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  1. #1
    Needs more flowers Moderator drone's Avatar
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    Default Re: Obama's Executive Compensation Plan

    What really needs doing is a rewrite of how corporate officer compensation boards work. More input from shareholders, and more focus on bonuses for long-term success. For all companies, not just the ones taking a bailout. Then, with the federal government as a large shareholder of the failing companies, these limitations can be applied as part of the new process. This would also give large retirement plans and mutual funds a better say in how their investments are to be squandered.

    Shareholders really need to be more involved in the process, and people should not invest in companies that allow the board to raid the profits.
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  2. #2
    Nobody expects the Senior Member Lemur's Avatar
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    Default Re: Obama's Executive Compensation Plan

    Quote Originally Posted by drone View Post
    More input from shareholders, and more focus on bonuses for long-term success.
    We have a winner!

  3. #3
    Jillian & Allison's Daddy Senior Member Don Corleone's Avatar
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    Default Re: Obama's Executive Compensation Plan

    You're free to pay your executives whatever you want to with your own money. Shareholders and banks (the 2 normal sources of capital) place restrictions on executive pay, why shouldn't the government when they take up the role of investor.

    Besides, rewarding somebody for gross incompetence really rubs me the wrong way. If Citibank feels so morally outraged that the White House would dare to suggest that they're overpaid, don't take their money!
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  4. #4
    The Usual Member Ice's Avatar
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    Default Re: Obama's Executive Compensation Plan

    Quote Originally Posted by Don Corleone View Post
    Besides, rewarding somebody for gross incompetence really rubs me the wrong way. If Citibank feels so morally outraged that the White House would dare to suggest that they're overpaid, don't take their money!
    From the Article:

    Quote Originally Posted by Pearl Meyer
    It sounds very good if you believe that the people who are now in charge were responsible for the disaster. But these disasters were caused by a small segment of the managing population and the problem is proper oversight by senior management, most of which are gone. Now there is a cadre of executives who are going to be punished or penalized for the actions of others. I am concerned that these institutions won't be able to maintain the quality of their hires.
    I'd have no problem if the pay restrictions were on the idiots who caused this. Unfortunately, it's not really that simple.



  5. #5
    Jillian & Allison's Daddy Senior Member Don Corleone's Avatar
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    Default Re: Obama's Executive Compensation Plan

    Quote Originally Posted by Kush View Post
    From the Article:



    I'd have no problem if the pay restrictions were on the idiots who caused this. Unfortunately, it's not really that simple.
    It's not simply a matter of punishment on those responsible. It's a matter of "do you really need a government bailout or don't you"? If your CEO is raking in $10million, maybe the answer is no.

    Seriously, let's consider the worst case scenario proposed by Ms. Meyer. The position and tone of her arguments seem to indicate that she believes maintaining the maximum number of corporate entities is a goal, in and of itself. But should it be?

    Let's say AIG takes the TARP money, and in doing so, restricts executive pay. And as a result, the wall-street regulars all bail off of AIG's senior management team. What happens next? They have to go to the minor leagues. Since it was conventional wisdom and business-as-usual that caused the current mess, wouldn't fresh blood likely be a good thing?

    And there's another syllogism in her article. She highlights that AIG is hemorraghing talent right now. But the executive restrictions haven't gone into affect yet. So these guys are paying themselves gobs of taxpayer cash, and leaving anyways.

    Finally, I conclude that even if the worst were to happen, and some troubled instutions weren't able to retain top talent and ended up going under... is that so terrible? It's not as though the talent is just going to stop working... they'll be adopted into higher-paying (therefore, non-TARP limited, therefore, not in fiscal crisis) competitors.

    This, by the way is reason #2 I believe the only thing the government ever should have done was buy troubled assets directly. Had they stuck to that approach, even if AIG went under, the government still had the assets they purchsed. By handing a bag of money to a thief and hoping this time he doesn't pocket it... well, you can see how well it's working out.
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  6. #6
    smell the glove Senior Member Major Robert Dump's Avatar
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    Default Re: Obama's Executive Compensation Plan

    It doesn't matter if the specific individuals being capped were responsible or not, what matters is that they are part of a company that is being bailed out at the taxpayers expense.

