Economics: Golden Parachute Myth

[DBTrek]

Don't you hate it when some CEO is paid millions of dollars for sinking a company and then they skip away with a multi-million dollar golden parachute? I mean, if *we* did our jobs that poorly we'd be fired and maybe sued, not given millions of dollars and a pat in the back. Corporate greed run amok, right!?!?

Not right.

First, it's important to ask yourself who sets the terms of a CEO's compensation and separation package. Hint: It's not the CEO. The next step is to ask yourself why a board of directors would give a CEO millions of dollars. Do you think they do it because they love handing cash to others? Or . . . is it possible that the skills required to run a multinational corporation are possessed by a meager few, and among those few only a handful are actually good at it?

Look at it another way, does Disney's board pay Robert Iger $41million a year because they love to make him rich and have no need of desire for money themselves? Do they pay it because they can get him for less? If they decided to pay only $10million for their CEO, would they get the same results that Iger gets? The answers, likely, are no, no, and no. They pay him Iger because there are very few people who could successfully run a multinational corporation like Disney, and the board feels that Iger brings the best returns for their investment. When they feel otherwise, Iger will be gone.

Now - on to the golden parachute. What if corporations aren't actually "rewarding" a failing CEO. What if they're actually "divorcing" the CEO while the company is still solvent. Anyone who has been married should be able to relate. Which costs more - the wedding or the divorce? If you are a corporation, "married" to a bad CEO, it may cost you millions to part ways with them. But going the distance with them could cost you billions. So what do you do?

You golden parachute the failures out before they pull down the whole shebang, that's what you do. A golden parachute isn't actually a bunch of rich cats shoving money in the pockets of one of their cronies because rich cats love handing money out to failures. It's a bunch of rich cats going through a really expensive divorce with another, incompetent rich cat, who is so bad at their job it's simply cheaper to hand them millions than to let them wreck your company for hundreds of millions.

[ssu]

The above is what I would call social-democratic bitching.

Being the CEO OUGHT to be one the most likeliest places to lose in a firm. Just as allways, it is supposed to be about supply and demand when asking for a job position. So if one can get a good CEO By giving perks like golden parachute, who's to say no?

That's the theory. Reality is different.

The way I see why the overall compensation of managerial positions, just like the CEO, has spiralled out of control is the simple fact that people in the manager-level have turned into a ruling class. Who makes the board of the companies? Their colleagues in similar positions. Owners? Nope, the faceless shareholders just need the small dividend similar that other companies pays (or for their stock just to go up), and ANYTHING else can be decided By the CEO-class.

And that's why CEO compensation has become so fantastic these days from what it was decades ago. With golden parachutes.

[Martin Hash]

The above is what I would call social-democratic bitching.

Being the CEO OUGHT to be one the most likeliest places to lose in a firm. Just as allways, it is supposed to be about supply and demand when asking for a job position. So if one can get a good CEO By giving perks like golden parachute, who's to say no?

That's the theory. Reality is different.

The way I see why the overall compensation of managerial positions, just like the CEO, has spiralled out of control is the simple fact that people in the manager-level have turned into a ruling class. Who makes the board of the companies? Their colleagues in similar positions. Owners? Nope, the faceless shareholders just need the small dividend similar that other companies pays (or for their stock just to go up), and ANYTHING else can be decided By the CEO-class.

And that's why CEO compensation has become so fantastic these days from what it was decades ago. With golden parachutes.

This forum is Royalist leaning, apologists for the aristocracy. No argument you make will sway their allegiance. The Rich DESERVE to be rich.

[Fife]

CEO Nick Saban is mildly amused.

J/K, Nick doesn't GAF about the insects. He's got shit to do.

[Martin Hash]

CEO Nick Saban is mildly amused.

J/K, Nick doesn't GAF about the insects. He's got shit to do.

Need I say more?

[Speaker to Animals]

I have seen it with my own eyes in the tech sector. They definitely get so-called golden parachutes.

You have to look at who is on those boards. They are a clique of CEOs and their allies. A CEO of one company can serve on the board of other non-competing companies. The whole system is totally rigged.

The media is complicit as well. If you look at coverage of a guy like Carl Icahn, he is demonized. They portray him as a corporate raider like Gordan Gecko. But he's often trying to fix this shit that incompetent executive officers created.

