Comments

Spot On Mr. President and an honorary Irishman - just add the apostrophe.

Capping CEO pay is the right thing to do and to the point the most difficult and challenging job on the planet is the President of the U.S. who only makes $450K/yr.

We have too many underperfoming corporations with too lofty of payscales for senior management. The notion they are worth 100's of times the value of a typical employee is absurd. I'll change my tune once a Board of Directors and the Stockholders all "off shore" one CEO figure head to India where the top guy (probably a Harvard or Duke Grad) will make a fraction of his US counterpart.

Why not take it a step further - if your the head of any publically traded company that enjoys a single cent of tax benefit from the government, state or city you're doing business in - then cap the pay scales and redirect those funds back into R&D, employee bennefits or other company beneficial programs.

If you own the risk yourself and are organically funded (with the exception of some bank loans) - then you can pay yourself whatever you want.

Half the guys we're reading about in the newspaper ought to be hanged or sent to jail (and I don't mean camp cupcake!) for the rape and pillage of our nation and workers.

Posted by Mkogrady at February 4, 2009 1:40 PM

Rather than peg them to the level of a public servant, although that has attractions, I'd peg them to a multiple of the lowest paid workers in their company (including affiliates etc). Why not go say you've got to take the average pay of the lowest paid 10% of people in the company and apply a multiple of 40 times that number?

In the UK, the minimum rate is £5.73 per hour which is (in round numbers) £230 per 40 hour week or just under £12k pa. The maximum salary has just become about £500k. The flaw in a maximum salary, of course, is this: is a bonus above and beyond the salary or is it part of this maximum?

And another thing: outlaw share options. Make executives put their money where their mouths are and buy real shares, just like the rest of us.

And another another thing: if they want us to pay their kids school fees and wife's medical expenses, fine. But it comes out of their salary and it isn't an extra.

Posted by Mark JF at February 4, 2009 2:04 PM

A bit of balance - Not all CEOs are bad news - I work for a company where people are genuinely sad when a senior figure steps down. But then I work for a company where the senior people treat people with some respect and dignity. These senior people are making some tough decisions right now - you can see in their eyes that it's not easy and that it hurts - I don't know what they get paid but I wouldn't be in their shoes right now.

Posted by PaulH at February 4, 2009 2:25 PM

Tom, Agree with you. And to be fair, what do you think about mandatory term limits for members of Congress who vote for legislation that is found to be harmful. As an example, many pushed GNMA and FNMA to create more low quality mortgages.

Financial execs should have been smart enough to say no. Its only fair play to take this issue back to its source (or at least one major source).

Posted by Greg Krauska at February 4, 2009 2:41 PM

I'm torn on this.

Are they overpaid? Yes. CEO compensation is in the stratosphere. And if you are at the helm of a company that needs a bailout, you shouldn't receive a bonus. At least not until you've turned it around.

On the other side of the equation, will this create a doom loop for the companies that took the bailout money? After all, how can they attract the best and the brightest if they can't compensate them competitively?

Posted by Patrick Byers at February 4, 2009 2:43 PM

My fear would be that the pool of incoming CEOs, replacing a fired CEO, would be limited to those willing to work for army wages. I would rather make them and their boards of directors truly accountable for their performance. And, I think accountablity should include criminal charges for the board and CEO if laws are broken.

Posted by Jim Outland at February 4, 2009 2:50 PM

Yes a tough one indeed. Patrick, I agree with the sentiment in your post. What is bothering me is that I keep hearing how restricting compensation would hurt their ability to retain top talent. My question is what top talent? Why would you want to retain leadership that has made such poor judgments? Call me too simple, but I don't get the logic. The folks I really feel bad for are the supervisors and managers down the ranks that have to try and implement a "pay for performance" system at their level. Can you imagine the hypocrisy? Also, I would give bonuses based on five year results, not annual. But then again, no one is asking me to be king. :)

Posted by Mike Neiss at February 4, 2009 4:17 PM

How great to see Mr Obama asking CEO's to show common sense!! – Maybe he loves simplicity too :-)

It is a great test for all of the CEO’s. It is a brilliant expression. If the CEO's do not understand the concept of ‘common sense’ then why should they expect any worker to apply common sense? I love it that the world’s most powerful man is not over complicating things - just asking for common sense ... sweet. I would suggest those who do not show common sense are not worthy if being CEO’s anyway. Life is good - perhaps our leaders are finally realising that “Doing what I say, not what I do” is NOT the way forward.

Bravo common sense and Simplicity!

Posted by Trevor Gay at February 4, 2009 4:18 PM

Good post TP! My only concern is that CEOs, in all of their selfish glory, will run companies in the ground and run off payroll to protect their own self-interests; they may elect to file Chapter 11 to save their own pay. If caps are put in place, we may see bad leadership leave and promote people with more altruistic reasons (like watching people and companies grow within the States and abroad).

Look at Nardelli and what a dipshit he is. Yet, given the opportunity, he robbed HD of several hundred million dollars to produce poorer results. If you regulate...regulate across the board based on whether or not executive teams are producing. There should be someway to regulate through the SEC, so when shareholders lose, so do executive teams. If companies want the public to buy into their companies for future growth, there should be a great deal of responsibility with regard to pay too. If you don't want to take the risk (owners), don't go public.

I like your ideas though.

