The party's over :(
QuoteObama orders pay cut for execs at rescued firms
BY GREG GARDNER
FREE PRESS BUSINESS WRITER
The top 25 executives at General Motors Co., Chrysler Group LLC, GMAC and Chrysler Financial could face pay cuts under the Obama administration's latest plan to rein in compensation to companies that still owe billions to the government.
Kenneth Feinberg, who reviews executive compensation for the U.S. Treasury Department, has ordered cuts in the total pay for the top 25 executives at seven companies receiving the most federal aid. A department spokeswoman said Feinberg would make an announcement soon and declined to comment further.
Banks and insurance giant AIG could suffer the brunt of the cuts, while GM and Chrysler may face minor adjustments. GM has already reduced Chief Executive Officer Fritz Henderson's 2009 pay by 27% from last year, to $1.26 million. Chief Financial Officer Ray Young is to receive $720,000, or 15% less than in 2008.
AIG, whose underwriting of risky credit default swaps triggered the financial meltdown, received more than $180 billion in taxpayer assistance, more than three times what GM received and more than 20 times Chrysler's aid.
Some execs exempt from pay cuts
The Obama administration is slashing executive pay at two beleaguered banking giants and derivative kings AIG, but leaders at General Motors Co. and Chrysler Group LLC will have to make sacrifices, too.
GM, Chrysler, GMAC and Chrysler Financial have known for months that 2009 pay for their top 25 executives could be cut; it was a condition of the federal loans that helped the automakers through their bankruptcies. GMAC and Chrysler Financial received government loans to help jump-start lethargic new-car sales in the wake of last fall's credit freeze.
Kenneth Feinberg, who reviews executive compensation for the U.S. Treasury Department, is responding to public outrage over the resumption of lavish bonuses at banks such as Goldman Sachs and J.P. Morgan Chase. But neither of those institutions will be subject to the pay cuts because they have already repaid the billions they borrowed under the Troubled Asset Relief Program.
For Chrysler in particular, Feinberg's actions could trigger unintended consequences.
The sale agreement that granted Fiat 20% ownership of Chrysler exempted Fiat executives who took on responsibilities at Chrysler from any government-set compensation limits. That would include Chief Executive Officer Sergio Marchionne and Olivier Francois, the newly promoted president and CEO of Chrysler brand. Marchionne's total compensation for 2008 was 3.05 million euros, or $4.5 million, according to a McGraw-Hill profile.
But any of the top 25 who stayed with the Auburn Hills automaker during the dark days before and during its wrenching 41-day bankruptcy restructuring could see their pay cut, just as Marchionne is trying to build teamwork between Americans and Europeans.
Although Feinberg is expected to provide details of the compensation cuts later this week, reports that the average executive pay package at the seven companies would be cut by 50% overlook what likely will be significant differences in his treatment of banks and automakers.
A Treasury Department spokeswoman declined to comment.
The deepest cuts will come at the financial products division of AIG, according to the New York Times. That operation was at the epicenter of last fall's financial meltdown when it failed to pay on trillions of dollars of risky derivative investments linked to delinquent home mortgages. U.S. taxpayers have given more than $180 billion to bail out AIG.
No executive in that unit will receive more than $200,000 in total compensation, according to a person familiar with the plan. That's a stunning comedown for people who regularly made at least 50 times that.
At GM and Chrysler, many executives have already seen significant pay cuts.
GM said CEO Fritz Henderson will be paid $1.26 million for 2009, or about 27% less than he received in 2008. Chief Financial Officer Ray Young's pay has dropped about 15%, to $720,000.
Chrysler has sent Feinberg a compensation plan for its top 25 people that was "developed in a manner both consistent with our traditional compensation practices and responsive to the current financial position of the company," the company said in a statement.
Centrally-planned economies tend to do really well, right? :unsure:
QuoteThe deepest cuts will come at the financial products division of AIG, according to the New York Times. That operation was at the epicenter of last fall's financial meltdown when it failed to pay on trillions of dollars of risky derivative investments linked to delinquent home mortgages. U.S. taxpayers have given more than $180 billion to bail out AIG.
No executive in that unit will receive more than $200,000 in total compensation, according to a person familiar with the plan. That's a stunning comedown for people who regularly made at least 50 times that.
Aren't pretty much all the people still working there people who didn't really have much to do with the whole...fucking up...thing (at least at the higher levels)? As in...competent people? I, obviously, don't really know much about this stuff, but what's keeping some other company from coming along and offering them a million bucks a year, them taking the offer, and leaving AIG with the relative scrubs? Some sort of contracts or something?
Quote from: MadBurgerMaker on October 22, 2009, 03:37:02 PM
QuoteThe deepest cuts will come at the financial products division of AIG, according to the New York Times. That operation was at the epicenter of last fall's financial meltdown when it failed to pay on trillions of dollars of risky derivative investments linked to delinquent home mortgages. U.S. taxpayers have given more than $180 billion to bail out AIG.
No executive in that unit will receive more than $200,000 in total compensation, according to a person familiar with the plan. That's a stunning comedown for people who regularly made at least 50 times that.
Aren't pretty much all the people still working there people who didn't really have much to do with the whole...fucking up...thing (at least at the higher levels)? As in...competent people? I, obviously, don't really know much about this stuff, but what's keeping some other company from coming along and offering them a million bucks a year, them taking the offer, and leaving AIG with the relative scrubs? Some sort of contracts or something?
I think that ship has already sailed.
Quote from: MadBurgerMaker on October 22, 2009, 03:37:02 PM
Aren't pretty much all the people still working there people who didn't really have much to do with the whole...fucking up...thing (at least at the higher levels)? As in...competent people? I, obviously, don't really know much about this stuff, but what's keeping some other company from coming along and offering them a million bucks a year, them taking the offer, and leaving AIG with the relative scrubs? Some sort of contracts or something?
I'm not sure there are a bunch of people looking to hire the successful executives of AIG.
Quote from: MadBurgerMaker on October 22, 2009, 03:37:02 PM
QuoteThe deepest cuts will come at the financial products division of AIG, according to the New York Times. That operation was at the epicenter of last fall's financial meltdown when it failed to pay on trillions of dollars of risky derivative investments linked to delinquent home mortgages. U.S. taxpayers have given more than $180 billion to bail out AIG.
No executive in that unit will receive more than $200,000 in total compensation, according to a person familiar with the plan. That's a stunning comedown for people who regularly made at least 50 times that.
Aren't pretty much all the people still working there people who didn't really have much to do with the whole...fucking up...thing (at least at the higher levels)? As in...competent people? I, obviously, don't really know much about this stuff, but what's keeping some other company from coming along and offering them a million bucks a year, them taking the offer, and leaving AIG with the relative scrubs? Some sort of contracts or something?
I guess that would put them in line with the reality every other firm has to deal with.
Quote from: Warspite on October 22, 2009, 05:56:51 PM
Quote from: MadBurgerMaker on October 22, 2009, 03:37:02 PM
QuoteThe deepest cuts will come at the financial products division of AIG, according to the New York Times. That operation was at the epicenter of last fall's financial meltdown when it failed to pay on trillions of dollars of risky derivative investments linked to delinquent home mortgages. U.S. taxpayers have given more than $180 billion to bail out AIG.
No executive in that unit will receive more than $200,000 in total compensation, according to a person familiar with the plan. That's a stunning comedown for people who regularly made at least 50 times that.
Aren't pretty much all the people still working there people who didn't really have much to do with the whole...fucking up...thing (at least at the higher levels)? As in...competent people? I, obviously, don't really know much about this stuff, but what's keeping some other company from coming along and offering them a million bucks a year, them taking the offer, and leaving AIG with the relative scrubs? Some sort of contracts or something?
I guess that would put them in line with the reality every other firm has to deal with.
No, every other firm would have the possibility of matching the pay that might be offered to one of their executives by another firm.
QuoteCorporate America gets a lesson from the pay czar
Jay Hancock
Corporate America is shocked at pay czar Kenneth Feinberg.
That Washington appointed him to oversee compensation at companies getting bailouts? Nah. That he thinks people who abused shareholders and crippled the economy don't deserve pay of tens of millions in some cases? Not really.
People are flabbergasted he has the stomach to do anything about it.
CEOs figured that Feinberg would be like every other paymaster they ever had. That he would rub his chin, act concerned about doing the right thing and then wire the gross domestic product of Nicaragua into their bank accounts.
Strange to say, however, he seems to be cracking down.
On Thursday, the Treasury Department announced that he'll chop cash salaries by 90 percent, partly substituting long-term stock grants in many cases.
Overall, it looks as if he'll cut pay in half for 175 top employees at Bank of America, Citigroup, General Motors and other firms that got taxpayer bailouts. At American International Group's financial-products unit, he'll cap pay at $200,000, the Wall Street Journal reported. That's below Wall Street's poverty level.
The whacks "were clearly much worse than what had been anticipated," an anonymous exec at one of the companies told the Journal.
OK, bigwigs at these companies will still get big packages. Pay is descending from stratospheric levels to K2 or Denali. The $5 million Feinberg is likely to award Citigroup boss Vikram Pandit is still a lot more than the $0.00 million Pandit would have gotten if the American people hadn't rescued his stupid company.
Give a casting call to the guy who talked to the Journal. To counteract complaints that Feinberg is going too easy, these folks will act aggrieved even if he just cancels a couple golf-club memberships.
Even so, he's slicing pay by more than analysts expected. And that brings shame to boardrooms not just in New York but in Baltimore, Boston, Chicago and every town where flunky directors won't stand up to the CEO and his agent.
Folks, Feinberg just showed you how to do your job.
He's working for the interests of the shareholders he represents - in this case, U.S. taxpayers. His first concern isn't maintaining a lucrative board seat by avoiding controversy. He's focused on making sure shareholders don't get looted, not on the CEO's donation to his pet charity.
He grasps a simple concept understood by every employee up to the level of senior vice presidents and their bosses, among whom it's as incomprehensible as particle physics: When you mess up, you don't get rewarded.
Feinberg rejects arguments that the job market demands obscene pay for Wall Street hotshots and that eight-figure packages are crucial to retain talent. To stars who threaten to walk, he says: The elevator's down the hall, just past the cigar humidor.
No doubt some will leave. But as a good shareholder proxy, Feinberg probably knows that such folks may represent more of a liability than an asset. Many of these people make money on financial-market whiplash, not on the long-term health of their companies.
Heck, they cause the whiplash. If they want to leave AIG and go wreck some hedge fund, Feinberg ought to personally clean out their desks and carry their boxes down to the limo.
By slashing cash payments and giving people stock they must keep for years, he puts executives in the same harness with shareholders. This is what corporate boards claim to do but don't. Instead, they pay millions to consultants who come up with specious arguments to give CEOs what they want.
Watch and learn, corporate directors. Feinberg shows what independence looks like. He says "no." He causes friction. He hacks off the people whose pay he sets. Spend more time doing that and less time partying with the CEO.
By doing the right thing, by showing some guts, by putting up with what must be ridiculous lobbying and pressure, Feinberg is the guy who deserves the big payday.
Quote from: MadBurgerMaker on October 22, 2009, 03:37:02 PM
Aren't pretty much all the people still working there people who didn't really have much to do with the whole...fucking up...thing (at least at the higher levels)?
Not at Chrysler and GM; Ron Gettelfinger is still president of the United Auto Workers.
Quote from: MadBurgerMaker on October 22, 2009, 03:37:02 PM
Aren't pretty much all the people still working there people who didn't really have much to do with the whole...fucking up...thing (at least at the higher levels)? As in...competent people? I, obviously, don't really know much about this stuff, but what's keeping some other company from coming along and offering them a million bucks a year, them taking the offer, and leaving AIG with the relative scrubs? Some sort of contracts or something?
The contracts would likely be voided by the compensation cuts. AIG going out of the financial products business because all their "competent" people get hired away would be a good thing. Then you just fire the rest and shut the unit down.
AIG should have been allowed to go bust to begin with. It may have been more painful in the short term, but less over the long haul.
I think it would be cool if he, instead, put them on proscription lists.
Quote from: Faeelin on October 22, 2009, 04:41:27 PM
Quote from: MadBurgerMaker on October 22, 2009, 03:37:02 PM
Aren't pretty much all the people still working there people who didn't really have much to do with the whole...fucking up...thing (at least at the higher levels)? As in...competent people? I, obviously, don't really know much about this stuff, but what's keeping some other company from coming along and offering them a million bucks a year, them taking the offer, and leaving AIG with the relative scrubs? Some sort of contracts or something?
I'm not sure there are a bunch of people looking to hire the successful executives of AIG.
AIG's core operations weren't the reason it imploded. There were insurance industry publications in the early part of this year that highlighted the number of departures at key insurance businesses at AIG. Basically when AIG went down a year ago, the executives did split for greener pastures. I posted a partial listing on the old forum when some people were skeptical that AIG executives would have other job opportunities in such a bad economy.
