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2007-10-15 Home Front Economy

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Posted by gorb 2007-10-15 04:51|| || Front Page|| [11138 views ] Top

#1 CEOs and the top five managers of US corporations have increased their total share of national income from around $50 billion a year in 2001 to more than $140 billion a year in just five years;

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Income disparity has now reached obscene levels. Capital One Financial CEO Richard Fairbank exercised 3.6 million options for gains of nearly $250 million, on which he pay tax on the lower capital gain rate rather the income tax rate. His personal take exceeded the annual corporate profits of more than half of the Fortune 1000 companies, including Goodyear Tire & Rubber, Reebok and Pier One.

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Median pay among chief executives running most of the nation's 100 largest companies soared 25% to $17.9 million in 2005, dwarfing the 3.1% average gain by typical US workers.

Posted by 3dc 2007-10-15 11:02|| 2007-10-15 11:02|| Front Page Top

#2 From what I remember, you pay ordinary income taxes on the exercise of options- unless they changed the laws in the last 5 years I will have to call that inaccurate reporting, though I agree with the premise that executives are overpaid...

Posted by Ol Dirty American 2007-10-15 14:08|| 2007-10-15 14:08|| Front Page Top

#3 One more thing, Richard Fairbanks made a fortune because his company did very well. What is worse is the executives that pay themselves 10s of millions when profits are down or the company is losing moeny.

Posted by Ol Dirty American 2007-10-15 14:10|| 2007-10-15 14:10|| Front Page Top

#4 Investors have become more vocal in attacking what they often call pay for failure large severance packages awarded to ousted chief executives.

Just wait until you get to the part about Michael Ovitz! I've posted this before and submit it once again for your perusal.

The issue of CEO overcompensation is one that really does need to be addressed. A standard practice among newly hired CEOs is to cut expenses by immediately eliminating the most seniorread: highest paid workers. This supposed cost-saving measure is one of the most damaging to the vast majority of businesses.

It remains a simple fact that an overwhelming number of companies have poor quality documentation. Too often it results from an attitude of; "Get the job done and worry about documentation later." This sort of shortsighted management is incredibly toxic to real productivity as it inhibits expedient streamlining of manufacturing processes. This in turn inhibits ROI (Return On Investment) based upon legitimate increases in productivity and decreased cost of manufacturing. It remains a simple fact thatin nearly every casethe cost of labor is a tiny fraction of overall expenses and even a significant reduction in workforce generates little to no actual increase in true profitability.

Lack of adequate documentation automatically engenders the growth of "tribal lore" amongst workers with respect to methodology and solutions. This knowledge usually concentrates in senior employees and is forever lost in the usual initial round of cost-cutting layoffs. While a CEO may appear to have reduced expensesexcepting his own, of coursein reality this attempt to weather economic downturns leaves companies completely crippled once the marketplace recovers. Bereft of seasoned talent, labor costs and operating losses soar due to poor outgoing quality, expensive rework to correct the mistakes of new-hires and NRE (Non-Recurring Engineering) costs related to recapturing the manufacturing knowledge lost by reductions in the experienced workforce.

None of this stops the new CEO from being awarded lavish stock options and bonuses despite having gutted the company's talent pool. Even incompetent CEOs are rewarded by massive "golden parachutes" inserted into hiring contracts to lure them into joining the firm. Anyone who doubts this need only examine how Michael Ovitz was given a 90 million dollar severance package for 14 months service at Disney Studios.

Any significant compensation to top executives must be tied to long term profitability and viability. This is rarely the case and thereby encourages artificial "turnaround" strategies like the one mentioned above. The damage done to the working class and society in general by CEO overcompensation cannot be overstated. It is absolute poison to the growth of overall wealth and is a direct byproduct of a corrupt and self-shielding good old boy network that exists within the top echelons of Americas executive and political community. Through their collusion they have become a traitor elite that threatens the very survival of our nations economy.