Even better than this...I think it's great that Obama tossed two of his own cabinet nominations, the one from NM bailed prior as well, and admitted to making a mistake. Holy s$%t Batman, did a politician, our Commander in Cheif, admit to making a mistake right after it happened? Kudos Obama for having the balls to admit your flaws. I like the leadership!

Your turn Judith...because you carried on about some of these dopey appointments after Obama got elected.

Dropping Almonds on those comments!

www.droppingalmonds.com

Posted by Candy Man at February 4, 2009 4:25 PM

Tom,

I'd like to restructure your mortgage. In that restructure, you'll need to send me $50,000. Sorry, no arguing. You have my email address. Send me a note and I'll tell you where to send the check.

Right. Of course you're not going to. We have no agreement that I can dictate those types of demands. Well, where in the world does Obama get the authority to specify limits on anyone's compensation? If I'm not mistaken, the Constitution is the document he's sworn to uphold and defend. The Constitution puts strict limits on the authority of the state. If you're OK with Obama making up the law to suit his whims here, where does it stop?

If you'll let him do this without any authority? Why not just cut me that $50,000 check?

You'll also need to note, not everyone who's receiving these funds wanted them. There's been some heavy-handed deals happening. Do those executives deserve to have their compensation limited as well?

Posted by Andrew at February 4, 2009 4:33 PM

In public traded companies, it is usually the Board of Directors (or the compensation committee of the board) that sets the CEO’s compensation package. Where have these boards been in recent years? What in the world were they thinking? Too many corporations have become so bloated with overpaid executives who have done so little right, and so much wrong, that St. Elba would be a perfect place for them…along with their board of directors.

The irreplaceable executive (or any employee) is the greatest myth in business—perpetrated by pundits, academics, and, of course, replaceable employees.

Now, the federal government is stepping in to try to control the rampant extravagance of a few greedy people. Will this greed, coupled with the failure of corporate boards to perform—and now the involvement of the federal government—bring about the demise of capitalism, as we know it? It will be interesting to see how this all unfolds.

Bob Foster

Posted by Bob Foster at February 4, 2009 5:10 PM

Pure political grandstanding. For the millions that lost jobs over the past 12 months does this bring them even one inch closer to a new job? Does this help restore confidence in this failing banks? in our markets? in our economy?

It is populist sillyness in the extreme. And I was hopeful that Obama would be more careful in his decision making. I guess he needed to rebound from his series of tax evading cabinet picks.

This will lock tarp recipients in a death loop. Non tarp companies will poach top talent. Top talent will walk away-why bother? It does absolutely nothing to stimulate this economy.

It panders to the dailykos, huffingtonpost and dare i say-Tom Peters? crowd, gets him some headlines and applause on Chris Matthews. It weakens business, weakens the economy, weakens the companies that it impacts and sets a VERY dangerous precedent for the future.

Posted by John Cunneen at February 4, 2009 5:33 PM

Will somebody please tell these clueless talking head financial "experts" who rejected the President's $500,000 salary cap for those banks who receive taxpayer money to get a grip and come out of their alternative universe. Their fear is that the financial industry will not be able to draw top talent. Well, obviously these banks and board members are incapable of doing so.

Were the men who drove these banks into the ground top talent? (By the way, where were the women?) Why would bankers and board memembers now know now to draw top talent after recieving billions of dollars in bailout money, giving these CEOs from $3 million to $23 million dollars, plus millions in bonuses, for driving their banks into the ground?

Some say that these CEOs and board members have failed miserably. Some also say that they all should be fired and new board members selected, perhaps replaced by younger hungrier more idealist professionals with fresh ideas? $500,000 dollars is a good salary for shuffling paper. How much do doctors get for saving lives?

I fully support President Obama's salary cap.

Posted by Judith Ellis at February 4, 2009 5:34 PM

Would this cap also extend to management gurus who have no real responsibility and only advise with (sometimes) hair brained schemes on how to improve companies?

Just curious.

Posted by Peter at February 4, 2009 5:37 PM

John Cunneen - Here is the brilliant Arianna Huffington on "Morning Joe" today expressly for you. Maybe a great many of these Wall Street banks should fail and be replaced with community banks.

http://www.huffingtonpost.com/arianna-huffington/cnbcs-clueless-mark-haine_b_163877.html

Surprise! Bigger proves not to be better. Of course, this notion that they are too big to fail should perhaps be challenged.

If this is not good for capitalism, was excessive gluttony to the tune of billion of dollars in non-performance incentives good for capitalism? HELL NO!

It is not money itself that is the root of all evil; it is "the love of many" which objectifies instead of productively incentivize.

These Wall Street banks have already failed miserably, causing great damage to the global market.

Prime Minister Gordon Brown of Britain said today that we are in a Depression.

Posted by Judith Ellis at February 4, 2009 6:06 PM

It may turn out the President is being generous. The anger associated the meltdown and cost of the rescue has just begun to boil at the grass roots level. When you've gone on the government dole, wiped out your shareholders, and 98% of the population would gladly take your job for a heck of a lot less than $500K then it's best to at least appear to share the pain. (Sure, few really think they can play ball in the majors, but manage a company?) "Fairness" needs to be restored or the ability of the government to take the next round of 'necessary' steps will be significantly reduced even if it is a case of us little people cutting our nose off to spite our faces. If the CEO's can find more elsewhere- let 'em go -and let a new, young crop of aggressive managers come in and make a name for themselves.