Quote from: CountDeMoney on October 23, 2009, 06:11:06 AM
QuoteCorporate America gets a lesson from the pay czar
So how long have you been a socialist, Seedy?
I guess limiting pay and bonuses for bailed out companies hits us emotionally as the right thing to do. But the non-bailed out corps won't have such restraints, will be paying their execs what that market pays out. So I'd have to think that at least one unintended affect of limiting AIG or others bailed out, will be that their execs leave, making it all the harder for the bailed out corps to make money and pay back the taxpayer investment in them.
I'm also wary of limiting pay, a pay Czar and all, because I feel that some of these politicians want to go further. Why not limit pay for defense contractors, or elsewhere? I'm sure there are many places where this could eventually be extended out to. Not sure I want the govt to be in the pay Czar business.
Quote from: dps link=topic=2624.msg130470No, every other firm would have the possibility of matching the pay that might be offered to one of their executives by another firm.
No, they don't. Other firms going down the sink - even if it was just one division's catastrophic results sending them down - would not be underwritten by taxpayers to the extent that an overall corporate failure sees no real hurting in the pocket.
For example, the many small and medium enterprises that have nothing to do with either the housing bubble or financial crisis have to face the reality that declining orders and tighter lending will mean pay freezes and cuts, even for executives.
A lot of finance types tell us that were they not able to offer massive bonuses and generous renumeration, they would not hold on to their best staff. Well, so what? From my anecdotal evidence at least, even after the pruning of excess pay in the last two years the average banking salary is well above any other sector I can think of in the UK, at least.
I don't see why having talent spread to other sectors of the economy is such a bad thing. I was always taught to believe that was the essence of capitalism: the resources and talent goes to the most profitable use.
Really, I do not see why saving the overall functioning of the banking system has to go hand in hand with moral hazard.
Quote from: KRonn on October 23, 2009, 09:18:45 AM
Why not limit pay for defense contractors,
Good question.
Quote from: alfred russel on October 23, 2009, 08:57:31 AM
Quote from: Faeelin on October 22, 2009, 04:41:27 PM
Quote from: MadBurgerMaker on October 22, 2009, 03:37:02 PM
Aren't pretty much all the people still working there people who didn't really have much to do with the whole...fucking up...thing (at least at the higher levels)? As in...competent people? I, obviously, don't really know much about this stuff, but what's keeping some other company from coming along and offering them a million bucks a year, them taking the offer, and leaving AIG with the relative scrubs? Some sort of contracts or something?
I'm not sure there are a bunch of people looking to hire the successful executives of AIG.
AIG's core operations weren't the reason it imploded. There were insurance industry publications in the early part of this year that highlighted the number of departures at key insurance businesses at AIG. Basically when AIG went down a year ago, the executives did split for greener pastures. I posted a partial listing on the old forum when some people were skeptical that AIG executives would have other job opportunities in such a bad economy.
The question is - would these people in core operations get their bonuses if AIG imploded because of its insurance operations? If the answer is "no" then they shouldn't get their bonuses now.
Quote from: Martinus on October 23, 2009, 09:37:17 AM
The question is - would these people in core operations get their bonuses if AIG imploded because of its insurance operations? If the answer is "no" then they shouldn't get their bonuses now.
I have no idea what you are trying to say.
Quote from: Peter Wiggin on October 23, 2009, 09:24:55 AM
Quote from: KRonn on October 23, 2009, 09:18:45 AM
Why not limit pay for defense contractors,
Good question.
I'm also wary of limiting pay, a pay Czar and all, because I feel that some of these politicians want to go further. Why not limit pay for defense contractors, or elsewhere? I'm sure there are many places where this could eventually be extended out to. Not sure I want the govt to be in the pay Czar business. ;)
Quote from: KRonn on October 23, 2009, 09:18:45 AM
Why not limit pay for defense contractors, or elsewhere?
That would be an excellent idea, had it not already been done. The contracts specify who can charge to a contract and at what rate.
Quote from: Warspite on October 23, 2009, 09:23:35 AM
I don't see why having talent spread to other sectors of the economy is such a bad thing. I was always taught to believe that was the essence of capitalism: the resources and talent goes to the most profitable use.
The essence of capitalism is that the *price mechanism* directs resources and talent to the most profitable use. This is not the price mechanism, it's government fiat. The counterargument to that is that the executive compensation system is broken, and government fiat more closely reflects the market value of executives than the existing system. But the counterargument to *that* is that the present pay caps are being driven more by populist rage than by any attempt to ascertain the intrinsic value of said executives. That can be seen in the article Seedy posted. The salary of the GM CEO is not being cut because he fucked up; the dude was hand-picked by Obama back only in the spring when Waggoner got thrown to the populist wolves. What fucked up decisions has GM made since the spring?
Something that might or might not be relevant to this discussion: the average compensation of *all* employees at Goldman is 700K.
Quote from: grumbler on October 23, 2009, 10:07:23 AM
Quote from: KRonn on October 23, 2009, 09:18:45 AM
Why not limit pay for defense contractors, or elsewhere?
That would be an excellent idea, had it not already been done. The contracts specify who can charge to a contract and at what rate.
I'm sure there are cost controls there and other regulations, good. But does the government control what pay can be for contractor employees or executives? Which ever the case, I'm probably not so concerned with that on defense contracts. But if it causes contractors to lose good people then it could be an issue.
My over all concern is how, or will, this pay limit idea can be pushed out in other ways once it gets started. Right now it's for corps that were bailed out, which I would have been for before, but I've become more cynical to such efforts. Partly due to what seemed the Kangaroo court, the populism, of some Congressional hearings on company failings.
I'm just trying to look at this in a bigger picture, beyond the idea of anger with the corps that were bailed out, and going after their bonuses, and the ramifications of expanding pay limiting ideas and attitudes elsewhere.
Normally, I would be rather against the government telling companies what they can pay anyone, but fuck 'em, they decided to crawl into bed with the Feds to save their ass, well, what did they expect was going to happen? Of course the government is going to then start telling them what to do, who they can fire, what cars to make, blah, blah, blah.
Quote from: Berkut on October 23, 2009, 11:59:30 AM
Normally, I would be rather against the government telling companies what they can pay anyone, but fuck 'em, they decided to crawl into bed with the Feds to save their ass, well, what did they expect was going to happen? Of course the government is going to then start telling them what to do, who they can fire, what cars to make, blah, blah, blah.
I wish would would just kill them off now, rather than waiting.
Quote from: Admiral Yi on October 23, 2009, 10:12:40 AM
The essence of capitalism is that the *price mechanism* directs resources and talent to the most profitable use. This is not the price mechanism, it's government fiat. The counterargument to that is that the executive compensation system is broken, and government fiat more closely reflects the market value of executives than the existing system. But the counterargument to *that* is that the present pay caps are being driven more by populist rage than by any attempt to ascertain the intrinsic value of said executives. That can be seen in the article Seedy posted. The salary of the GM CEO is not being cut because he fucked up; the dude was hand-picked by Obama back only in the spring when Waggoner got thrown to the populist wolves. What fucked up decisions has GM made since the spring?
Something that migght be relevant to this discussion: these compensation decisions are not being made by government fiat (for they do not affect all industries, even of a given type) but by direction of the overwhelmingly major shareholder in these companies.
The market has spoken, and the value of the jobs that these executives do in these positions is zero; they should not exist. I, like many others, find it galling that our tax dollars were not just wasted buying companies of dubious value and distorting the market, but also in paying people to spend the time to decide what the executives of those companies should be paid. However, that horse has left the barn, and so all we have left is making sure that the maximum amount of "profit" from these companies is returned to the unwilling shareholders (the tax paying public) rather than to executives who are involved in this voluntarily.
Quote from: dps on October 22, 2009, 06:42:39 PM
No, every other firm would have the possibility of matching the pay that might be offered to one of their executives by another firm.
Let's see...
Were would these companies be today without the government's financial help?
They would be bankrupt, or their assets bought by another firm.
In case #1, these excutives who never receive their bonus, or any increase in pay.
In case #2, these excutives who never receive their bonus, or any increase in pay.
When things go well, regardless of the division, nearly everyone gets better wages.
When things go bad, regardless of the division, nearly everyone gets a pay cut.
Imho, it should be made clear in advance that any compay receiving bailout money at any point in time will have to face strict regulations by the government concerning their daily operations including but not limited to the wages of higher executives, and it will remain like this for a period of 5 years after they finish paying back the money they owe.
So the companies have a clear chance: they either go bankrupt, or they take the government money with the rules that come with it.
In a really free market, there would have been no bailout. So they really aren't losing anything. They made a choice, they live with it. Simple.
Quote from: grumbler on October 23, 2009, 08:36:52 AM
AIG should have been allowed to go bust to begin with. It may have been more painful in the short term, but less over the long haul.
I'm not entirely sure about that.
Quote from: viper37 on October 23, 2009, 12:15:14 PM
Quote from: dps on October 22, 2009, 06:42:39 PM
No, every other firm would have the possibility of matching the pay that might be offered to one of their executives by another firm.
Let's see...
Were would these companies be today without the government's financial help?
They would be bankrupt, or their assets bought by another firm.
In case #1, these excutives who never receive their bonus, or any increase in pay.
In case #2, these excutives who never receive their bonus, or any increase in pay.
When things go well, regardless of the division, nearly everyone gets better wages.
When things go bad, regardless of the division, nearly everyone gets a pay cut.
Imho, it should be made clear in advance that any compay receiving bailout money at any point in time will have to face strict regulations by the government concerning their daily operations including but not limited to the wages of higher executives, and it will remain like this for a period of 5 years after they finish paying back the money they owe.
So the companies have a clear chance: they either go bankrupt, or they take the government money with the rules that come with it.
In a really free market, there would have been no bailout. So they really aren't losing anything. They made a choice, they live with it. Simple.
I disagree with that.
If I'm an executive in charge of a profitable division of AIG, and AIG goes bust in a spectacular manner without government intervention, there are two reasons I can expect to still get paid: 1) I'm an employee, and going to have priority over a lot of groups in a bankruptcy proceeding, and 2) My division probably has more value to creditors through a sale rather than a liquidation. If so, it is in the interest of creditors to keep paying key employees like me to maintain the value of the division.
Also, what you are saying may be a reason to void compensation agreements at the time of a bailout, but not when my pay is due. If I've done work after the bailout, the government is simply stiffing me for services I've provided. (this goes back to the AIG situation in March).
Ultimately--this is fairly academic. I don't think anyone still at these companies didn't know what the gig was months ago, and those who could found new places to work.
Quote from: Admiral Yi on October 23, 2009, 10:12:40 AM
Something that might or might not be relevant to this discussion: the average compensation of *all* employees at Goldman is 700K.
Yes, Goldman-Sax, as the secondary recipient of something like a trillion dollars of US bailout money (in the form of repaid loads from the bailed-out companies) is enjoying record profits. It gambled heavily that the US government would not let these institutions fail, and struck the jackpot.
Quote from: alfred russel on October 23, 2009, 09:51:26 AM
Quote from: Martinus on October 23, 2009, 09:37:17 AM
The question is - would these people in core operations get their bonuses if AIG imploded because of its insurance operations? If the answer is "no" then they shouldn't get their bonuses now.
I have no idea what you are trying to say.
Well I am saying that whether they should get bonuses or not should not be solely the question of whether they are responsible for the mess, but whether they would have got the bonuses absent of the bail out.
If the entire group would go bust and pay no bonuses if the government didn't bail it out with the tax payer money, then I don't see why people in the company should get a bonus paid out of the same tax payer money effectively, even if they themselves are not at blame.
I mean, many companies and firms (even those not going bust or getting tax payer money) have suspended bonus pay outs to all employees for the difficult times. It seems only fair that a company that exists only because the tax payers footed the bill did the same.
Quote from: Admiral Yi on October 23, 2009, 10:12:40 AM
Quote from: Warspite on October 23, 2009, 09:23:35 AM
I don't see why having talent spread to other sectors of the economy is such a bad thing. I was always taught to believe that was the essence of capitalism: the resources and talent goes to the most profitable use.
The essence of capitalism is that the *price mechanism* directs resources and talent to the most profitable use. This is not the price mechanism, it's government fiat. The counterargument to that is that the executive compensation system is broken, and government fiat more closely reflects the market value of executives than the existing system. But the counterargument to *that* is that the present pay caps are being driven more by populist rage than by any attempt to ascertain the intrinsic value of said executives. That can be seen in the article Seedy posted. The salary of the GM CEO is not being cut because he fucked up; the dude was hand-picked by Obama back only in the spring when Waggoner got thrown to the populist wolves. What fucked up decisions has GM made since the spring?
Something that might or might not be relevant to this discussion: the average compensation of *all* employees at Goldman is 700K.