I know tech corporations pretty well, so I will limit myself to them, even though the worst offenders are outside that sector. If you look at the most successful tech companies, they are run by engineers who understand the products and services, not merely from a business and consumer standpoint, but how the technology actually works. The tech companies start to lose quality and market share when MBA faggots take over. Every time. They streamline the company for short-term profit, spin off potentially profitable side products, and focus on the one cool thing that is selling now. But then a competitor still run by engineers out-innovates them and their scheme collapses. The company faces bankruptcy and decline because they are no longer diversified, and they are so far behind innovation that it requires a major flush of capital and total management change to reverse it.

Motorola used to be an innovative monster. MBA types ousted the last of the Galvens in early 2000s. They replaced the CEO with Zander, who had no idea how any of this technology worked. At the time, the Razr was selling like crack cocaine. Zander realized he could spin off all the new markets they were developing (like Freescale) and just put everything into the Razr to maximize earnings growth for the next few quarters. Stock soared on earnings growth while Zander quietly liquidated his call options every few months.

But Motorola was no longer "wasting" money on innovation or diversifying it's businesses so it wasn't really innovating and it wasn't buffering against the cyclical nature of the mobile device market at all. Apple, which was being run by a man who understood the core products better than most engineers who worked for him, saw an opening in the wireless device market. Note, all he did back then was build computers and MP3 players. He suddenly dropped on the market the greatest technological advance in mobile devices we have ever seen. Nobody has replicated the leap between phones like the Razr to that of the first generation iPhone since. It took Motorola about five years to market something comparable, and that required heavy collaboration with Google (also run by engineers at the time). It was too late and the only way to save the business was eventually to get subsumed by Google.

But Zander walked away with more fuck you money than most of us truly can imagine. He literally destroyed a company for his personal gain as far as I am concerned. That's just my opinion (cannot prove it as fact), but I suspect most of these guys deliberately destroy businesses because they are doing what profits them personally.

[DBTrek]

The way I see why the overall compensation of managerial positions, just like the CEO, has spiralled out of control is the simple fact that people in the manager-level have turned into a ruling class. Who makes the board of the companies? Their colleagues in similar positions. Owners? Nope, the faceless shareholders just need the small dividend similar that other companies pays (or for their stock just to go up), and ANYTHING else can be decided By the CEO-class.

So if you and I are on a board of directors, and we have a CEO that's terrible and losing the company billions you think we hand that guy millions to fire him because we're all part of the "CEO class" and we have to stick together? That's your theory?

You find that more likely then you and I pay him millions to GTFO so our company doesn't lose billions and you and I become board members of a bankrupt failure?

I disagree. I think self preservation is a stronger instinct than "CEO class" philanthropy to one another.

[brewster]

You have to look at who is on those boards. They are a clique of CEOs and their allies. A CEO of one company can serve on the board of other non-competing companies. The whole system is totally rigged.

Precisely. These are EMPLOYEES who have leveraged their management positions to act like owner/founders. I do not believe in the godlike powers of CEO's, with rare exceptions of visionaries like Jobs they're a commodity item who have convinced people they're irreplaceable. And that's just in the tech sector, outside rapidly innovating business it's even less critical. Their pay has gone from 30x the average employee to 300x in 40 years, while the rest of the world wonders wtf is wrong with us.

Can we also discuss the finance sector? They've captured 20% of the economy, getting rich by handling the money like getting covered in shit by working in the sewer. There's thousands of people making 7 figures on Wall Street who would otherwise be Walmart managers based on their actual smarts and skills. Just read or watch The Big Short or any other expose. Who decides how much they make? They do!

[Martin Hash]

When brew comes back, we double the number of Liberals on this forum.

[Speaker to Animals]

The mistake is in equating limiting destructive avarice in business with being liberal. Insofar as you wish to constrain such destructive avarice you are not liberal.

Neocons are liberals in commerce. Progressives are liberals in personal morals. Libertarians are the apex liberals, wanting to "liberalize" destructive, immoral behavior of all kinds.

DB wants to liberalize the economy and Hash wants to constrain it under some basic moral order.

I would suggest to you that the most reasonable constraiknt is forcing people to pay for their negative externalities first and foremost, and secondly to actually enforce fiduciary responsibilities. CEOs who destroy companies for short-term earnings growth so that they can maximize their return on stock options have not only violated their fiduciary responsibilities to shareholders, but arguably defrauded them. They should be held accountable for that.