Posted by Fred H Schlegel at February 4, 2009 6:13 PM

"Prime Minister Gordon Brown of Britain said today that we are in a Depression."

The man is a genius (not) - the other 99.9% of the British population realised that well before today Judith :-)

Ironically, Mr Brown is the man who has been in charge of our UK economy since 1997 - first of all as Chancellor and now as Prime Minister (and part time Chancellor). Mr Brown however says it’s the rest of the world that is to blame for our UK economic problems. As a life long supporter of the Labour Party it pains me to say negative things about the current (unelected) leader of the Labour Party.

Posted by Trevor Gay at February 4, 2009 6:56 PM

And please also a similar cap on Congressional salaries. How about setting that salary at the average national salary, apparently $36,764 in 2002? That would mean an average salary drop of roughly $1.5 million per member of Congress. This would align them with the capped CEO salaries.

Posted by Mike L. at February 4, 2009 7:11 PM

I've read comments about "top talent" in a number of places now. Fear of not being able to attract or retain it. What I'm really curious about is - what are these talents? They don't seem to involve anything having to do with business, which leads me to believe I'm ready to be a CEO. I'll lead a company like a mofo for $500,000. Hell, I'll do it for 250K. Beats 35K out on the shop floor, you know, where all the work is getting done...

-Lead 10-12 people in trying to produce items customers want on equipment bought used in 1974.
-Get yelled at for not hitting numbers.

------or------

-Sit at big oak desk.
-Look stern and have unrealistically high expectations of others.
-Take trip to tropical island to hook up with mistress.

Where can I pick up a CEO application?

Posted by John G! at February 4, 2009 7:32 PM

Trevor- Whether Prime Minister Brown is perceived to be a genuis or not, he has been the first world leader that I have heard utter that the word Depression.

If the Prime Minister is not a genuis, many world leaders aren't, he most certainly has guts, rightly or wrongly, to utter the D-word that many other world leaders have feared to utter.

If we are not in a Depression we most certainly look to be heading there. Americans lost 1 million jobs over the last 2 months.

I agree with Mike L. about capping Congressinal pay. Persident Obama has already capped the pay of the Executive branch.

Posted by Judith Ellis at February 4, 2009 7:36 PM

John G - This is pure insanity and hypocrisy of the worst kind!

Are board of directors paid? What are their salaries? What are their benefits?

Why do they give nods to such incompetence again and again? What's in it for them?

Posted by Judith Ellis at February 4, 2009 7:41 PM

Gah, you're right. $500,000 would just turn me into a snob!

Posted by John G! at February 4, 2009 7:54 PM

Would $250,000 turn most?

Posted by Judith Ellis at February 4, 2009 7:56 PM

A very good executive friend has just flown away on business. He just phoned to tell me that he has checked into the Hampton Inn. I laughed royally. And this guy is loaded outside of his current salary and could stay anywhere. In fact, he has never needed the salary and is the furthest thing from a snob. I wish some of these other guys would take a clue from him.

Posted by Judith Ellis at February 4, 2009 8:04 PM

If I recall correctly the Senate and Congress voted themselves raises, not their board of directors (ie voters). It would be interesting to see how many got rides on those nice shiney corporate jets on their way to some far flung boondoggle at taxpayers expense. To make matters worse, the Democrats and Republicans were the only two parties on watch during the past 9 decades. Time to switch to something new.

Sorry! I feel like I'm Hannitizing again. I better shit to Lou Dobbs for a moment....

Posted by mkogrady at February 4, 2009 8:08 PM

Quite frankly I am pretty disgusted with a great many Congresspersons, both Republicans and Democrats. I have written more than a few posts on "The Old Vanguard" and have written articles on the Huffington Post about both. Ugh!

Posted by Judith Ellis at February 4, 2009 8:13 PM

Judith,

Are you beginning to cross over to the dark side? Are you beginning to see that big government is more failed than many corporations? If we weren't bailing everyone's ass out, we wouldn't be discussing salary caps. Salary caps, in the very nature of capitalism, are ridiculous. Let the companies fail and let the American people endure the pain. Socialized business through salary caps...Ugh! Let them fail already!!!!

I'm still awaiting your apology for raising up some of Obama's crooked cabinet appointments. Time for us all to perform a little self reflection.

Nice to see that you're beginning to understand that our whole system is in complete shambles. What a joke I say...what say you?

Posted by Candy Man at February 4, 2009 8:25 PM

Just caught Arianna Huffington on MSNBC and she made a great point, referring to a plaque on her desk that reads: "make new mistakes." I shall adopt this one. It also sounds a lot like TP's "fail fast."

Posted by Judith Ellis at February 4, 2009 8:38 PM

Perhaps Obama can pass a law that says the head of the IRS pays all of his taxes...I'm always wary of government getting involved in pay caps, maximums, minimums etc. Do agree that corporations that pay their executives millions etc of bonuses while forgetting about the rest need to be exposed and given the worst publicity as possible, though!

Posted by Alex at February 4, 2009 10:22 PM

I think the problem is that pragmatism and idealism don't always come together on issues like pay. Linking exec pay to performance is very difficult and tends to skew at least part of what you are doing (e.g. behaviour that just drives share price) - even if you make it longer term it still skews behaviour.

capping exec pay is tricky yes you can say that the head of large corp that has failed may deserve this or that but do you then apply the same rules to an entrepreneur who has personal risk in the venture and is creating jobs and work?