Man, where have you been for the last 12 months? The entire bail out business and saving companies that are "too big to fail" is socialism, pure and simple. There is no free market capitalism left in the finance markets at the moment.
Stopping now to complain about this not being a free market response is like stopping to complain about a slightly-too-revealing hemline in the middle of a full-blown orgy.
Quote from: garbon on October 23, 2009, 12:01:34 PM
Quote from: Berkut on October 23, 2009, 11:59:30 AM
Normally, I would be rather against the government telling companies what they can pay anyone, but fuck 'em, they decided to crawl into bed with the Feds to save their ass, well, what did they expect was going to happen? Of course the government is going to then start telling them what to do, who they can fire, what cars to make, blah, blah, blah.
I wish would would just kill them off now, rather than waiting.
I just with the DoJ drew up the proscription lists of all the bankers for the murder or robbery of whom people would not be prosecuted. That would be a nice republican solution that would not distort the market, imo. :)
Quote from: alfred russel on October 23, 2009, 12:26:53 PM
I disagree with that.
If I'm an executive in charge of a profitable division of AIG, and AIG goes bust in a spectacular manner without government intervention, there are two reasons I can expect to still get paid: 1) I'm an employee, and going to have priority over a lot of groups in a bankruptcy proceeding, and 2) My division probably has more value to creditors through a sale rather than a liquidation. If so, it is in the interest of creditors to keep paying key employees like me to maintain the value of the division.
Also, what you are saying may be a reason to void compensation agreements at the time of a bailout, but not when my pay is due. If I've done work after the bailout, the government is simply stiffing me for services I've provided. (this goes back to the AIG situation in March).
Ultimately--this is fairly academic. I don't think anyone still at these companies didn't know what the gig was months ago, and those who could found new places to work.
CEOs are not ordinary employees. I may be wrong, but I'd assume that their bonuses are also based on the overall performance of the company, and probably do not apply when it goes bust.
Also, wouldn't they be at least partially tied to some sort of share options? Again, such options would be worth nothing if the company went bust.
Quote from: Martinus on October 23, 2009, 12:56:42 PM
Quote from: alfred russel on October 23, 2009, 09:51:26 AM
Quote from: Martinus on October 23, 2009, 09:37:17 AM
The question is - would these people in core operations get their bonuses if AIG imploded because of its insurance operations? If the answer is "no" then they shouldn't get their bonuses now.
I have no idea what you are trying to say.
Well I am saying that whether they should get bonuses or not should not be solely the question of whether they are responsible for the mess, but whether they would have got the bonuses absent of the bail out.
If the entire group would go bust and pay no bonuses if the government didn't bail it out with the tax payer money, then I don't see why people in the company should get a bonus paid out of the same tax payer money effectively, even if they themselves are not at blame.
I mean, many companies and firms (even those not going bust or getting tax payer money) have suspended bonus pay outs to all employees for the difficult times. It seems only fair that a company that exists only because the tax payers footed the bill did the same.
Do you extend that line of reasoning to vendors and other counterparties, or is it limited to employees?
Quote from: Martinus on October 23, 2009, 01:07:47 PM
CEOs are not ordinary employees. I may be wrong, but I'd assume that their bonuses are also based on the overall performance of the company, and probably do not apply when it goes bust.
Also, wouldn't they be at least partially tied to some sort of share options? Again, such options would be worth nothing if the company went bust.
We aren't talking about just CEOs.
Quote from: Martinus on October 23, 2009, 12:59:12 PM
Man, where have you been for the last 12 months? The entire bail out business and saving companies that are "too big to fail" is socialism, pure and simple. There is no free market capitalism left in the finance markets at the moment.
Stopping now to complain about this not being a free market response is like stopping to complain about a slightly-too-revealing hemline in the middle of a full-blown orgy.
Your comment should have been directed at Warspite, not me.
Quote from: alfred russel on October 23, 2009, 12:26:53 PM
I disagree with that.
If I'm an executive in charge of a profitable division of AIG, and AIG goes bust in a spectacular manner without government intervention, there are two reasons I can expect to still get paid: 1) I'm an employee, and going to have priority over a lot of groups in a bankruptcy proceeding,
Only base salary as of yet unpaid. Meaning you didn't get your paycheck last week and today the company is bankrupt. You'll be part of the creditors, and will have to vote on a proposal (20-50% of what is owed to you).
Quote
and 2) My division probably has more value to creditors through a sale rather than a liquidation. If so, it is in the interest of creditors to keep paying key employees like me to maintain the value of the division.
They may not see it that way. In fact, if they think you're good, they'll offer you a job elsewhere while someone else cleans the shit there. You are an asset, they want you. Why wait 1 year to recruit you if they can right now?
If they don't want you, you're stuck with the whole process or you are laid off immediatly.
Quote
Also, what you are saying may be a reason to void compensation agreements at the time of a bailout, but not when my pay is due. If I've done work after the bailout, the government is simply stiffing me for services I've provided. (this goes back to the AIG situation in March).
Nope. They received bailout instead of going bankrupt. Sure you did not vote on that. But you probably did not vote on the things that made your company going bankrupt.
There must be a price for failure, otherwise no one learns.
Quote from: viper37 on October 23, 2009, 01:23:24 PM
There must be a price for failure, otherwise no one learns Goldman-Sachs makes a fortune.
Fixed - though it is to be noted that GS is paying these bonuses out of its own profits, not bailout money (all of which it has already returned).
Quote
GM has already reduced Chief Executive Officer Fritz Henderson's 2009 pay by 27% from last year, to $1.26 million.
Chief Financial Officer Ray Young is to receive $720,000, or 15% less than in 2008.
The deepest cuts will come at the financial products division of AIG, according to the New York Times...No executive in that unit will receive more than $200,000 in total compensation, according to a person familiar with the plan. That's a stunning comedown for people who regularly made at least 50 times that.
We can quibble all we want about justice and fairness, but the pay amounts from the article are ridiculous. There are a lot of small cap companies with CEO pay over $1.26 million and CFO pay over $720k.
Maybe you can get some good people who want to make a mark on American industry at GM, but who are you going to get with a $200k annual cap on compensation at the financial products division of AIG? There are first years at investment banks straight out of MBA programs that make more than that.
Quote from: alfred russel on October 23, 2009, 01:39:06 PM
Maybe you can get some good people who want to make a mark on American industry at GM, but who are you going to get with a $200k annual cap on compensation at the financial products division of AIG? There are first years at investment banks straight out of MBA programs that make more than that.
I'm willing to bet you can find a lot of people willing to work for $200k.
Quote from: ulmont on October 23, 2009, 01:53:52 PM
Quote from: alfred russel on October 23, 2009, 01:39:06 PM
Maybe you can get some good people who want to make a mark on American industry at GM, but who are you going to get with a $200k annual cap on compensation at the financial products division of AIG? There are first years at investment banks straight out of MBA programs that make more than that.
I'm willing to bet you can find a lot of people willing to work for $200k.
As would I--but those people aren't going to be qualified to run (or unwind) the financial products division of AIG.
Quote from: alfred russel on October 23, 2009, 02:05:09 PMAs would I--but those people aren't going to be qualified to run (or unwind) the financial products division of AIG.
The guys that ran it for "at least 50 times that" were not successful (and thus apparently not qualified) either so there does not seem to be an obvious relationship between high renumeration and qualification or success.
Quote from: Zanza on October 23, 2009, 02:10:44 PM
Quote from: alfred russel on October 23, 2009, 02:05:09 PMAs would I--but those people aren't going to be qualified to run (or unwind) the financial products division of AIG.
The guys that ran it for "at least 50 times that" were not successful (and thus apparently not qualified) either so there does not seem to be an obvious relationship between high renumeration and qualification or success.
That is like arguing that since planes crash when their are qualified pilots flying them due to their errors, we should just ahve some schmuck fly the planes, since clearly being qualified doesn't matter anyway.
Quote from: alfred russel on October 23, 2009, 02:05:09 PM
As would I--but those people aren't going to be qualified to run (or unwind) the financial products division of AIG.
Considering that Supreme Court Justices only get paid $208,100, I'm going to disagree with you here.
Quote from: Berkut on October 23, 2009, 02:16:45 PMThat is like arguing that since planes crash when their are qualified pilots flying them due to their errors, we should just ahve some schmuck fly the planes, since clearly being qualified doesn't matter anyway.
No.
My point was that renumeration and qualification are not necessarily related. Not that qualification does not matter.
Following from that, I don't think that Alfred's point that you would not find someone qualified for $200k is correct.
Quote from: ulmont on October 23, 2009, 02:24:13 PM
Quote from: alfred russel on October 23, 2009, 02:05:09 PM
As would I--but those people aren't going to be qualified to run (or unwind) the financial products division of AIG.
Considering that Supreme Court Justices only get paid $208,100, I'm going to disagree with you here.
Great point. If I ever own a sports franchise, I'm going to base everyone's pay on USSC justice salaries. If it is good enough to get talent for the USSC, then surely it is good enough for a sports team! I could get Derek Jeter to play shortstop--or even Ruth Bader Ginsberg!
Quote from: Zanza on October 23, 2009, 02:30:14 PM
Quote from: Berkut on October 23, 2009, 02:16:45 PMThat is like arguing that since planes crash when their are qualified pilots flying them due to their errors, we should just ahve some schmuck fly the planes, since clearly being qualified doesn't matter anyway.
No.
My point was that renumeration and qualification are not necessarily related. Not that qualification does not matter.
Following from that, I don't think that Alfred's point that you would not find someone qualified for $200k is correct.
...then following from that point, I don't think there is any reason to imagine that we cannot find "qualified" jumbo jet pilots for $6/hr.
Quote from: alfred russel on October 23, 2009, 01:39:06 PM
There are first years at investment banks straight out of MBA programs that make more than that.
Which investment banks are those? Lehman Brothers? Morgan Stanley?
Quote from: grumbler on October 23, 2009, 02:33:34 PM
Quote from: alfred russel on October 23, 2009, 01:39:06 PM
There are first years at investment banks straight out of MBA programs that make more than that.
Which investment banks are those? Lehman Brothers? Morgan Stanley?
Goldman Sachs.
Quote from: alfred russel on October 23, 2009, 02:31:37 PM
Quote from: ulmont on October 23, 2009, 02:24:13 PM
Quote from: alfred russel on October 23, 2009, 02:05:09 PM
As would I--but those people aren't going to be qualified to run (or unwind) the financial products division of AIG.
Considering that Supreme Court Justices only get paid $208,100, I'm going to disagree with you here.
Great point. If I ever own a sports franchise, I'm going to base everyone's pay on USSC justice salaries. If it is good enough to get talent for the USSC, then surely it is good enough for a sports team! I could get Derek Jeter to play shortstop--or even Ruth Bader Ginsberg!
I think his point is that you could find someone for $200k, and since we know that there are lots of teams out there who fail to win the World Series (in act, MOST of them fail), and those teams have lots of people making more than $200k/year, then clearly it isn't really that important to pay them such lofty salaries. Obviously.
Quote from: Berkut on October 23, 2009, 02:16:45 PM
That is like arguing that since planes crash when their are qualified pilots flying them due to their errors, we should just ahve some schmuck fly the planes, since clearly being qualified doesn't matter anyway.
This is like arguing that since the schmuck is going to crash the plane anyway, he should be paid $2 million a year, since total compensation should be divorced from success.
Quote from: alfred russel on October 23, 2009, 02:31:37 PMGreat point. If I ever own a sports franchise, I'm going to base everyone's pay on USSC justice salaries. If it is good enough to get talent for the USSC, then surely it is good enough for a sports team! I could get Derek Jeter to play shortstop--or even Ruth Bader Ginsberg!
So you think we should have a salary cap for investment bankers? :P
Quote from: grumbler on October 23, 2009, 02:35:26 PM
Quote from: Berkut on October 23, 2009, 02:16:45 PM
That is like arguing that since planes crash when their are qualified pilots flying them due to their errors, we should just ahve some schmuck fly the planes, since clearly being qualified doesn't matter anyway.
This is like arguing that since the schmuck is going to crash the plane anyway, he should be paid $2 million a year, since total compensation should be divorced from success.
Sounds good to me! We should work for the government.
Quote from: alfred russel on October 23, 2009, 02:31:37 PM
Great point. If I ever own a sports franchise, I'm going to base everyone's pay on USSC justice salaries.
In the sports context, where each game is zero-sum, it may make sense to pay 100 times more to get someone twice as good as average.
In almost every other context, you're just throwing your money away after you reach the "competent" zone.
Quote from: alfred russel on October 23, 2009, 02:34:02 PM
Goldman Sachs.
Goldman Sachs is not an investment bank. It is bank holding company (as of September last year). They still do some investment banking, but I don't think there are any indie investment banks left.
Quote from: ulmont on October 23, 2009, 02:41:49 PM
Quote from: alfred russel on October 23, 2009, 02:31:37 PM
Great point. If I ever own a sports franchise, I'm going to base everyone's pay on USSC justice salaries.