    I understand this is a form of socialism, I understand it violates some of the basics of free market capitalism -- but how does saving failing companies and nationalizing banks not do the same thing? How does giving auto companies who can't manage their business and peddle subpar goods a handout not qualify as socialism when it essentially stifles competition from the other car companies who play on the same field as the Big3? How does a state paying for a large companies parking and plumbing in order to lure them to the state not qualify as socialism when 99.9% of that companies competitors recieved no such assistance

    My point is that's its absolutely ridiculous that we this perverted system masquerading as capitalism yet critics of this salary cap cry about interfering in the market. Hell, McCain ran an entire campaign about Obama turning us socialist as billions of dollars were being poured into banks and billions more were being promised to car companies. Give me a break.

    Using the logic of not capping salaries for these companies on bailout funds, well, poor people on welfare shouldn't have a limit in benefits and in fact should get a raise every year. I mean really, it is the same thing in theory and procedure. I'm curious how many people against the salary caps are for more lax qualifications for social welfare, and how many people against drug and alcohol testing of welfare recipients are for the salary caps.

    As for caps for people in office I think the only people not for that are the people in office. Still, there's a difference between the pols salaries and the exec caps because pols were elected or appointed, and stupid spending on retreats and big dinners and high salaries are kind of expected because they are slimy politicians after all.
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  7. #7
    The Usual Member Ice's Avatar
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    Default Re: Obama's Executive Compensation Plan

    Quote Originally Posted by Don Corleone View Post
    It's not simply a matter of punishment on those responsible. It's a matter of "do you really need a government bailout or don't you"? If your CEO is raking in $10million, maybe the answer is no.
    Perhaps, although 10 million is fairly small peanuts compared to the billions we are giving these firms.

    Seriously, let's consider the worst case scenario proposed by Ms. Meyer. The position and tone of her arguments seem to indicate that she believes maintaining the maximum number of corporate entities is a goal, in and of itself. But should it be?
    If not, what was the point of spending how hundreds of billions of dollars bailing them out?

    Let's say AIG takes the TARP money, and in doing so, restricts executive pay. And as a result, the wall-street regulars all bail off of AIG's senior management team. What happens next? They have to go to the minor leagues. Since it was conventional wisdom and business-as-usual that caused the current mess, wouldn't fresh blood likely be a good thing?
    Fresh Blood? Sure. Lower Talent Fresh Blood? No.

    And there's another syllogism in her article. She highlights that AIG is hemorraghing talent right now. But the executive restrictions haven't gone into affect yet. So these guys are paying themselves gobs of taxpayer cash, and leaving anyways.
    It could be due the fact that they expect a pay cut and are leaving before such a thing is enforced. I really don't know why though.

    Finally, I conclude that even if the worst were to happen, and some troubled instutions weren't able to retain top talent and ended up going under... is that so terrible? It's not as though the talent is just going to stop working... they'll be adopted into higher-paying (therefore, non-TARP limited, therefore, not in fiscal crisis) competitors.
    Like I said before, what was the point of bailing these companies out if we are just going to let them fall to the "minor leagues"? It really doesn't make sense.
    This, by the way is reason #2 I believe the only thing the government ever should have done was buy troubled assets directly. Had they stuck to that approach, even if AIG went under, the government still had the assets they purchsed. By handing a bag of money to a thief and hoping this time he doesn't pocket it... well, you can see how well it's working out.
    I'm sure Mr. Obama and our treasury secretary agree with you now. I agree with you
    Last edited by Ice; 02-07-2009 at 23:18. Reason: grammar



  8. #8
    Iron Fist Senior Member Husar's Avatar
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    Default Re: Obama's Executive Compensation Plan

    Quote Originally Posted by Lemur View Post
    We have a winner!
    Yes, because we all know from the gaming industry how shareholders always have the best interests of the company's customers in mind and no company would ever try to screw it's customers or employees to appease the shareholders.