Posted by PaulH at February 5, 2009 2:49 AM

Paul - it's a good point and highlights the assumption many people seem to have that bonuses should be linked to profits. Profits are essential but a bonus can be linked to other things. For example, you can say that if the business makes a certain profit, then a bonus will be paid but it will be based on ROS or customer satisfaction or staff retention or whatever issue(s) the Directors feel are important that year. Then target another factor next year.

I think the big problem we have here is a lack of imagination and a steadfast refusal to reinvent the remuneration package. People need to think a little more creatively about how bonuses should be calculated and about what values and behaviours they are intended to drive.

Posted by Mark JF at February 5, 2009 5:10 AM

Self fulfilling myth at that! (5 words? if you can't express a view ???)

Posted by Patrick at February 5, 2009 5:18 AM

Judith - turns out Mr Brown ‘mistakenly’ (according to his PR folks) used the word ‘depression’ – when what he meant to say was ‘recession.’ Not the greatest communicator in the world is our Gordon. By the way why is it brave and such a big deal about the words used? We are in the S**t – that is the language people understand. It’s surely not ‘brave’ to say that whether you are a world leader or not. I think if world leaders said it as it really is more often then we would all have far more respect for them.

John G - you are Soooooooooooo right. I agree with you that the ‘top talent’ is found at the front line where the work is actually done. The managers and CEO’s I respect most are the ones who were front liners at one time in their career. They remember what the real world is like; they are grounded; they talk language we understand; they spend time every week talking and more importantly listening to front line folks and customers.

Woke up to 6 inches of snow this morning in Shakespeare's County, England. It’s just wonderful as I look out my window to see the kids outside playing with their parents who can’t get to work. They are building snowmen and generally being silly. In fact I’ve just built my snowman in the garden …. Life is good.

And it beats school or work :- )

Posted by Trevor Gay at February 5, 2009 5:53 AM

The sense I get from this debate is that a fundamental American value is being thrashed out.

From my association over the years with dear American friends and colleagues, there is one value that I think you hold more dear than, say, Europeans and that is freedom. And you could say the great American Dream - anyone can be anything if they put their mind to it and work hard to get it - has been the natural extension of that value. This mindset has led to the creation of a dynamic, capitalist, consumer focused, innovative, and thriving economic model, albeit with many ups and downs, and some winners and some losers.

I have also been lucky enough to work with Scandinavians, who have a different set of core values. There is a word in Swedish, Lagom, which has no direct English translation, but its meaning is "just enough". From my impression, this sense of "just enough" pervades the Scandinavian mindset, and I think has a moderating effect on behaviour. For example,their tax and social security systems seem to equalise wealth and opportunity.

Interestingly enough, the five main countries that comprise Scandinavia have a population of only around 25 million people, and yet have created some admirable, innovative and significant businesses; Nokia, Eriksson, Alfa Laval, Tetrapak, Saab to name but a few. Scandinavian Social Justice and Diversity are also commonly cited as exemplary in studies and comparisons of all kinds. It is far from a communist approach, and does rely on the individual to self police, but societally, there is an example for us to study.

As a nation, it seems to me that the USA is tussling with what to do about the impact that unbridled freedom has on individual behaviour. I do take the point that Obama's decision will contribute little, financially, to the economic crisis. However, his gesture is symbolic, and for me sends a message that says business leaders must take more moral and personal responsibility for the decisions we make.

Personally, I applaud his decision, but it will be interesting to see how the bankers and the nation respond.

Posted by Madeleine at February 5, 2009 6:21 AM

Mr. Obama is working the motivation of the people from his country. Leadeship is all about this.
He is getting a big wave started.
Hooray!
Capitalism has many fine features.
Learning the tricks to play god is not one of them.
"Equal opportunity" is not equal opportunity to cheat legally. Law has a spirit - so says Jack Welch.

Posted by gerson barbosa at February 5, 2009 6:41 AM

Not being an American, it's not for me to comment on whether your President should have such powers.

However, on the subject of irreplaceable executives (or staff) I'm reminded of a comment by my first boss - it's easy to measure, put your hand in a bucket of water, pull it out, then measure the hole!

One possible remedy might be to never select a single candidate for a highly paid post, always select a small group and let them bid for the post. Or perhaps even stand for election by shareholders (or staff)! I reckon it would be a lot cheaper, and quality would remain.

Posted by Michael Saunby at February 5, 2009 7:06 AM

Good article, thanks

Posted by Beal at February 5, 2009 7:29 AM

Who else should we limit pay? How about athletes? Does Tiger need another $60 million? I don’t disagree that many executives are overpaid but I am not in that job to make an honest assessment and neither is President Obama. I think Tom you said it once that many people want to be the CEO but very few want to “Do” CEO. To have Washington tell anyone how much to make is a joke. Especially, since none of them seem to pay taxes and can get away with by simply saying whoops. The market system works. Maybe it doesn’t work as fast as some people think but it always works. CEO’s that are overpaid will be run out of town, what was the average tenure of the CEO again? One year? Two Years? Maybe Washington should go back to investigating Baseball players.