In the sports context, where each game is zero-sum, it may make sense to pay 100 times more to get someone twice as good as average.
In almost every other context, you're just throwing your money away after you reach the "competent" zone.
I'll settle for 'mediocre'.
Quote from: ulmont on October 23, 2009, 02:41:49 PM
Quote from: alfred russel on October 23, 2009, 02:31:37 PM
Great point. If I ever own a sports franchise, I'm going to base everyone's pay on USSC justice salaries.
In the sports context, where each game is zero-sum, it may make sense to pay 100 times more to get someone twice as good as average.
In almost every other context, you're just throwing your money away after you reach the "competent" zone.
I don't think you can meaningfully talk about a banker being "twice as good as average," so i agree with you. Corporate compensation is so messed up not because of market pressures, but because of the fucked-up way senior compensation is handled.
Quote from: grumbler on October 23, 2009, 02:42:17 PM
Quote from: alfred russel on October 23, 2009, 02:34:02 PM
Goldman Sachs.
Goldman Sachs is not an investment bank. It is bank holding company (as of September last year). They still do some investment banking, but I don't think there are any indie investment banks left.
There are a lot of indie investment banks left, and Goldman Sachs does plenty of investment banking.
Quote from: ulmont on October 23, 2009, 02:41:49 PM
Quote from: alfred russel on October 23, 2009, 02:31:37 PM
Great point. If I ever own a sports franchise, I'm going to base everyone's pay on USSC justice salaries.
In the sports context, where each game is zero-sum, it may make sense to pay 100 times more to get someone twice as good as average.
In almost every other context, you're just throwing your money away after you reach the "competent" zone.
Okay, but how do you get to the competent zone? Who are you going to get to head up accounting? An accountant with the organizational and technical skills to lead a group could probably be a partner at a large firm--where he or she would command 7 figures. Anyone with the management experience and skill you would expect could become a partner in a consulting firm and make even more. Who is going to competently manage the IT system? Are you going to compete with investment banks, hedge funds, and private equity groups for any employees, or just take the leftovers?
Quote from: alfred russel on October 23, 2009, 03:00:05 PM
Are you going to compete with investment banks, hedge funds, and private equity groups for any employees, or just take the leftovers?
I'll happily take the leftovers; remove the striving for the absolute top dog salaries, and I'm sure you weed out a lot of the douchebags.
Quote from: alfred russel on October 23, 2009, 03:00:05 PMWho is going to competently manage the IT system?
This, I am 100% sure I can get done for less than 200k.
Quote from: ulmont on October 23, 2009, 03:09:03 PM
Quote from: alfred russel on October 23, 2009, 03:00:05 PM
Are you going to compete with investment banks, hedge funds, and private equity groups for any employees, or just take the leftovers?
I'll happily take the leftovers; remove the striving for the absolute top dog salaries, and I'm sure you weed out a lot of the douchebags.
Quote from: alfred russel on October 23, 2009, 03:00:05 PMWho is going to competently manage the IT system?
This, I am 100% sure I can get done for less than 200k.
I don't think you have priced people with heavy duty SAP experience recently.
Quote from: ulmont on October 23, 2009, 03:09:03 PM
I'll happily take the leftovers; remove the striving for the absolute top dog salaries, and I'm sure you weed out a lot of the douchebags.
Presumably those leftovers wanted top dog salaries, as well, but they failed to make the grade.
Quote from: ulmont on October 23, 2009, 03:09:03 PM
This, I am 100% sure I can get done for less than 200k.
For a company the size of AIG? Not a chance.
Quote from: alfred russel on October 23, 2009, 12:26:53 PMI don't think anyone still at these companies didn't know what the gig was months ago, and those who could found new places to work.
Looks like they have been.
Quote from: WaPo
Top employees leave financial firms ahead of pay cuts
Grass is greener where bonuses are sky-high
NEW YORK -- Even before the Obama administration formally tightened executive compensation at bailed-out companies, the prospect of pay cuts had led some top employees to depart.
The administration had tasked Kenneth Feinberg, the Treasury Department's special master on compensation, to evaluate the pay packages of 25 of the most highly compensated executives at each of seven firms receiving exceptionally large amounts of taxpayer assistance.
But Thursday, he ruled only on slightly more than three quarters of the pay packages that were to be under his purview. The balance reflected executives who have left since he began his work in June or will be gone by the end of the year.
Many executives were driven away by the uncertainty of working for companies closely overseen by Washington, opting instead for firms not under the microscope, including competitors that have already returned the bailout funds to the government, according to executives and supervisors at the companies.
"There's no question people have left because of uncertainty of our ability to pay," said an executive at one of the affected firms. "It's a highly competitive market out there."
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At Bank of America, for instance, only 14 of the 25 highly paid executives remained by the time Feinberg announced his decision. Under his plan, compensation for the most highly paid employees at the bank would be a maximum of $9.9 million. The bank had sought permission to pay as much as $21 million, according to Treasury Department documents.
At American International Group, only 13 people of the top 25 were still on hand for Feinberg's decision.
Feinberg did not detail how he plans to tackle the politically sensitive issue of nearly $200 million in bonuses due in March to employees at AIG Financial Products, the unit whose complex derivatives contracts led to the collapse of AIG last fall. Feinberg has urged the company to find a way to scale back the bonuses in hopes of preventing another round of public outrage.
In his written ruling Thursday, Feinberg noted that the firm had played a role "in the events necessitating taxpayer intervention," and concluded that AIG Financial Products employees should be paid only what their base salaries were on Dec. 31, 2008. In addition, he said that he continues to urge company officials to recoup the bonus payments that some Financial Products employees pledged to repay earlier this spring but did not. Until that issue is resolved, he wrote, employees should receive no pay in addition to their base salaries.
That news drew scorn Thursday from employees at AIG Financial Products who said they had repeatedly offered to rework their pay arrangements but that Feinberg was unwilling to work with them.
"He has zero credibility with FP employees at this point," said one employee, who was not authorized to speak on the record. "It's a very demoralized workforce."
Several of the companies said they had already been making changes in their compensation plans to better link executive pay to performance and that their compensation committees had worked closely with Feinberg's team to come up with a final plan reflecting that principle.
"We've been going down that road," said Bob Stickler, a Bank of America spokesman. "This is really more of the same." But he also said that the ruling "does go pretty far and there are competitive issues we're worried about."
On Wall Street, reaction to Feinberg's ruling was swift, with some executives arguing that it will further handicap the most troubled firms by driving away top employees while making companies unwilling to promote rising stars for fear of bringing them to Feinberg's attention.
But Nomi Prins, a former Goldman Sachs employee, said Feinberg's rulings are unlikely to change the culture of bonuses on Wall Street.
"I don't think Wall Street is afraid of this at all," said Prins, author of "It Takes a Pillage: Behind the Bailouts, Bonuses, and Backroom Deals from Washington to Wall Street."
"It's going to affect a small portion of a small portion of the industry. It won't have a lasting impact."
Quote from: MadImmortalMan on October 23, 2009, 03:29:20 PM
Quote from: ulmont on October 23, 2009, 03:09:03 PM
This, I am 100% sure I can get done for less than 200k.
For a company the size of AIG? Not a chance.
Per employee, MiM.
Quote from: garbon on October 23, 2009, 03:27:38 PM
Quote from: ulmont on October 23, 2009, 03:09:03 PM
I'll happily take the leftovers; remove the striving for the absolute top dog salaries, and I'm sure you weed out a lot of the douchebags.
Presumably those leftovers wanted top dog salaries, as well, but they failed to make the grade.
Not necessarily. Even if assumed, though, there are a lot of reasons one can not be hired by someone paying the absolute top dog salary and still be competent.
Thinking about it, 200k is too low a limit. But I still don't think you need to pay the original "at least 50 times that" to get people that are qualified to run the company.
Anyway, I think in this discussion we confuse two completely different groups of people: the CEO (who are only several, maybe 20 for a big company like AIG) and the rank and file. Some arguments are true for one group but not for the other, and others vice-versa.
For example, in this work market climate, the rank and file is unlikely to easily find a better paid job for the competitor. On the other hand, the CEOs would be unlikely to be protected in case of a company's bankruptcy. And so on.
There's only one CEO per company.
Quote from: MadImmortalMan on October 23, 2009, 05:46:07 PM
There's only one CEO per company.
Ok then whatever these 14 out of 26 (or something) people that changed jobs are called, as per your article.
I'm with those who think that this "highly competitive hiring market" on Wall Street is completely fictitious. I am also one of those who is convinced that no employee could possibly be worth $1 million per year. There may be specialists worth that kind of pay rate on a short-term basis, but no one is worth that on a day-to-day basis.
The reason top execs get multi-million-dollar-per-year compensation packages is because they can, not because they are worth it. And the best top execs are not motivated by money.
Isn't that how people with less money generally feel?
Quote from: garbon on October 23, 2009, 09:49:17 PM
Isn't that how people with less money generally feel?
Generally.
Quote from: Warspite on October 23, 2009, 09:23:35 AM
Quote from: dps link=topic=2624.msg130470No, every other firm would have the possibility of matching the pay that might be offered to one of their executives by another firm.
No, they don't. Other firms going down the sink - even if it was just one division's catastrophic results sending them down - would not be underwritten by taxpayers to the extent that an overall corporate failure sees no real hurting in the pocket.
For example, the many small and medium enterprises that have nothing to do with either the housing bubble or financial crisis have to face the reality that declining orders and tighter lending will mean pay freezes and cuts, even for executives.
A lot of finance types tell us that were they not able to offer massive bonuses and generous renumeration, they would not hold on to their best staff. Well, so what? From my anecdotal evidence at least, even after the pruning of excess pay in the last two years the average banking salary is well above any other sector I can think of in the UK, at least.
I don't see why having talent spread to other sectors of the economy is such a bad thing. I was always taught to believe that was the essence of capitalism: the resources and talent goes to the most profitable use.
Really, I do not see why saving the overall functioning of the banking system has to go hand in hand with moral hazard.
Yeah, the only reason that these companies are still in business is because the government used a ton of taxpayer money to bail them out (unwisely, IMO). But given that they are still in business, it seems to me that they shouldn't be potentially hamstrung in their ability to attract and retain top people.
Quote from: grumbler on October 23, 2009, 06:51:44 PM
The reason top execs get multi-million-dollar-per-year compensation packages is because they can, not because they are worth it.
The worth (in economic terms) of anything, be it your time, a fine diamond, or a used car that barely runs, is what you can get someone to pay you for it. If you can get someone to pay you a million a year, or 10 million, then you're worth it to them.
Of course, when people get the ability to set their own pay, their time tends to be worth more. ;)
grumbler displays kindergarten view of economics. Film at 11.
I think what grumbler is saying is this: beyond a certain pay level, each dollar you pay translates to a smaller and smaller improvement in the work quality provided by the employee, until it reaches certain point when the improvement is 0 or close to 0. Essentially, if you put it on a graph, with the x axis representing pay and the y axis representing quality of work you get, you would get a hyperbole.
In that sense, people at the top pay levels stop being "worth" it in terms of a simple quality-per-dollar ratio.
Now, of course you can retort, like dps, that a person is worth whatever the markets will pay for it - that may be true, however there is one little twist which you are forgetting. The markets work the way you describe in classic capitalism phase, when the owner of the capital (the "stock holder") is making the decisions on how much to pay people they are hiring. With the stockholders being extremely dispersed and these decisions being made by largely unaccountable CEOs, however, this simple free market mechanism is distorted.
Effectively, the capitalist system has undergone this silent revolution, with the money-owning "capitalist" caste being displaced and usurped by the expert "MBA" caste. It's not unlike the hereditary land-owning feudal lords being displaced by educated bureaucrats in the late middle ages.
Except that you are the one who is trying to sneak in a free market requirement.
Quote from: The Brain on October 24, 2009, 03:31:29 AM
Except that you are the one who is trying to sneak in a free market requirement.
Explain.
Quote from: Martinus on October 24, 2009, 03:31:50 AM
Quote from: The Brain on October 24, 2009, 03:31:29 AM
Except that you are the one who is trying to sneak in a free market requirement.
Explain.
"Now, of course you can retort, like dps, that a person is worth whatever the markets will pay for it - that may be true, however there is one little twist which you are forgetting. The markets work the way you describe in classic capitalism phase, when the owner of the capital (the "stock holder") is making the decisions on how much to pay people they are hiring. With the stockholders being extremely dispersed and these decisions being made by largely unaccountable CEOs, however, this simple free market mechanism is distorted."
dps didn't mention free market in his post, nor is it obvious why he would have.