    So if shareholders and banks are the only sources of capital nowadays anyway, then why are people supposed to buy all the stuff companies produce anyway if I may ask into the round?
    Last edited by Husar; 02-06-2009 at 22:01.


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  9. #9
    The Usual Member Ice's Avatar
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    Default Re: Obama's Executive Compensation Plan

    Quote Originally Posted by Husar View Post

    So if shareholders and banks are the only sources of capital nowadays anyway, then why are people supposed to buy all the stuff companies produce anyway if I may ask into the round?
    You are confusing financing and profit. People are suppose to buy the products because they need the products. Companies are suppose to sell the products to pay their debt and/or make profit.

    Now the sources of financing, are shareholders, banks, or corporate paper (like treasury bonds, except issued by corporations).



  10. #10
    Iron Fist Senior Member Husar's Avatar
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    Default Re: Obama's Executive Compensation Plan

    Quote Originally Posted by Kush View Post
    You are confusing financing and profit. People are suppose to buy the products because they need the products. Companies are suppose to sell the products to pay their debt and/or make profit.

    Now the sources of financing, are shareholders, banks, or corporate paper (like treasury bonds, except issued by corporations).
    Well, if they'd skip one cycle of financing, they could use all that profit for financing and wouldn't have to pay any interests. That way they would have more money for financing, unless you are saying that they only use the profits to pay the interest on their loans while taking up ever more loans in which case it's no wonder the industry is in big trouble if you ask me.


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  11. #11
    The Usual Member Ice's Avatar
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    Default Re: Obama's Executive Compensation Plan

    Quote Originally Posted by Husar View Post
    Well, if they'd skip one cycle of financing, they could use all that profit for financing and wouldn't have to pay any interests.
    This a very conservative method. By doing this, the companies has no reserve resources to capitalize on any investment opportunity that may appear. Not to mention that the tax shield effect (you can write a certain amount of interest off of your taxes) and capitalization of interest making constant financing a good thing. However, it needs to be balanced. Too much financing can lead to bankruptcy.
    That way they would have more money for financing, unless you are saying that they only use the profits to pay the interest on their loans while taking up ever more loans in which case it's no wonder the industry is in big trouble if you ask me.
    What? Read above as to what I meant.



  12. #12

    Default Re: Obama's Executive Compensation Plan

    The New York times has some fascinating insight...

    PRIVATE school: $32,000 a year per student.

    Mortgage: $96,000 a year.

    Co-op maintenance fee: $96,000 a year.

    Nanny: $45,000 a year.

    We are already at $269,000, and we haven’t even gotten to taxes yet.

    Five hundred thousand dollars — the amount President Obama wants to set as the top pay for banking executives whose firms accept government bailout money — seems like a lot, and it is a lot. To many people in many places, it is a princely sum to live on. But in the neighborhoods of New York City and its suburban enclaves where successful bankers live, half a million a year can go very fast.

    “As hard as it is to believe, bankers who are living on the Upper East Side making $2 or $3 million a year have set up a life for themselves in which they are also at zero at the end of the year with credit cards and mortgage bills that are inescapable,” said Holly Peterson, the author of an Upper East Side novel of manners, “The Manny,” and the daughter of Peter G. Peterson, a founder of the equity firm the Blackstone Group. “Five hundred thousand dollars means taking their kids out of private school and selling their home in a fire sale.”

    Sure, the solution may seem simple: move to Brooklyn or Hoboken, put the children in public schools and buy a MetroCard. But more than a few of the New York-based financial executives who would have their pay limited are men (and they are almost invariably men) whose identities are entwined with living a certain way in a certain neighborhood west of Third Avenue: a life of private schools, summer houses and charity galas that only a seven-figure income can stretch to cover.