Posted by Rob at February 5, 2009 8:56 AM

Trevor - I shall leave you with your personal opinions regarding your Prime Minister, and whether he should plainly use the less than ignoble S-word publicly or not, and if this would constitute bravery or ignorance. Personally, I'm for elevating the office and practices of world leadership. Words spoken in the pub need not be spoken in high office.

(Regarding President Obama, I am very pleased with his leadership thus far. He's only been on the job for 16 days. For those who wish that he would fail, I question their patriotism. For those who challenge President Obama's leadership or Congress's legislation, I salute them.)

PaulH – At face value your point seems significant. But it becomes less so when we look a little deeper and determine that we are talking here about taxpayers' money and not private money, without which there would be NO company to run and NO salary to be paid. President Obama has seemingly not capped salaries indefinitely. This would be unjustly intrusive or perhaps socialistic indeed. But taxpayers have a vested interest here. It is that temporary Keynesian intervention. CEOs can go right back to paying themselves as they please ONCE the American people have been repaid with interest. I think this is good. Another point, if not performance than what? Good looks?

Patrick – Is that the only way to draw attention to yourself is by pointing out your "5 words" etc. etc. etc. Let the words speak for themselves and others will decide their significance or lack thereof. Frankly, your cryptic 5 words are spastic and unclear – a word clipped here and another there. There is no expression there save that somewhat cryptic explanation thereafter which perhaps points more to your (failed?) effort than the message itself. Others will express themselves as they please as you have done so here. What either say may be up for criticism. I'm down with that.

Posted by Judith Ellis at February 5, 2009 9:05 AM

Rob - The joke is on you. Anywhere MY taxpayer money is being used to bail these private companies out I would not like to see it go to excessive bonuses and salaries while these very companies are being tanked.

Nassim Nicholas Taleb advocates getting those bonuses back. I agree, though I don't see how. You conflate a great many things in your comment, convulting the discussion indeed.

Posted by Judith Ellis at February 5, 2009 9:10 AM

Here Donald Trumps says that President Obama is "absolutely right" in capping CEO pay and that we are indeed in a "Depression" and it could be even worse than "Depression 1" if the stimulus package is not passed:

http://www.huffingtonpost.com/2009/02/04/donald-trump-obama-absolu_n_164120.html

Posted by Judith Ellis at February 5, 2009 9:49 AM

Jack Welch said this morning, "Revenge is not a strategy". I heartily agree. I fail to understand how any government official feels that they know enough to mandate pay scales and/or run a corporation. I would urge them to clean up their own house first. How about actually passing a budget without deficit spending? How about ending the smoke and mirrors that are today's Social Security and Medicare programs? Show me a highly efficient government that actually functions and I will listen to any politician. Until then, get out of the boardroom. There have always been crooks/thieves/liars in business and there will be again, no matter how much overbearing regulation that government puts in place.

Posted by Bruce Bortree at February 5, 2009 11:05 AM

Agreed Bruce...but not on the public dime. That changes everything. My thought is a better strategy is consumer revolt. Just don't do business with those folks and check your investments..if they are held by the companies and banks in question...dump em

Posted by Mike Neiss at February 5, 2009 11:10 AM

Surprise, surprise! What twists and turns the mind of a nation can do under stress! The most capitalist nation on the globe, the believers in the free market all of a sudden ask for some socialism where the state owns at least parts of companies, dictates salaries? Remember, all power comes from the people and through the people. It is US who allowed these astronomical salaries by not objecting, by buying their products, by fostering the genuine goodness of greed (bigger better, faster, more). And now that the system strikes back, we all go oops! Well, you can't drink an entire bottle of champagne and think you are still fit for driving! All of you, including myself: Sit down! Shut up! And change your behaviour - FOR GOOD!

Posted by Sven at February 5, 2009 11:13 AM

Bruce - I'm no expert, but some may say the Mr. Welch may not be the best person to say such a thing, as he has essentially turned GE into a financial industry instead of one that largely produces products. Since his reign GE, has taken on more investments in this industry than in making things. Some have even suggested that since then GE stock has been in steady decline. Again, I'm no expert.

Sven - It's not the "US who allowed these astronomical salaries." The people of the US have have not decided how much executives got paid in these private industries; board members made these decisions. It's not a matter of whether we buy their products or not. We have bought their products, but they're still in dire straights. The people are deciding through executive order because of the people's vested interest. Upon our election of President Obama we have given him such power to act.

Posted by Judith Ellis at February 5, 2009 11:34 AM

In my mind, the question is really how to compensate them for "desirable social behavior" rather than simply "share value maximization."

I know this is problematic - after all, who defines what is "desirable" and why should the shareholders bear the cost, but we've gotten into our own "doom loop" caused by the absolute value of "share value maximization."

In this loop, public companies are deterred from investing in long term projects, companies are rewarded for shedding workers and skirting regulations, and CEOs are rewarded based upon share price rather than true company performance. It all seems to work fine when things are going up, but its tough when they crash - as evidenced by recent months.

Defining the measure - while protecting the corpus of share value maximization (which realistically isn't going to change) is, I think, key to pulling us somewhat out of this mess.

Posted by Gary Zeiss, Esq. at February 5, 2009 11:43 AM

This argument is useless. Its like arguing which of two cars with no motors is faster. The stimulus package/bailout plans are nothing more than steaming piles of crap designed to make good on a back room vis a vis sit down. Doesn't anybody get it? We've been had. These are just the type of arguments they want us to have. Keep the commoners busy while they sack the treasury.