Two thoughts:
1) the "price mechanism" in banking is fundamentally broken. A bank is in the money business - but the cost of money to the bank is not set by the market. It is set by the Fed which has priced that commodity at only slightly above zero, and indirectly by Treasury which has aritificially lowered bank borrowing costs by guaranteeing other financial liaiblities (like commercial bank bonds). Only the revenue side of the bank business is market-based right now - it is like being able to play in Vegas with loaded dice.
2) It is interesting to compare Goldman Sachs in the not so-long ago day when it was a private partnership (essentially a purely capitalistic enterprise where the owners managed the enterprise and bore all the risks) as opposed to its time as a public company. There are two major differences: post-IPO GS carried (and carries) significantly more leverage and risk and the "partners" get a bigger cut of the income then ever before even though they hold vastly less equity. Basically the bank has put significant risks onto the shareholders and then appropriated the extra compensation of that risk for the banker-employees.
This is not an attack on GS in particular - just that their recent conversion to public company form makes the comparison easier.
Quote from: Martinus on October 24, 2009, 03:26:51 AM
I think what grumbler is saying is this: beyond a certain pay level, each dollar you pay translates to a smaller and smaller improvement in the work quality provided by the employee, until it reaches certain point when the improvement is 0 or close to 0. Essentially, if you put it on a graph, with the x axis representing pay and the y axis representing quality of work you get, you would get a hyperbole.
In that sense, people at the top pay levels stop being "worth" it in terms of a simple quality-per-dollar ratio.
You don't pay the top guy more to get better work out of him; you pay him more so he works for you and not your competitor.
Quote from: The Minsky Moment on October 27, 2009, 09:48:46 AM
2) It is interesting to compare Goldman Sachs in the not so-long ago day when it was a private partnership (essentially a purely capitalistic enterprise where the owners managed the enterprise and bore all the risks) as opposed to its time as a public company. There are two major differences: post-IPO GS carried (and carries) significantly more leverage and risk and the "partners" get a bigger cut of the income then ever before even though they hold vastly less equity. Basically the bank has put significant risks onto the shareholders and then appropriated the extra compensation of that risk for the banker-employees.
Didn't the change in SEC leverage rules predate the IPO?
http://www.nytimes.com/2009/10/27/business/27aig.html?hp
QuoteOctober 27, 2009
Ex-A.I.G. Chief Is Back, Luring Talent From Rescued Firm
By MARY WILLIAMS WALSH
Maurice R. Greenberg, who built the American International Group into an insurance behemoth with an impenetrable maze of on- and offshore companies, is at it again.
Even as he has been lambasting the government for its handling of A.I.G. after its near collapse, Mr. Greenberg has been quietly building up a family of insurance companies that could compete with A.I.G. To fill the ranks of his venture, C.V. Starr & Company, he has been hiring some people he once employed.
Now, Mr. Greenberg may have received some unintended assistance from the United States Treasury. Just last week, the Treasury severely limited pay at A.I.G. and other companies that were bailed out by taxpayers. That may hasten the exodus of A.I.G.'s talent, sending more refugees into Mr. Greenberg's arms, since C. V. Starr is free to pay whatever it wants.
"Basically, he's just starting 'A.I.G. Two' and raiding people out of 'A.I.G. One,' " said Douglas A. Love, an insurance executive who has also hired A.I.G. talent for his company, Investors Guaranty Fund of Pembroke, Bermuda.
While America generally loves stories of entrepreneurs making a comeback, Mr. Greenberg's success may be at the expense of taxpayers. People who work in the industry say that if he is already luring A.I.G.'s people, he may soon be siphoning off its business and, therefore, its means to repay its debt to the government.
"To me, it's just going to be a matter of time before the valuation of what he's building is greater than the valuation of A.I.G.," said Andrew J. Barile, an insurance consultant in Rancho Santa Fe, Calif.
A.I.G., meanwhile, is struggling to regain its footing. The recipient of the biggest taxpayer bailout in history, it has been ordered by the government to restructure, unwind its complex derivatives and pay back the taxpayers.
At 84, Mr. Greenberg remains larger than life. He spent nearly four decades forging A.I.G. out of private companies, devising its Rubik's Cube structure and building it into the world's largest insurance group, with a $1 trillion balance sheet. He lost most of his fortune when the company nearly collapsed last year.
And now, he appears to be starting over.
He was ousted from A.I.G. in an accounting scandal in 2005, and has insisted that he was not responsible for the problems that almost brought down A.I.G. last year — extremely risky trading in derivatives by its financial products unit. At the moment, C. V. Starr does not have a financial products unit, a spokesman for Mr. Greenberg said.
After he was pushed out, Mr. Greenberg fought bitterly with A.I.G. over how to untangle assets that they both laid claim to. Over the summer, he won, earning the rights to $4.3 billion in A.I.G. stock that he had removed from an unusual offshore retirement plan. The company had argued that he had improperly cashed out the stock and used the money to finance new business ventures that were competing with his former company.
With his battles with A.I.G. now largely resolved, Mr. Greenberg is free to use that money as the seed for his latest ventures. Just this month, C. V. Starr leased 141,000 square feet of space — three stories — on Park Avenue in Manhattan, in one of Lehman Brothers' old headquarters. Previously, he had expressed an interest in buying one of A.I.G.'s prizes, a sprawling global insurance group, but only if he could buy the whole thing. A.I.G. is trying to keep a stake.
Mr. Greenberg declined to comment. But his lawyer, Lee Wolosky, said he was not trying to undercut his former company. "Mr. Greenberg built A.I.G. and wants to see it succeed," Mr. Wolosky said. He added that since the bailout Mr. Greenberg had been trying to offer consistent advice, both in public and private settings, "about the best course to restore A.I.G. for the benefit of all its stakeholders." After all, Mr. Greenberg remains A.I.G.'s largest shareholder aside from the government.
As to whether Mr. Greenberg was poaching his former employees, Mr. Wolosky said, "C. V. Starr does employ a number of former A.I.G. personnel, but far fewer than the global insurance companies that are A.I.G.'s direct competitors." He declined to provide a specific number.
A.I.G. declined to comment.
Treasury officials said their special master for pay, Kenneth R. Feinberg, was aware that if he set pay standards that were too stringent, he could further harm A.I.G. by driving away its executives. "We're acutely aware of this possibility," said Andrew Williams, a department spokesman. "That's why Ken Feinberg spent hours at A.I.G. trying to understand that specific dynamic and strike the right balance."
Unlike A.I.G., C. V. Starr is privately held, so there is no stock to entice investors, and no disclosure of financial information. Little is known about its business plan, although it has been announcing ventures to insure things as diverse as wayward corporate directors and construction accidents on the bridges and roads being built under the Obama administration's fiscal stimulus program.
The firm seems to be focusing on the specialized lines of business insurance that once made A.I.G. stand out. The government had hoped to leave those businesses at A.I.G. intact after selling off most of its other operations, like life insurance and household finance.
C. V. Starr is also taking on the same form as A.I.G. — an intricate group of companies, each with its own line of business.
For now, most of those companies do not sell their own insurance, but operate as general agencies, representing insurers from rival groups on products that C. V. Starr does not yet sell.
That way, if C. V. Starr does not yet profit from the underwriting of a line of insurance, it can still receive commission income by selling it. "That's the beauty of how he structures the company," Mr. Barile said. "Everything is in such silos that every time you make a transaction, the outside world thinks you're competing, but you aren't."
In March, the Starr Indemnity & Liability Company named Charles H. Dangelo its president and chief executive, after bringing him from A.I.G. Global Risk Management.
A few months later, Starr Indemnity hired another executive from A.I.G., Jim Vendetti, making him its senior vice president and chief underwriting officer. The company also hired a former A.I.G. crisis manager, Alex Pittignano, to build up its businesses of insuring against specialized risks like environmental disasters.
Mr. Greenberg has found ways to exploit A.I.G. without directly hiring former employees. Starr has formed a joint venture with Ironshore, led by the former chief executive of an A.I.G. company called Lexington Insurance. Each of Ironshore's five new businesses is headed by still more A.I.G. alumni. The joint venture, called Iron-Starr Excess Agency Ltd., is headed by Geoff Smith, an executive hired away from A.I.G. in December. It provides insurance to businesses after they have exhausted their primary insurance.
Maybe it was noted before in this thread, but apparently the Obama admin is looking into pay controls at banks and financial companies, regardless whether they received any bail out money.
Not sure now how much. or if, I should care, though I'm still wary of a pay Czar. Then too, the banks and financial institutions, money supply, etc are already regulated by the government. I've been annoyed at financial managers who risk investor money, and when the risk goes well the manager makes big bucks, but if not then the investors lose while the manager doesn't. That includes pension funds and such, for big and small customers, not just the wealthy. Plus other mischief the financial corps have been up to. But I think some in Congress have had their hands in helping the mess come about. For one thing the repeal of Smoot-Hawley which allowed banks to get more into riskier investing?
Quote[size]
http://www.latimes.com/business/la-fi-exec-pay23-2009oct23,0,3190494.story
Bank bonuses are in Fed's cross hairs
The regulator seeks to limit rewards for risky practices at the 6,000 institutions it oversees.
Reporting from Los Angeles and Washington - Escalating the government's intervention in corporate pay practices, the Federal Reserve moved Thursday to restrict the ability of thousands of banks to pay bonuses in an effort to curb risky practices widely cited for helping to trigger the global financial crisis.
Under its proposal, the Fed would examine the compensation of any bank employees -- including senior executives, securities traders and loan officers -- who individually or collectively could significantly increase the amount of risk taken on by their employer. The central bank could order changes to policies that encourage too much risk.
The Fed's action came as the Obama administration's "pay czar," as expected, took the unprecedented step of dictating changes to the pay packages of the highest-paid employees at the seven companies that received the most federal bailout money.
The dual steps taken Thursday came amid an unrelenting public outcry about the scale of pay on Wall Street in the wake of the financial crisis. Some experts predicted the actions could provide momentum for changes in corporate compensation beyond the companies directly affected.
"The debate over CEO pay fundamentally shifted last year when it became not just shareholders getting ripped off, but also taxpayers getting ripped off," said Dan Pedrotty, director of investments at the AFL-CIO and a critic of high executive pay. "I think the outrage over all of these economic collapses is going to fuel reform."
The Fed's action could have a far-reaching effect on Wall Street, said Patrick McGurn, special counsel at RiskMetrics Group, a New York advisor to large investors about how companies are governed.
"It might stop a lot of the free-agency mentality that has played out in the financial services industry, where someone would look for a quick kill and then jump to another firm and let the house of cards come crashing down behind them," he said.
The Fed's proposal would apply to the nearly 6,000 banks it regulates. The 28 largest of those institutions -- almost certainly including Citigroup, Bank of America, Wells Fargo, JPMorgan Chase and Goldman Sachs Group -- would receive extra scrutiny.
The Fed would not dictate salary or bonuses for bank employees but instead would take compensation policies into account as part of its routine determination of whether the firms were being soundly run. Regulators would look in particular for incentives that encourage undue risk.
As an example of such incentives, a senior Fed official pointed to bonuses that are based on the volume of loans made by an employee or the amount of trading revenue generated without taking into account the riskiness of the loans or trades.
The central bank issued very general guidance Thursday on how pay arrangements should be structured and asked for public comment on the proposals for the next 30 days.
But it said banks shouldn't wait for the final guidance but should "immediately" launch their own reviews and alter pay arrangements that could threaten bank safety.
Also Thursday, Kenneth Feinberg, the Treasury Department's special master for executive compensation under the $700-billion Troubled Asset Relief Program, announced his decision to cut by more than half the average total compensation for top employees at the seven biggest recipients of TARP money -- Bank of America, Citigroup, American International Group, General Motors, Chrysler and the automakers' financing units.
The cuts, which apply to as many as 25 employees at each company and take effect Nov. 1, will reduce their total compensation an average of 50% and their cash pay an average of 90%.
The changes boost the proportion of compensation paid in company stock, but executives generally have to wait years -- or until the employer has repaid its TARP money -- before selling those shares. The restrictions are designed to limit conduct by the executives that would harm the value of their companies' stock.
Feinberg said he tried to balance the public anger over salaries at those firms with the need to keep too much top talent from fleeing.
"The taxpayers are in deep with these seven companies," he said, "and one of my primary obligations is to see to it that the taxpayers' dollars are returned to the U.S. Treasury."
At the White House, President Obama praised Feinberg's work.
"This is America. We don't disparage wealth. We don't begrudge anybody for doing well. We believe in success," Obama said. "But it does offend our values when executives of big financial firms -- firms that are struggling -- pay themselves huge bonuses, even as they continue to rely on taxpayer assistance to stay afloat."
Several of the companies under Feinberg's watch, though they didn't criticize his orders, said their compensation plans already were heavily weighted toward long-term, stock-based compensation.
But Bank of America issued a statement complaining about "an inability to pay people based on their performance and value," suggesting the pay cuts could prompt some executives to leave the company.
"Competitors not subject to the pay restrictions are already exploiting this situation," the bank said.