    Few are playing sad cellos over the fate of such folk, especially since the collapse of the institutions they run has yielded untold financial pain. But in New York, where a new study from the Center for an Urban Future, a nonprofit research group in Manhattan, estimates it takes $123,322 to enjoy the same middle-class life as someone earning $50,000 in Houston, extricating oneself from steep bills can be difficult.

    Therefore, even if it is not for sympathy but for sport, consider the numbers.

    The cold hard math can be cruel.

    Like those taxes. If a person is married with two children, the weekly deductions on a $500,000 salary are: federal taxes, $2,645; Social Security, $596; Medicare, $139; state taxes, $682; and city, $372, bringing the weekly take-home to $5,180, or about $269,000 a year, said Martin Cohen, a Manhattan accountant.

    Now move to living expenses.

    Barbara Corcoran, a real estate executive, said that most well-to-do families take at least two vacations a year, a winter trip to the sun and a spring trip to the ski slopes.

    Total minimum cost: $16,000.

    A modest three-bedroom apartment, she said, which was purchased for $1.5 million, not the top of the market at all, carries a monthly mortgage of about $8,000 and a co-op maintenance fee of $8,000 a month. Total cost: $192,000. A summer house in Southampton that cost $4 million, again not the top of the market, carries annual mortgage payments of $240,000.

    Many top executives have cars and drivers. A chauffeur’s pay is between $75,000 and $125,000 a year, the higher end for former police officers who can double as bodyguards, said a limousine driver who spoke anonymously because he does not want to alienate his society customers.

    “Some of them want their drivers to have guns,” the driver said. “You get a cop and you have a driver.” To garage that car is about $700 a month.

    A personal trainer at $80 an hour three times a week comes to about $12,000 a year.

    The work in the gym pays off when one must don a formal gown for a charity gala. “Going to those parties,” said David Patrick Columbia, who is the editor of the New York Social Diary (newyorksocialdiary.com), “a woman can spend $10,000 or $15,000 on a dress. If she goes to three or four of those a year, she’s not going to wear the same dress.”

    Total cost for three gowns: about $35,000.

    Not every bank executive has school-age children, but for those who do, offspring can be expensive. In addition to paying tuition, “You’re not going to get through private school without tutoring a kid,” said Sandy Bass, the editor of Private School Insider, a newsletter that covers private schools in the New York City area. One hour of tutoring once a week is $125. “That’s the low end,” she said. “The higher end is 150, 175.” SAT tutors are about $250 an hour. Total cost for 30 weeks of regular tutoring: $3,750.

    Two children in private school: $64,000.

    Nanny: $45,000.

    Ms. Bass, whose husband is an accountant with many high-end clients, said she spends about $425 every 10 days on groceries for her family. Annual cost: about $15,000.

    More? Restaurants. Dry cleaning. Each Brooks Brothers suit costs about $1,000. If you run a bank, you can’t look like a slob.

    The total costs here, which do not include a lot of things, like kennels for the dog when the family is away, summer camp, spas and other grooming for the human members of the family, donations to charity, and frozen hot chocolates at Serendipity, are $790,750, which would require about a $1.6-million salary to compensate for taxes. Give or take a few score thousand of dollars.

    Does this money buy a chief executive stockholders might prize, a well-to-do man with a certain sureness of stride, something that might be lost if the executive were crowding onto the PATH train every morning at Journal Square, his newspaper splayed against the back of a stranger’s head?

    The man would certainly not feel like himself on that train, said Candace Bushnell, the author of “Sex and the City” and other books chronicling New York social mores.

    “People inherently understand that if they are going to get ahead in whatever corporate culture they are involved in, they need to take on the appurtenances of what defines that culture,” she said. “So if you are in a culture where spending a lot of money is a sign of success, it’s like the same thing that goes back to high school peer pressure. It’s about fitting in.”

    By the way, the frozen hot chocolate costs $8.50.
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