Posted by JB at February 5, 2009 11:54 AM

Can't help feeling that the government is doubling down on the recession. On one hand, destroying the value of these businesses, and on the other hand, piling on deficit spending that will cripple the nation for generations.

To Sevn's point, is this a collective emotional reaction to the situation rather than a rational approach to the facts?

Posted by Bruce Bortree at February 5, 2009 11:58 AM

You drove here in SUV's? tsk tsk.. say Jim next time drive here in one of those hybrid thingies... yeah I know no one has really proved global warming is real and I have heard some rumblings of some crazy scientists getting off the bus but I think this could be a real money maker for all of us... so just follow our lead tomorrow ok? great.. What time are we teeing off this weekend? Great, say afterwards why don't you and the missus come up to the estate? they wives can keep each other busy, while step into the den for cognac and cigars.. ehh Jim? Good talking to ya.

Posted by JB at February 5, 2009 12:08 PM

I have no idea what JB has just written relevant to the discussion here besides let's sit here and do nothing. Is that smart?

Posted by Judith Ellis at February 5, 2009 12:14 PM

Yeah comments on a Tom Peters site. Boy thats action for you.

Posted by JB at February 5, 2009 12:15 PM

Judith, by US I meant US as in WE, just in capital letters, and not the US as in United States.

Bruce, you are right. It is an emotional approach. A German language institution just named the term "needy banks" as the faux-pas word of 2008, because it turns around cause and effect. It is business, sorry, behaviour as usual: we all want to be rich and almost everybody strived for that goal and did not want to hear or see any governmental intervention. Now, that times are dire, we all call for the state to help / bail us out. It is like speeding in a car because it is fun and then wanting the ambulance, fire brigade and insurance to help and fix it after the accident has happened. I am aware that there is no other choice NOW for the government to help in order to protect its citizens from even worse scenarios. But why does this always happen once the damage is done? Why did all the economists, analysts, specialists did not do their highly paid job?????

Posted by Sven at February 5, 2009 12:17 PM

I used to trust the media
To tell me the truth, tell us the truth
But now I've seen the payoffs
Everywhere I look
Who do you trust when everyone's a crook?

Revolution calling

Written by a rock band in 1988 and can be applied to every adminstration since then including the current. Nothing has changed. Because no one heeded the last line there.

Posted by jmd at February 5, 2009 12:21 PM

Bruce - These companies have little or nor present value.

Posted by Judith Ellis at February 5, 2009 12:24 PM

Judith - I wonder what the employees of these companies would say when being told their work has no value!

Posted by Sven at February 5, 2009 12:28 PM

Sven - Got it! Thanks! But how does the distinction differ from what was written? We are the US.

Posted by Judith Ellis at February 5, 2009 12:31 PM

JMD, it is already revolutionary hearing the President of the USA saying publicly on TV that he srewed up! Wow, I salute to him! Although it should be a habit for every executive to be able to admit mistakes

Posted by Sven at February 5, 2009 12:33 PM

BTW that Rob is a different Rob from this Rob.

Posted by Rob at February 5, 2009 12:35 PM

Judith, I am German, ,living in Germany (though I not always did) and by "us" I meant "us", the people, consumers, voters, employees around the globe.

Posted by Sven at February 5, 2009 12:35 PM

Sven - When I wrote of value I was referring to stock value which would essentially be the value of the company. These banks that have been bailed out have negligible value. Would you not agree?

Posted by Judith Ellis at February 5, 2009 12:36 PM

I don't know. These are simple things that are getting screwed up. Really don't find it to be revolutionary quite honestly. But if people find it gives them comfort, so be it.

Posted by JB at February 5, 2009 12:39 PM

Judith, I do agree regarding the finacial institutions. A teacher of mine once said, he has never actually seen money working, only people and machines. But telling the line staff at any manufacturing company that their work has no value just because their company's stocks are in the pennies, is a slap in their face.

Posted by Sven at February 5, 2009 12:40 PM

Sven - I value people. Great statement by your teacher. I also value your point about the line workers--much appreciated.

Posted by Judith Ellis at February 5, 2009 1:04 PM

THANK YOU! No more "No strings attached" bailouts with public dollars. If the execs don't like it they can go find work elsewhere. There are plenty of folks out there in the job market ready and willing to take their places.

Posted by Dave Cade at February 5, 2009 1:32 PM

Shut up, sit down, and what? I happen to agree with Judith on this discussion (did I just say that?). I prefer, "Get Up, Stand Up, Stand Up for Your Right." Anybody remember Bob Marley. I mean c'mon Sven, you get all riled up and tell everyone to change their behaviors...almost as productive as telling people in a manufacturing plant their work is worth nothing. Chill out man and go smoke a blunt for Mr. Marley.

By the way...if people are in a manufacturing plant, and the manufacturing plant has no earnings to distribute to shareholders, I'm afraid to tell you, along with thousands of workers in Detroit, their work is worth absolutely nothing to shareholders. The people of Detroit may be a little safer because the Unions will help them get something for nothing.

If the market deems that your manufactured product isn't worth investing in, bye-bye. The problem we've got in America is that we're investing in businesses that should fail and go bye-bye. Because politicians have their hands in the pockets of the banks and banks have their hands in the pockets of corporation, and so on and so on, we are unraveling our capitalistic markets.