Feinberg encouraged other companies to follow his lead voluntarily and structure pay to reduce risk-taking.
"I personally believe that it's a lost opportunity for a broader marketplace not to take advantage of what we've learned in this process," he said, but he pointed out that his jurisdiction "begins and ends with these seven companies."
Congress is considering "say on pay" legislation that would give shareholders in all public companies an advisory vote on executive pay packages. Some compensation watchdogs say the measure wouldn't have much effect and are pushing for more direct measures, such as giving shareholders more control over corporate boards.
Such moves could help realign pay scales at U.S. companies.
In 2007, U.S. chief executives were paid on average 275 times the average compensation of the workers at their companies, compared with 24 times in 1965, according to the Economic Policy Institute.
The ratio currently is also much higher in the U.S. than in other countries, other studies have found.
But McGurn said a general lowering of the pay scale for U.S. executives was unlikely.
"It may slow the rate of growth," he said, "but one constant in the universe is that you never see executive pay go down."
Quote from: garbon on October 23, 2009, 09:49:17 PM
Isn't that how people with less money generally feel?
Those with less money feel that way, as do those with more money, and those with exactly-equal money.
Quote from: dps on October 24, 2009, 12:39:18 AM
The worth (in economic terms) of anything, be it your time, a fine diamond, or a used car that barely runs, is what you can get someone to pay you for it. If you can get someone to pay you a million a year, or 10 million, then you're worth it to them.
Of course, when people get the ability to set their own pay, their time tends to be worth more. ;)
Exactly. CEOs don't bid for their jobs, and the cheapest one gets it; compensation is determined by the compensation committee, which consists of one's peers at other firms, who have a vested interest in seeing one get the highest possible compensation, to justify increasing their own compensation.
This isn't a market system.
Quote from: Admiral Yi on October 27, 2009, 10:37:32 AM
Quote from: The Minsky Moment on October 27, 2009, 09:48:46 AM
2) It is interesting to compare Goldman Sachs in the not so-long ago day when it was a private partnership (essentially a purely capitalistic enterprise where the owners managed the enterprise and bore all the risks) as opposed to its time as a public company. There are two major differences: post-IPO GS carried (and carries) significantly more leverage and risk and the "partners" get a bigger cut of the income then ever before even though they hold vastly less equity. Basically the bank has put significant risks onto the shareholders and then appropriated the extra compensation of that risk for the banker-employees.
Didn't the change in SEC leverage rules predate the IPO?
No the IPO was in 99; the rule change was in 2004.
The SEC rule only relates to broker-dealer operations; it does not regulate capital in the proprietary trading side of the business which is where a lot of GS' leverage (and risk) can be found.
Quote from: The Brain on October 24, 2009, 03:18:32 AM
grumbler displays kindergarten view of economics. Film at 11.
:lol:
Quote from: KRonn on October 27, 2009, 11:13:50 AM
For one thing the repeal of Smoot-Hawley which allowed banks to get more into riskier investing?
Glass-Steagall. Smoot-Hawley was an import tariff.
Quote from: grumbler on October 27, 2009, 11:32:38 AM
Exactly. CEOs don't bid for their jobs, and the cheapest one gets it; compensation is determined by the compensation committee, which consists of one's peers at other firms, who have a vested interest in seeing one get the highest possible compensation, to justify increasing their own compensation.
This isn't a market system.
QFT. Anecdotally, the empirical literature I have seen does not provide much support for the claim that CEO salaries accurately reflect value added.
Quote from: The Minsky Moment on October 27, 2009, 11:35:37 AM
Quote from: KRonn on October 27, 2009, 11:13:50 AM
For one thing the repeal of Smoot-Hawley which allowed banks to get more into riskier investing?
Glass-Steagall. Smoot-Hawley was an import tariff.
Lol... Duh, I knew that too! :blush: Smoot-Hawley was the tariff prior to, or during, the great depression days.
Thanks for the correction.
Quote from: The Minsky Moment on October 27, 2009, 09:48:46 AM
Two thoughts:
1) the "price mechanism" in banking is fundamentally broken. A bank is in the money business - but the cost of money to the bank is not set by the market. It is set by the Fed which has priced that commodity at only slightly above zero, and indirectly by Treasury which has aritificially lowered bank borrowing costs by guaranteeing other financial liaiblities (like commercial bank bonds). Only the revenue side of the bank business is market-based right now - it is like being able to play in Vegas with loaded dice.
2) It is interesting to compare Goldman Sachs in the not so-long ago day when it was a private partnership (essentially a purely capitalistic enterprise where the owners managed the enterprise and bore all the risks) as opposed to its time as a public company. There are two major differences: post-IPO GS carried (and carries) significantly more leverage and risk and the "partners" get a bigger cut of the income then ever before even though they hold vastly less equity. Basically the bank has put significant risks onto the shareholders and then appropriated the extra compensation of that risk for the banker-employees.
This is not an attack on GS in particular - just that their recent conversion to public company form makes the comparison easier.
I wouldn't consider those factors an attack on GS, it would seem to be a solid case for a ringing endorsement, as the company has provided strong returns for shareholders. Outsized returns for shareholders + higher compensation for employees and executives = a win - win.
Quote from: alfred russel on October 27, 2009, 11:51:05 AM
I wouldn't consider those factors an attack on GS, it would seem to be a solid case for a ringing endorsement, as the company has provided strong returns for shareholders. Outsized returns for shareholders + higher compensation for employees and executives = a win - win.
Particularly when everyone else who did the same went bankrupt.
Quote from: alfred russel on October 27, 2009, 11:51:05 AM
I wouldn't consider those factors an attack on GS, it would seem to be a solid case for a ringing endorsement, as the company has provided strong returns for shareholders. Outsized returns for shareholders + higher compensation for employees and executives = a win - win.
Those shareholders that bought early and held have done very nicely. Those that were forced to liquidate in the crisis did not do so well. Those that bought in the crisis in the belief that the government would rescue the system (hello Mr. Buffett) have done very well indeed.
I agree that the present setup does provide a win-win for both GS execs and those shareholders with the fortitude to sit out crises. The cost of providing the win-win unfortunately falls to the general taxpayer which explains in part the rising tide of popular anger.
Quote from: The Minsky Moment on October 27, 2009, 11:38:06 AM
Quote from: grumbler on October 27, 2009, 11:32:38 AM
Exactly. CEOs don't bid for their jobs, and the cheapest one gets it; compensation is determined by the compensation committee, which consists of one's peers at other firms, who have a vested interest in seeing one get the highest possible compensation, to justify increasing their own compensation.
This isn't a market system.
QFT. Anecdotally, the empirical literature I have seen does not provide much support for the claim that CEO salaries accurately reflect value added.
My company is a small public company in the insurance industry with just over $1 billion in annual revenues. The publicly available compensation data (companies are required to disclose the CEO, CFO, and top 3 other execs):
CEO: $2 million
CFO: $1 million
Three others: All over $1 million, one is twice as much as the CEO.
The three others are rainmakers that negotiate their salaries directly with the board (they have their own legal counsel for the negotiation). Those people can not be paid less, as they are in a good position to walk and take their clients with them (which are about 15% of our revenues). The CFO came from public accounting, where the average partner pay is in the $600-$700k range. I don't know how we could retain him with significantly less pay.
The problem with the pay restrictions the government is putting out there is that companies like GM and AIG--big companies that effect the entire economy--now have noncompetitive pay scales with minnows such as us. At the end of the day, $2 million for a CEO isn't material to the success or failure of even our business, but the leadership team can have a material effect. The only reason for major companies such as GM or AIG to offer such dismal salary structures is to appease an outraged public--it doesn't make business sense.
Quote from: The Minsky Moment on October 27, 2009, 12:04:01 PM
I agree that the present setup does provide a win-win for both GS execs and those shareholders with the fortitude to sit out crises. The cost of providing the win-win unfortunately falls to the general taxpayer which explains in part the rising tide of popular anger.
Yes, it was win-win-lose, but it was impossible for the taxpayer to avoid unfairly rewarding GS execs and stockholders (by saving them from bankruptcy) without suffering a lot of collateral damage in the process. Sometimes you just have to let the bums have their day.
Though I suppose questions could be raised about how much of a "gamble" it was for GS to hold all that "risky" debt, vice how much the government interference that would save them from utter ruin was a "sure thing."
Sorta funny how the US government forced all of GS's competitors from the market, but not GS themselves.
Quote from: grumbler on October 27, 2009, 11:57:28 AM
Quote from: alfred russel on October 27, 2009, 11:51:05 AM
I wouldn't consider those factors an attack on GS, it would seem to be a solid case for a ringing endorsement, as the company has provided strong returns for shareholders. Outsized returns for shareholders + higher compensation for employees and executives = a win - win.
Particularly when everyone else who did the same went bankrupt.
MS is up about 4x from its IPO, and GS about 3x. (I'm pulling those numbers from Yahoo! finance, so they may not be the most accurate). Even if you put equal amounts of money in all 5 investment banks, you haven't done too poorly.
Quote from: grumbler on October 27, 2009, 12:09:40 PM
Sorta funny how the US government forced all of GS's competitors from the market, but not GS themselves.
:D
Quote from: grumbler on October 27, 2009, 12:09:40 PM
Sorta funny how the US government forced all of GS's competitors from the market, but not GS themselves.
Both parts of the House of Morgan came off OK.
Barclays ended up with Lehman's swanky new NYHQ, most of Lehman's US-based human capital and billions from the US Treasury to cover their AIG exposure.
Quote from: alfred russel on October 27, 2009, 12:07:54 PM
My company is a small public company in the insurance industry with just over $1 billion in annual revenues. The publicly available compensation data (companies are required to disclose the CEO, CFO, and top 3 other execs):
CEO: $2 million
CFO: $1 million
Three others: All over $1 million, one is twice as much as the CEO.
The three others are rainmakers that negotiate their salaries directly with the board (they have their own legal counsel for the negotiation). Those people can not be paid less, as they are in a good position to walk and take their clients with them (which are about 15% of our revenues). The CFO came from public accounting, where the average partner pay is in the $600-$700k range. I don't know how we could retain him with significantly less pay.
The problem with the pay restrictions the government is putting out there is that companies like GM and AIG--big companies that effect the entire economy--now have noncompetitive pay scales with minnows such as us. At the end of the day, $2 million for a CEO isn't material to the success or failure of even our business, but the leadership team can have a material effect. The only reason for major companies such as GM or AIG to offer such dismal salary structures is to appease an outraged public--it doesn't make business sense.
Well, the outraged public is the entity whose money has been diverted to keeping these businesses going (and that made no business sense either) so they get listened to.
And, BTW, if your CFO is claiming that the average salary in public accounting is $600-$700k, you should check out other sources like http://www.careers-in-accounting.com/acsal.htm (http://www.careers-in-accounting.com/acsal.htm) which notes that it is $150k.
I think part of the perception that these salaries are or are not outrageous is due to the fact that people don't understand that sometimes these things are guaranteed compensation, in which case disaster pays as well as success (though not, perhaps, for as long! :D) and sometimes they are partly performance-based (in which case poor decisions are punished). the former is far more objectionable than the latter, but both are seen as objectionable when a firm is sucking on the public teat.
Business sense says that these firms should be allowed to fail. Then other firms (like yours, AR) can pick up new talent cheaply, and don't have to overpay your own execs. You can almost certainly get a decent CFO for $150k. Paying a million is a crime.
Quote from: grumbler on October 27, 2009, 12:34:20 PM
Quote from: alfred russel on October 27, 2009, 12:07:54 PM
My company is a small public company in the insurance industry with just over $1 billion in annual revenues. The publicly available compensation data (companies are required to disclose the CEO, CFO, and top 3 other execs):
CEO: $2 million
CFO: $1 million
Three others: All over $1 million, one is twice as much as the CEO.
The three others are rainmakers that negotiate their salaries directly with the board (they have their own legal counsel for the negotiation). Those people can not be paid less, as they are in a good position to walk and take their clients with them (which are about 15% of our revenues). The CFO came from public accounting, where the average partner pay is in the $600-$700k range. I don't know how we could retain him with significantly less pay.
The problem with the pay restrictions the government is putting out there is that companies like GM and AIG--big companies that effect the entire economy--now have noncompetitive pay scales with minnows such as us. At the end of the day, $2 million for a CEO isn't material to the success or failure of even our business, but the leadership team can have a material effect. The only reason for major companies such as GM or AIG to offer such dismal salary structures is to appease an outraged public--it doesn't make business sense.
Well, the outraged public is the entity whose money has been diverted to keeping these businesses going (and that made no business sense either) so they get listened to.
And, BTW, if your CFO is claiming that the average salary in public accounting is $600-$700k, you should check out other sources like http://www.careers-in-accounting.com/acsal.htm (http://www.careers-in-accounting.com/acsal.htm) which notes that it is $150k.
