or small group no longer owns most of the company (using ownership in the economic and spiritual sense here) and has no long-term ties to it. Jeff Bezos and Amazon do not relate to my previous posts, because they are still in the founder-controlled stage of the corporate life cycle. Amazon is owned by Jeff Bezos to a much larger degree than most corporations are owned by their CEOs. And with Bezos, your ego argument makes a lot more sense because Amazon is like his child. He wants to see Amazon prosper in the long-term, like any father would.

My CEO, however, owns a mere few million bucks worth of shares, which doesn't even constitute a majority of his net worth. And he worked in a completely different industry before he came here. I honestly don't think he has any egotistical attachment to the products or the company. If he did, he would stop cutting costs at the expense of product quality.

[Martin Hash]

Also, lol @ Robert Iger being an example of a valuable CEO. That guy and his team have done immeasurable damage to their ESPN cash cow in order to further a political agenda.

But hey, I'm sure management had a sound business reason for alienating half the country. I'm sure they just know super secret management tricks that I don't know.

That's why they earn the big bucks for leaving, after all.

You need to sign up for the Libertyist team, Calcey.

What R U when you're neither a Collectivist nor Libertarian; you're a Libertyist.

I'm open to it, but I need to understand your position on redistribution better.

My pamphlet, The Center, is less than a dollar. Give it a read.

p.s. You're going to have to buck a forum full of Libertarians.

[Calculus Man]

You need to sign up for the Libertyist team, Calcey.

What R U when you're neither a Collectivist nor Libertarian; you're a Libertyist.

I'm open to it, but I need to understand your position on redistribution better.

My pamphlet, The Center, is less than a dollar. Give it a read.

p.s. You're going to have to buck a forum full of Libertarians.

Rich dude opposed to aristocracy wants me to give him a buck. Sounds legit.

(lol I'll check it out. I've definitely gotten more than a dollar worth of enjoyment out of your forum, so it's a steal)

[DBTrek]

1. They persist for generations because they have enormous accumulated competitive advantages. There are usually huge barriers to entry for new competition. In a completely free market, many more of them WOULD go out of business.

Seems like a chicken/egg dilemma. They persist for generations because of enormous accumulated competitive advantages? Don’t they have to persist first, in order to accumulate advantages? They can’t be founded with accumulated advantages.

I think they persist because a corporation isn’t a structure created to encourage short term looting, but rather to protect the personal assets of venture capitalists who aim to do something big.

2. Stock markets steadily rise for many reasons, and I doubt you can prove that prudent management is a major contributor.

If you don’t think the management of a company directly influences stock prices, what do you think does? Only sales? Because it’s pretty easy to cite examples of management directly influencing the value of a company (since management includes everything from labor reduction to offshoring to new processes to mergers to entering new markets, etc). I’m surprised you don’t consider it a factor in stock value.

[Calculus Man]

Seems like a chicken/egg dilemma. They persist for generations because of enormous accumulated competitive advantages? Don’t they have to persist first, in order to accumulate advantages? They can’t be founded with accumulated advantages.

I think they persist because a corporation isn’t a structure created to encourage short term looting, but rather to protect the personal assets of venture capitalists who aim to do something big.

The accumulated advantages are usually created by the founders, like Jeff Bezos. In the early stages of the corporate life cycle, responsibility and ownership are much more concentrated, and the incentives are longer term.

Venture capitalists don't usually invest in mature corporations in mature industries. Those companies get bought by pensions, mutual funds, etc. which often have neither the time nor the energy to closely monitor their investment.

If you don’t think the management of a company directly influences stock prices, what do you think does? Only sales? Because it’s pretty easy to cite examples of management directly influencing the value of a company (since management includes everything from labor reduction to offshoring to new processes to mergers to entering new markets, etc). I’m surprised you don’t consider it a factor in stock value.

I do think management affects stock prices, but the effects are delayed. The strategic-level decisions made by upper mgmt take years, even decades, to play out. That's why the short-term incentives are so screwed up.

My company's stock price is incredible right now. Very good for speculators, or for people who can sell all their shares in three years.

Long-term investors, however, are going to get fucked.

[Martin Hash]

I'm open to it, but I need to understand your position on redistribution better.

My pamphlet, The Center, is less than a dollar. Give it a read.

p.s. You're going to have to buck a forum full of Libertarians.

Rich dude opposed to aristocracy wants me to give him a buck. Sounds legit.

(lol I'll check it out. I've definitely gotten more than a dollar worth of enjoyment out of your forum, so it's a steal)

People treat things that are free as having no value.

[DBTrek]

For all the proponents of the “C-level execs are just looking out for the herd, which is why they give golden greed parachutes to failed CEOs, maaaaan” myth:

Tesla investors should reject huge pay plan for Elon Musk, proxy advisors say

Tesla Inc. investors should reject a plan to give Chief Executive Elon Musk an equity award valued at $2.6 billion, the world's largest proxy advisory firm said, echoing the recommendation of its biggest rival.

"Even the far-reaching performance goals do not justify the extraordinary grant magnitude," Institutional Shareholder Services Inc. said in a report, a copy of which was obtained Thursday by Bloomberg. "Even when annualized, Musk's pay opportunity would dwarf that of nearly every CEO at the largest and most profitable public companies."

Glass Lewis & Co., the second-biggest proxy advisor, also urged shareholders vote against the plan at Tesla's March 21 special meeting.

The recommendations from the firms, whose customers include the world's largest institutional investors, could be a hurdle for Tesla's board, which cannot make the grant without majority shareholder approval. The advisory firms' reports may not be enough to sway Tesla's biggest investors, who rely on their own research and have bet big on Musk and his long-term vision. . .

http://www.latimes.com/business/la-fi-h ... story.html

Say what? One of the biggest names, visionary, at-the-height-of-their-career CEOs can’t even get a couple billion? How is this possible. Shareholders don’t care about their own profits, right? Other board members don’t care about the fiscal health of their company, right? Nah, maaan, they love handing money out to each other for tanking companies because they’re all in it together! That’s the theory, right?

Poor Elon, he gave them PayPal, Tesla Motors, self-landing rockets, and goddam flame throwers and he can’t even pocket a couple Bill.

It’s almost like the other investors and board members actually care about that money.