So my friend, grab a glass of wine or beer, a blunt perhaps, and chill out.

Posted by Candy Man at February 5, 2009 1:37 PM

"Yeah comments on a Tom Peters site. Boy thats action for you."

JB - Don't presume to know me or what I do daily. You don't.

Posted by Judith Ellis at February 5, 2009 1:37 PM

Hi Judith - my point was not so much about the particular word I used (In fact I was wrong to use that word). My point was more about our leaders telling us the truth in plain language - I say let’s have more of it PLEASE. I am with you totally about Mr Obama - I loved it the other day when he admitted on TV a mistake and publicly said he accepted responsibility. To see a leader actually utter those words gave me a lift. Why? Because it is so rare! That’s my point. Why go round the houses using all sorts of ‘fluffy’ language designed to conceal the reality. I think most people appreciate leadership that tells it as it is in words that 99% of the population will understand rather than using words that only the best educated can even begin to decipher. That’s my point - sorry I didn’t make it clear first time round.

Always good to receive a knock back to make me qualify what I say and put it in more acceptable language.

Cheers Judith :-)

Posted by Trevor Gay at February 5, 2009 2:02 PM

Actually given the amount of comments you post on this site, I really do have a good idea of what you do all day.

Posted by JB at February 5, 2009 2:07 PM

Judith Ellis at February 4, 2009 5:34 PM
Posted by Judith Ellis at February 4, 2009 7:36 PM
Posted by Judith Ellis at February 4, 2009 7:56 PM
Posted by Judith Ellis at February 4, 2009 8:13 PM
Posted by Judith Ellis at February 4, 2009 8:38 PM
Posted by Judith Ellis at February 5, 2009 9:05 AM
Posted by Judith Ellis at February 5, 2009 9:10 AM
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Posted by Judith Ellis at February 5, 2009 12:14

etc...

nice job driving traffic to your site.

Posted by JB at February 5, 2009 2:13 PM

JB - You are a lightweight, unable to distinguish the very real fact that some of us work smarter and harder than others. Some of us need not be singleminded to produce great work. Distractions" are necessary things. Some of us only need a few hours of sleep nightly and some of us do our best work when the lights are dim. Some of our clients love our work. Others seek us out.

Let me repeat myself: You should not presume to know me or what I do daily. By your assumption here, you have failed miserably. For your information, there will very likely be two dozen or so more comments on this site before the new day begins and I will undoubtedly be up as it comes in. My person speaks for me wherever I might be.

One final thing: This site has increased my knowledge and built my confidence in very real ways and for this alone I return. There is great value here. This site has encouraged me to act wisely and consistently and build better organization. I am most grateful for Tom Peters, Erik Hansen, Cathy Mosca, Raj Setty, et al, and the many commentators. I shall return indeed, again and again.

Posted by Judith Ellis at February 5, 2009 3:21 PM

Trevor - I hear you.

Posted by Judith Ellis at February 5, 2009 3:22 PM

Judith you are so easy. You fell for it.

Sound familiar?

Posted by JB at February 5, 2009 3:25 PM

You would think a highly evolved person such as yourself would ignore such childish comments from me. But your ego won't allow it. Its all about Judith.

Posted by JB at February 5, 2009 3:30 PM

Ah, the ego is necessary for existence, JB; without it we would not be.

Posted by Judith Ellis at February 5, 2009 3:51 PM

Ouch. Maybe we need to send all bank and financial services CEO's back to the Lee Iacocca College of Borrowing. Cap salary at a buck a year until the American taxpayer gets back every dime borrowed, plus interest. If we wanted to own a bank, we'd buy stock, but in this instance we don't get either a choice nor a benefit. The financial shenanigans among investment banks and others makes the insanity of Joe Heller's wonderful book Catch-22 look positively simplistic. Argghhhhh.

Posted by Kerry Stackpole at February 5, 2009 4:09 PM

That was deep. Is the the ego that makes you hurl personal insults at people you don't know?

Wanna shoot the dozens in public?

Your so ugly I could push your face in some dough and make shnauzer cookies!

;-O)

Posted by JB at February 5, 2009 4:10 PM

Funny man, JB! Good one. Sorry to say that I cannot play the dozens on this site. But everything in its place and time.

You may email me (judedellis@gmail.com) and we can shoot away. I'm from Detroit and we created the dozens.

Looking forward to it!

Posted by Judith Ellis at February 5, 2009 4:17 PM

You got it.

Now go check out Billy Childs I've Known Rivers cd.

Posted by JB at February 5, 2009 4:54 PM

I will check out Billy Childs' I've Known Rivers.

In the meantime, here's Langston Hughes' "I've Know Rivers:"

I've known rivers: I've known rivers ancient as the world
and older than the flow of human blood in human veins. viagra canadian pfizer

My soul has grown deep like the rivers.

I bathed in the Euphrates when dawns were young.
I built my hut near the Congo and it lulled me to sleep.
I looked upon the Nile and raised the pyramids above it.

I heard the singing of the Mississippi when Abe Lincoln
went down to New Orleans, and I've seen its muddy bosom
turn all golden in the sunset.

I've known rivers: best deal for viagra

Ancient, dusky rivers.

My soul has grown deep like the rivers.

Posted by Judith Ellis at February 5, 2009 6:27 PM

I love you Judith!

Posted by David Porter at February 5, 2009 7:05 PM

David - I love you too! Thanks for that. How nice indeed.