I think part of the perception that these salaries are or are not outrageous is due to the fact that people don't understand that sometimes these things are guaranteed compensation, in which case disaster pays as well as success (though not, perhaps, for as long! :D) and sometimes they are partly performance-based (in which case poor decisions are punished). the former is far more objectionable than the latter, but both are seen as objectionable when a firm is sucking on the public teat.
Business sense says that these firms should be allowed to fail. Then other firms (like yours, AR) can pick up new talent cheaply, and don't have to overpay your own execs. You can almost certainly get a decent CFO for $150k. Paying a million is a crime.
The average pay at a Big Four firm is in the 600-700k range. Obviously not for all firms, most of which are going to be mom and pop shops.
$150k for a CFO for a global public company--even one as small as ours--is silly.
Quote from: The Minsky Moment on October 27, 2009, 11:33:10 AM
The SEC rule only relates to broker-dealer operations; it does not regulate capital in the proprietary trading side of the business which is where a lot of GS' leverage (and risk) can be found.
This sounds backwards to me. Please alleviate my ignorance. I don't see how leverage can be used in broker-dealer operations. It's the client's money. And when you say it does not regulate proprietary trading do you mean they can assume unlimited leverage for that part of the business, or that there is a different ratio?
Quote from: alfred russel on October 27, 2009, 12:39:55 PM
The average pay at a Big Four firm is in the 600-700k range. Obviously not for all firms, most of which are going to be mom and pop shops.
So the "Big Four" is now the average firm? I think not. The average pay for the Big Four partners is in the $200,000 - 3,000,000 range (it is right there in the link I provided). Even if you say that the average including only companies your size should be considered, you know it isn't going to be 33-50% more than the Big Four average, which is what you are paying.
Quote$150k for a CFO for a global public company--even one as small as ours--is silly.
So you say, but mere assertion isn't an argument. $1 million is silly as well (to make my own assertion).
Quote from: alfred russel on October 27, 2009, 12:07:54 PMMy company is a small public company in the insurance industry with just over $1 billion in annual revenues. The publicly available compensation data (companies are required to disclose the CEO, CFO, and top 3 other execs):
CEO: $2 million
CFO: $1 million
Three others: All over $1 million, one is twice as much as the CEO.
I work for a huge company with close to 100 billion euro in revenue (well, before the crisis ;)) and in 2007, the six board members were paid more than 30 million euros, with the CEO getting about 10 million euro. I wonder if their value-added even comes close. In 2008 which was already a really bad year for the company, they still got 16 million between them.
I have a hard time believing that their value added comes close to that. And I think that their jobs are so prestigious that you would get really good people who would do it for less.
Quote from: grumbler on October 27, 2009, 02:47:25 PM
Quote from: alfred russel on October 27, 2009, 12:39:55 PM
The average pay at a Big Four firm is in the 600-700k range. Obviously not for all firms, most of which are going to be mom and pop shops.
So the "Big Four" is now the average firm? I think not. The average pay for the Big Four partners is in the $200,000 - 3,000,000 range (it is right there in the link I provided). Even if you say that the average including only companies your size should be considered, you know it isn't going to be 33-50% more than the Big Four average, which is what you are paying.
Quote$150k for a CFO for a global public company--even one as small as ours--is silly.
So you say, but mere assertion isn't an argument. $1 million is silly as well (to make my own assertion).
I should have specified he came from a big four firm. Almost all global public companies use big four firms (I don't know of any that don't, though you could probably find a few)--and as such they are the source of accounting talent in similar companies in corporate america. The big four partner average pay is in the $600-$700k range, with about 25% of them over $1 million. Hiring someone into an executive role may also require a premium: a lot of that $1 million in compensation for our CFO is in stock options and other performance based awards that may not materialize (or he may hit jackpot and they could materialize in an amount much greater than $1 million--$1 million is the fair value of his expected earned comp for the year). He also doesn't have very much job security if things don't go well.
It is the same issue with a general counsel's office. Top corporate law firms such as those that Malthus works at (worked at) are going to pay a lot more than the big four accounting firms. For a company such as ours, we can't afford to hire a partner or a partner track person from such a firm, but a larger company would certainly want to. Top consulting firm partners such as McKinsey are going to have compensation similar to a corporate law firm.
Quote from: Zanza on October 27, 2009, 03:05:23 PM
Quote from: alfred russel on October 27, 2009, 12:07:54 PMMy company is a small public company in the insurance industry with just over $1 billion in annual revenues. The publicly available compensation data (companies are required to disclose the CEO, CFO, and top 3 other execs):
CEO: $2 million
CFO: $1 million
Three others: All over $1 million, one is twice as much as the CEO.
I work for a huge company with close to 100 billion euro in revenue (well, before the crisis ;)) and in 2007, the six board members were paid more than 30 million euros, with the CEO getting about 10 million euro. I wonder if their value-added even comes close. In 2008 which was already a really bad year for the company, they still got 16 million between them.
I have a hard time believing that their value added comes close to that. And I think that their jobs are so prestigious that you would get really good people who would do it for less.
I don't understand why board members would get much money, but think about it from this perspective (for the CEO, not the board members): when you are talking about $100 billion, $10 million is insignificant. I keep reading about how bad management decisions wrecked companies like AIG--if bad management decisions can have such a big effect, why skimp when it comes to retaining the guy you think is best?
Quote from: Zanza on October 27, 2009, 03:05:23 PM
I work for a huge company with close to 100 billion euro in revenue (well, before the crisis ;)) and in 2007, the six board members were paid more than 30 million euros, with the CEO getting about 10 million euro. I wonder if their value-added even comes close. In 2008 which was already a really bad year for the company, they still got 16 million between them.
I have a hard time believing that their value added comes close to that. And I think that their jobs are so prestigious that you would get really good people who would do it for less.
I'm surprised. I thought Germany was supposed to have a relatively flat pay structure.
Do those board members hold executive positions too, or do they just show up for the donuts?
Grumbler also supports a 100% inheritance tax.
I think he just hates rich people.
Quote from: alfred russel on October 27, 2009, 03:17:20 PMI don't understand why board members would get much money,
That was probably bad terminology: in German companies you have two boards. One is the management of the company (CEO, CFO etc.) and I referred to that. The other is the supervisory board which is probably closer to the board of directors in an American corporation. Those guys don't earn nearly as much (five or six digits I guess - they usually have another "real" job).
Quotebut think about it from this perspective (for the CEO, not the board members): when you are talking about $100 billion, $10 million is insignificant. I keep reading about how bad management decisions wrecked companies like AIG--if bad management decisions can have such a big effect, why skimp when it comes to retaining the guy you think is best?
Yes, that's of course one way to look at it. I guess if the management influence is really that big, you would be right. However, I wonder if the influence that the top management has is really that big. And if it is, I think something is wrong with the corporate culture. A 100 billion organisation should not rely just on the decision-making of a handful of individuals.
An aspect that is quite important at least in Germany (where equality is considered a more important value than in America I guess) is that $10 million could be considered excessive by the other 250,000 employees who are told that their salaries won't grow or are even reduced in the name of competitiveness. That creates a serious culture problem in your company which can wreck it just as well.
As the first big German company, BMW has now announced that they will link their top management salary to the salary of their blue collar workers. I think that makes sense.
A would expect cash compensation of a CFO to be lower than that of a comparable Big Four partner and that of a GC to be lower than a comparable Biglaw partner, because the corporate officer is more likely to get stock incentives, more perks and greater severance benefits.
Quote from: Admiral Yi on October 27, 2009, 03:31:23 PMI'm surprised. I thought Germany was supposed to have a relatively flat pay structure.
As far as I can tell, that changed a lot in the last two decades. A figure I found says that the top executive (CEO, CFO etc.) salaries of the 30 biggest listed companies grew about 650% in that time. From about 480,000 euro on average in 1987 to 3,33 million in 2007. It shrunk a bit in 2008, but still.
That happens to be a quite a bit more than the general income growth in Germany in those two decades. ;)
The best paid German executive in the last two years was Wendelin Wiedeking of Porsche who got something like 70 million euro or so. Before overleveraging his "hedgefund with attached car production" so much that it had to be "bailed out" by its erstwhile prey Volkswagen.
Quote from: alfred russel on October 27, 2009, 11:51:05 AM
I wouldn't consider those factors an attack on GS, it would seem to be a solid case for a ringing endorsement, as the company has provided strong returns for shareholders. Outsized returns for shareholders + higher compensation for employees and executives = a win - win.
Yeah, but not every company can get a whole army of its people into government or quasi-government institutions, and then have them manipulate the rules of the game in their favor. Those who can are, of course, a big win for all of it their stakeholders.
Quote from: grumbler on October 27, 2009, 12:09:40 PM
Though I suppose questions could be raised about how much of a "gamble" it was for GS to hold all that "risky" debt, vice how much the government interference that would save them from utter ruin was a "sure thing."
As much of a gamble as it was for Captain Renault to play in Rick's casino.
Quote from: DGuller on October 27, 2009, 04:00:49 PM
As much of a gamble as it was for Captain Renault to play in Rick's casino.
Let me guess, all the members of Congress who voted for TARP were Goldman alumni as well?
Quote from: Admiral Yi on October 27, 2009, 04:06:45 PM
Quote from: DGuller on October 27, 2009, 04:00:49 PM
As much of a gamble as it was for Captain Renault to play in Rick's casino.
Let me guess, all the members of Congress who voted for TARP were Goldman alumni as well?
Just because there was TARP doesn't mean that Goldman had to make out like a bandit. The devil is in the details, and there were a lot of Goldman alums that were working out the details. For example, Goldman didn't have to receive 100 cents on the dollar from the money they had in AIG.
Quote from: The Minsky Moment on October 27, 2009, 03:49:37 PM
A would expect cash compensation of a CFO to be lower than that of a comparable Big Four partner and that of a GC to be lower than a comparable Biglaw partner, because the corporate officer is more likely to get stock incentives, more perks and greater severance benefits.
For the CFO being discussed with comp of $1 mill, the cash comp is $400k.
Quote from: DGuller on October 27, 2009, 04:11:00 PM
Just because there was TARP doesn't mean that Goldman had to make out like a bandit. The devil is in the details, and there were a lot of Goldman alums that were working out the details. For example, Goldman didn't have to receive 100 cents on the dollar from the money they had in AIG.
True, but at the time the government was of the opinion that an AIG default presented a systematic risk. Without GS going along with reduced payments, AIG couldn't avoid defaulting without a full payoff, and apparently GS refused to negotiate.
Didn't some other (foreign) banks also get a lot of money from the AIG bailout? I seem to remember Deutsche Bank and UBS or so getting huge sums of American taxpayer money.
Quote from: DGuller on October 27, 2009, 04:11:00 PM
Just because there was TARP doesn't mean that Goldman had to make out like a bandit. The devil is in the details, and there were a lot of Goldman alums that were working out the details. For example, Goldman didn't have to receive 100 cents on the dollar from the money they had in AIG.
The Euro banks did. Barclays alone got paid off over 8 billion on AIG exposure. I don't see how Goldman's treatment was unfair in that context. They had fully hedged their exposure.
Quote from: alfred russel on October 27, 2009, 04:17:16 PM
For the CFO being discussed with comp of $1 mill, the cash comp is $400k.
OK that is reasonable but it is also a sample size of 1.
Quote from: The Minsky Moment on October 27, 2009, 05:22:05 PM
Quote from: alfred russel on October 27, 2009, 04:17:16 PM
For the CFO being discussed with comp of $1 mill, the cash comp is $400k.
OK that is reasonable but it is also a sample size of 1.
My point isn't that compensation for all executives is reasonable, it is that the compensation limits for GM and that were discussed for AIG are not. If $1 mill is reasonable for a guy at an insignificant company few have heard of, then what does that say when he is making more than than the pay caps at some of the biggest companies in the world?
It's understandable that execs at big companies get paid much higher. When your decisions make or lose billions, it makes sense for to be paid more. It doesn't make as much sense if your decisions mainly lose billions, though.
Quote from: Zanza on October 27, 2009, 04:33:49 PM
Didn't some other (foreign) banks also get a lot of money from the AIG bailout? I seem to remember Deutsche Bank and UBS or so getting huge sums of American taxpayer money.
Yes--at the time I thought we should have let AIG sink and bailed out the American banks that needed it directly, so the Europeans could clean up their own mess. That would have also avoided at least part of the current Goldman Sachs backlash. edit--one obvious reason that might not have worked is it would have created uncertainty regarding the insurance businesses of AIG. Not sure how could create confidence regarding those while allowing the holding company to fail.
Especially with their tax controversies and being a european company, I would think that UBS would be more controversial of a bailed out conterparty than GS, but I guess the people selling papers know what they are doing.