Posted by Zenster">Zenster 2007-10-15 14:13|| 2007-10-15 14:13|| Front Page Top

#5 Board level rewards should be tied to stock price OUTPERFORMANCE of peers.

It's time to let the people who own businesses (i.e. those investing in pension funds) have more of a say in running the companies, as there is definetly a bad smell coming from wall street.

Posted by Bright Pebbles 2007-10-15 14:45|| 2007-10-15 14:45|| Front Page Top

#6 I don't believe in stock price outperformance as a measure of pay. Sometimes you can be a great promoter and your stock price can outperfom your peers for years in the stock market without doing so in the market place.

I do agree with Zenster. What he says is true in many cases.

I think the most overpaid people in the world are hedge & pe fund managers though. I think most of them are very average.

Posted by Ol Dirty American 2007-10-15 15:27|| 2007-10-15 15:27|| Front Page Top

#7 Tie board level compensation to the increasing amount of dividends paid the stockholders & everyone will be happy.
Many CEO's are just looting the till because they are able to.

Posted by Anguper Hupomosing9418 2007-10-15 17:15|| 2007-10-15 17:15|| Front Page Top

#8 Tie Board compensation to dividend increases and payouts will increase at the expense of current business. Not a good idea. The problem is that whatever compensation is tied to is what will be done, in too many cases regardless what is best for the long term growth of the company. The other problem is how to motivate senior management and the Board to go for the best mix of current profitability and long term growth... which benefits share price, employees and society at large. I don't think anyone has found the answer to that, though.

Posted by trailing wife 2007-10-15 22:00|| 2007-10-15 22:00|| Front Page Top

#9 I'll also note that the republican party is often connected with big money. Taking into account CEO over-compensation, it is their alliance with the top corporate echalons that continues to drive middle class workers into the arms of the democratic party. If the republicans could just get over their obsession with big business, they might find a whole lot more support for their platform.

Consider this: Probably some 90% of democrat scandals involve sex while an equal number of republican scandals involve money.

Posted by Zenster">Zenster 2007-10-15 22:05|| 2007-10-15 22:05|| Front Page Top

#10 I've got a revolutionary new idea. Let's let the market figure this one out.

The boards of American corporations are getting tired of being taken for a ride by their CEOs. Soon enough they'll get tired of hiring a new one every couple of years and will catch on to keeping CEOs around for a while so they can tie pay to "real" performance.

The nice thing about a big time CEO having stable employment is that they tend to give back more in the form of charity. Some of you might recall who built the public library system in this country. A good modern day example of this would be Bill Gates.

The last thing we want to do is regulate CEO compensation. How the hell can someone have put an accurate dollar value on Jack Welch?

Posted by Mike N. 2007-10-15 23:05|| 2007-10-15 23:05|| Front Page Top

#11 How the hell can someone have put an accurate dollar value on Jack Welch?

I don't know but limiting the ability of people like Tyco's Dennis Kozlowski use of company funds to pay for a $6,000 gold-and-burgundy floral patterned shower curtain, a $15,000 umbrella stand for his apartment, and throwing a $2.1 million fortieth birthday party for his wife on the isle of Sardinia seems like a damn good place to start.

Posted by Zenster">Zenster 2007-10-15 23:17|| 2007-10-15 23:17|| Front Page Top

#12 And how would you propose we, the taxpayer, do that?

Posted by Mike N. 2007-10-15 23:30|| 2007-10-15 23:30|| Front Page Top

23:46 gorb
23:36 Mike N.
23:35 gorb
23:30 Mike N.
23:22 Zenster
23:17 Zenster
23:15 Eric Jablow
23:06 Zenster
23:05 Mike N.
23:00 Zenster
22:45 Zenster
22:14 trailing wife
22:10 eLarson
22:09 Zenster
22:07 trailing wife
22:07 DMFD
22:05 Zenster
22:03 Leonard Plynth Garnell
22:00 trailing wife
21:59 DMFD
21:57 Zenster
21:44 N guard
21:39 49 Pan
21:39 Beau