Quote from: alfred russel on October 27, 2009, 03:17:20 PM
I don't understand why board members would get much money, but think about it from this perspective (for the CEO, not the board members): when you are talking about $100 billion, $10 million is insignificant. I keep reading about how bad management decisions wrecked companies like AIG--if bad management decisions can have such a big effect, why skimp when it comes to retaining the guy you think is best?
The problem with paying guys $10 million to come aboard (and with hiring Big Four Partners away from Biig Four companies) is that you are getting the Peter-principaled guys who are motivated by money, and as we have seen, these guys suck when it comes to decision-making.
Offering less comp and more job satisfaction will get you better people, and save millions to boot.
You are correct to argue that CEOs don't look at it this way, though. CEOs are overwhelmingly products of, and therefor slaves to, the bureaucratic mentality. Rather than thinking, they want to spend money, so that they can justify their crappy personnel decisions by claiming that "they paid top dollar to bring in the best talent."
Note that I don't argue against compensating well for a difficult job well done (e.g. your rainmakers), but when companies are losing money, so should their top execs.
Quote from: grumbler on October 28, 2009, 12:33:15 PM
Quote from: alfred russel on October 27, 2009, 03:17:20 PM
I don't understand why board members would get much money, but think about it from this perspective (for the CEO, not the board members): when you are talking about $100 billion, $10 million is insignificant. I keep reading about how bad management decisions wrecked companies like AIG--if bad management decisions can have such a big effect, why skimp when it comes to retaining the guy you think is best?
The problem with paying guys $10 million to come aboard (and with hiring Big Four Partners away from Biig Four companies) is that you are getting the Peter-principaled guys who are motivated by money, and as we have seen, these guys suck when it comes to decision-making.
Offering less comp and more job satisfaction will get you better people, and save millions to boot.
You are correct to argue that CEOs don't look at it this way, though. CEOs are overwhelmingly products of, and therefor slaves to, the bureaucratic mentality. Rather than thinking, they want to spend money, so that they can justify their crappy personnel decisions by claiming that "they paid top dollar to bring in the best talent."
Note that I don't argue against compensating well for a difficult job well done (e.g. your rainmakers), but when companies are losing money, so should their top execs.
People may go to med school to heal the sick, or become teachers to teach, or join the military to defend the county. But for the most part, people get MBAs to make more cash.
Quote from: alfred russel on October 28, 2009, 12:46:57 PM
People may go to med school to heal the sick, or become teachers to teach, or join the military to defend the county. But for the most part, people get MBAs to make more cash.
True, but since you don't want those people to run your company anyway, moot.
Quote from: alfred russel on October 28, 2009, 10:49:25 AM
My point isn't that compensation for all executives is reasonable, it is that the compensation limits for GM and that were discussed for AIG are not. If $1 mill is reasonable for a guy at an insignificant company few have heard of, then what does that say when he is making more than than the pay caps at some of the biggest companies in the world?
A billion in revenue is a pretty serious business regardless of whether people have heard of it. It is not immediately obvious to me why there should be a direct linear relationship between revenue and exec comp. It is not necessarily the case that a company doing $10B in revenue or even $100B needs a more accomplished CEO than one doing $1B.
A business that is very complex may need a particularly skilled CEO; then again what it may really need is do some asset sales and focus.
Quote from: grumbler on October 27, 2009, 11:28:01 AM
Those with less money feel that way, as do those with more money, and those with exactly-equal money.
You would think that.
Quote from: garbon on October 29, 2009, 10:41:47 AM
You would think that.
This is merely what the poor people always say.
Quote from: grumbler on October 29, 2009, 11:54:48 AM
This is merely what the poor people always say.
No, not really. :)
Quote from: garbon on October 29, 2009, 12:11:04 PM
No, not really. :)
The poor people always say that, as well. :)
Quote from: grumbler on October 29, 2009, 12:45:12 PM
The poor people always say that, as well. :)
No, not really. :)
Quote from: grumbler on October 28, 2009, 04:15:57 PM
Quote from: alfred russel on October 28, 2009, 12:46:57 PM
People may go to med school to heal the sick, or become teachers to teach, or join the military to defend the county. But for the most part, people get MBAs to make more cash.
True, but since you don't want those people to run your company anyway, moot.
You would think so, but as it turns out MBAs run a lot of companies. It seems that somebody thinks that they're worthwhile.
Quote from: Neil on October 29, 2009, 02:04:27 PM
You would think so, but as it turns out MBAs run a lot of companies. It seems that somebody thinks that they're worthwhile.
But the MBAs who only got the degree to make more money are not the guys you want running your company. You want the ones who got their MBAs so they would qualify for the added responsibility and authority. The guys only out for the cash will fuck up your company for the quick buck, and then bail out with a golden parachute. They are the guys who got us all into this mess.
Quote from: grumbler on October 30, 2009, 09:36:46 AM
Quote from: Neil on October 29, 2009, 02:04:27 PM
You would think so, but as it turns out MBAs run a lot of companies. It seems that somebody thinks that they're worthwhile.
But the MBAs who only got the degree to make more money are not the guys you want running your company. You want the ones who got their MBAs so they would qualify for the added responsibility and authority. The guys only out for the cash will fuck up your company for the quick buck, and then bail out with a golden parachute. They are the guys who got us all into this mess.
The powertrippers can mess you up just as bad.
Unfortunately, you can only guess as to what sort of MBA you are hiring.
Quote from: Neil on October 30, 2009, 09:58:22 AM
Quote from: grumbler on October 30, 2009, 09:36:46 AM
Quote from: Neil on October 29, 2009, 02:04:27 PM
You would think so, but as it turns out MBAs run a lot of companies. It seems that somebody thinks that they're worthwhile.
But the MBAs who only got the degree to make more money are not the guys you want running your company. You want the ones who got their MBAs so they would qualify for the added responsibility and authority. The guys only out for the cash will fuck up your company for the quick buck, and then bail out with a golden parachute. They are the guys who got us all into this mess.
The powertrippers can mess you up just as bad.
Unfortunately, you can only guess as to what sort of MBA you are hiring.
Yeah, if I need a heart transplant, I want a surgeon who got into medicine because he wanted to help people and save lives, not one who went to med school just because doctors tend to make a really good living. But there's really no way to know which type your doctor is.
And anyway, grumbler has largely set up a false dichotomy. Most people with advanced degrees are motivated both by money and other factors. I'm not saying that there are
no people with advanced degrees who aren't motivated only by money, but I think that they're the exception.
If I was having a heart transplant, I would want it done by some type-A asshole who is driven to be the absolute best at whatever he does, and I could not care less whether he "cared about people" or not.
Those are the experts - the driven ones. And money plays into that, if nothing else as a way to "keep score". The idea that someone driven by money/success is necessarily a bad manager is not exactly sensible.
The currency of success in business is money, at all levels.
Quote from: dps on October 30, 2009, 11:51:52 AM
Yeah, if I need a heart transplant, I want a surgeon who got into medicine because he wanted to help people and save lives, not one who went to med school just because doctors tend to make a really good living. But there's really no way to know which type your doctor is.
Then, if one doctor refuses to transplant your heart for less than $5 million, and one will do it for $1 million, which do you choose? :contract:
QuoteAnd anyway, grumbler alfred russel has largely set up a false dichotomy.
Since AR is the one who insists that most MBAs are money-hounds and not seekers of responsibility, I would guess you mean he has set up this dichotomy. I never said that MBAs didn't seek money, just that it was not a motivator for all of them.
QuoteMost people with advanced degrees are motivated both by money and other factors. I'm not saying that there are no people with advanced degrees who aren't motivated only by money, but I think that they're the exception.
Management research says this is untrue - that, beyond a certain level of wages that make it clear that your employer values you and is not exploiting you, money does not motivate very much. Or, to put it another way, money (like all motivations) has diminishing returns, and those returns diminish faster for money than responsibility, amongst the kinds of people you want running your company. Thus, it is better to go for the prospective executive who wants less money but more responsibility, than to pay an exec ten million and just hope that he or she doesn't bankrupt your company.
Quote from: Berkut on October 30, 2009, 11:55:46 AM
If I was having a heart transplant, I would want it done by some type-A asshole who is driven to be the absolute best at whatever he does,
I dunno, that guy may be more stressed out and prone to mistakes because of it. I'd want the guy who practices Zen an hour a day.
Quote from: Berkut on October 30, 2009, 11:55:46 AM
If I was having a heart transplant, I would want it done by some type-A asshole who is driven to be the absolute best at whatever he does, and I could not care less whether he "cared about people" or not.
Those are the experts - the driven ones. And money plays into that, if nothing else as a way to "keep score". The idea that someone driven by money/success is necessarily a bad manager is not exactly sensible.
The currency of success in business is money, at all levels.
As garbon would say, "this is what the poor people would say."
Quote from: Peter Wiggin on October 30, 2009, 12:21:27 PM
Quote from: Berkut on October 30, 2009, 11:55:46 AM
If I was having a heart transplant, I would want it done by some type-A asshole who is driven to be the absolute best at whatever he does,
I dunno, that guy may be more stressed out and prone to mistakes because of it. I'd want the guy who practices Zen an hour a day.
If so, then he will fail at being a heart transplant surgeon, and won't be on my list anyway.
The ones who are great are the guys who thrive on stress. I know, because I watched Greys Anatomy once.
Quote from: grumbler on October 30, 2009, 12:19:13 PM
Thus, it is better to go for the prospective executive who wants less money but more responsibility, than to pay an exec ten million and just hope that he or she doesn't bankrupt your company.
Every prospective executive wants responsibility--hence the status as a prospective executive. I doubt there are many that want less money.
Quote from: alfred russel on October 30, 2009, 01:34:20 PM
Every prospective executive wants responsibility--hence the status as a prospective executive. I doubt there are many that want less money.
With the exception of the current AIG CEO and similar dollar a year men during WWII.:contract:
Quote from: grumbler on October 30, 2009, 12:19:13 PM
Quote from: dps on October 30, 2009, 11:51:52 AM
Yeah, if I need a heart transplant, I want a surgeon who got into medicine because he wanted to help people and save lives, not one who went to med school just because doctors tend to make a really good living. But there's really no way to know which type your doctor is.
Then, if one doctor refuses to transplant your heart for less than $5 million, and one will do it for $1 million, which do you choose? :contract:
Probably whichever one my G.P. referred me to.
QuoteAnd anyway, grumbler alfred russel has largely set up a false dichotomy.
QuoteSince AR is the one who insists that most MBAs are money-hounds and not seekers of responsibility, I would guess you mean he has set up this dichotomy. I never said that MBAs didn't seek money, just that it was not a motivator for all of them.
AR hasn't insisted that most MBAs are money-hounds and not seekers of responsibility, unless I've missed a post. He's insisted that qualified people at the executive level expect a level of compensation that seems excessive to many people.
QuoteQuoteMost people with advanced degrees are motivated both by money and other factors. I'm not saying that there are no people with advanced degrees who aren't motivated only by money, but I think that they're the exception.
Management research says this is untrue - that, beyond a certain level of wages that make it clear that your employer values you and is not exploiting you, money does not motivate very much. Or, to put it another way, money (like all motivations) has diminishing returns, and those returns diminish faster for money than responsibility, amongst the kinds of people you want running your company. Thus, it is better to go for the prospective executive who wants less money but more responsibility, than to pay an exec ten million and just hope that he or she doesn't bankrupt your company.
Not sure exactly what in the the rest of the above paragraph would demonstrate that my statement is untrue. In fact, it would seem to support my point that most people are motivated by factors other than money (though I suspect that there are very few people at any level in any field who want
less money, all else being equal).
Quote from: grumbler on October 30, 2009, 12:21:38 PM
As garbon would say, "this is what the poor people would say."
I'm sorry, but you don't quite seem to have the hang of it. Perhaps it is a cultural thing.
Quote from: garbon on November 01, 2009, 12:16:47 PM
I'm sorry, but you don't quite seem to have the hang of it. Perhaps it is a cultural thing.
Or it is
you that doesn't have the hang of it. :hug:
Quote from: dps on October 30, 2009, 11:35:08 PM
Probably whichever one my G.P. referred me to.
Really? You would pay an extra $4 million unnecessarily, just because your GP told you to?
Bullshit.
QuoteAR hasn't insisted that most MBAs are money-hounds and not seekers of responsibility, unless I've missed a post. He's insisted that qualified people at the executive level expect a level of compensation that seems excessive to many people.
No, because the latter point is one I agree with. The issue here is what kinds of people you want running your company: those who want to run the company for the enjoyment of the challenge, and those who want to run it because they think they will make more money that way. The former do not need to be compensated nearly as well as the latter, but will be much better for the company in other ways as well.
You're both bad at it, as is Neil. A true blueblood gives so little thought to the poor that his insults are unintentional.
What's a "poor"?
Quote from: grumbler on November 02, 2009, 09:59:23 AM
Or it is you that doesn't have the hang of it. :hug:
No, I understood what I was saying. :)