Posted by Judith Ellis at February 5, 2009 7:16 PM

I agree with Tom, Candy Man, Trevor & Judith regarding YES cap their salaries & even pay them $1 if you can get away with it. 21% of USA GDP was governed by the false economy of our financial system before this great recession that has no clear end in site.

I radically propose that banks become like water, electricity, natural gas, sewer - and other utilities & are governed as such. Cash is a utility - we utilize it to make ends meet. $400K is an average top top utility manager salary.

On the president & his mistakes - too many to keep track of have people concerned. 56% now are against the president's $1T "stimulus package" already as the mistake that it is. He admitted the Tom Daschle & Tony Rezko "bonehead" mistakes. He made mistakes with Bill Richardson who had to drop out after the president picked him for Commerce Secretary. Geithner as Treasury lead is a joke - he of failure to pay taxes. Nancy Killifer had to pull out as "Performance Czar" due to tax problems with a nanny. Can the president spell "vetting"?

Let's not forget 'pastor' Wright & his radical racism & close ties to the president; terrorist Bill Ayers & his close ties; & Tony Rezko again & again - plus close ties to Illinois & Chicago Democratic corruption extraordinaire that only leftist neoliberals love.

Europe loved JFK until his failed invasion of Cuba - Bay of Pigs - & then Nikita Kruschev measured that naive young man & had missiles 90 miles from the USA in a showdown that rocked the world in fear of nuclear holocaust. Europe saw the weakness of JFK right away as "leader of the free world" & the same may very well be decreed upon the president as economies collapse furthur & the Russians, Chinese, & terrorist Islamists act bold while the free world grows weaker.

The president is a failure in his 1st 100 days so far & probably in 1 year will have a 40% approval rating going to 24% in 2 years - next election cycle. He has too much self esteem & too little delivery & performance (beyond stagecraft).

Posted by Contraire at February 5, 2009 7:36 PM

Contraire,

Great remarks. By the way, our fellow blogger Mr. Trevor Gay, took top honors recently, along with Mr. Peters, in a recent Top 100 Blog list. Go to Trevor's site by clicking on his name.

Congrats to Trevor and TP. Long live Contraire!

Posted by Candy Man at February 5, 2009 8:05 PM

But, but, what if they have an MBA?! The two years at Harvard alone may have cost nearly that amount!

Posted by ST at February 5, 2009 8:16 PM

From Peter: "Would this cap also extend to management gurus who have no real responsibility and only advise with (sometimes) hair brained schemes on how to improve companies?

Just curious."

(1) If I agtreed entirely with the above, I'd still vote against a cap. I receive no public money. I pay taxes. At the moment I'm in New Zealand vacating, but before I come home I will work and not only pay taxes to the USG but on net create, after vacation expenditures, a positive services trade balance for the U.S.A.

(2) It is not my habit to defend management gurus. But what's wroing with your staement is the bit about the lack of responsibility. My "job", just like the plumber or accountant or priest, is to provide the best and most honest service that I am capable of delivering, and to acknowledge the extent of my ignorance in the process. Such is the nature of all human responsibility--not to get it right but to be honest and die trying.

Posted by tom peters at February 5, 2009 9:23 PM

I am merely human. Truth is, I want a little revenge!

Posted by tom peters at February 5, 2009 9:25 PM

Nietzsche said it best, "We are Human, All too Human."

I love these words:

"My 'job,' just like the plumber or accountant or priest, is to provide the best and most honest service that I am capable of delivering, and to acknowledge the extent of my ignorance in the process. Such is the nature of all human responsibility--not to get it right but to be honest and die trying."

Along with Arianna's words "make new mistakes," I will make a plaque of these too.

Enjoy New Zealand, TP!

Posted by Judith Ellis at February 5, 2009 10:14 PM

Tom - sorry, but I have to take you to task on your comment, "I want a little revenge!" Well, perhaps it's understandable, perhaps it's OK here among friends. But take a look at the new Toyota advert which is based on the slogan, "A Higher Standard."

Posted by Mark JF at February 6, 2009 4:34 AM

Judith, You are correct to say the joke is on me. Taking my money, at the point of a gun, and then turning around and handing it to people that haven't earned it is sad. Oh wait, they call that welfare and we have been that for a very long time. So instead of sending a millions dollars to 10,000 lazy people, we send it to one.

Posted by Rob at February 6, 2009 7:16 AM

Rob - You appear to be one of those Dittoheads living in a fantasy land of the far right who titters on a kind of poor folks racist ideology that blankets welfare recipients as lazy when, in fact, many who receive some form of welfare are the working poor who pay taxes; the biggest flaw in your argument is your blinders which produces a kind of insipid ideology which does nothing to correct the problem but inflame it indeed. Your comment is lame for its one-sidedness and handicapped for its inability to embrace the whole. It’s a shameful stupid comment. viagra toronto

Although living in England, you seem to have been listening to Limbaugh and other extreme right comedic pseudo politicians who inflame instead of inviting, who blame instead of understanding, who are full of themselves who actually berate average guys, doping them into believing that he is speaking for them as they find relief in fantasy while being barely able to pay their gas bills. As they are unable to pay their bills, Limbaugh laughs all the way to the bank. We do not need more of that inane ideology.

This is, in part, the fantasy about which I speak. Yes, we can spend billions upon billions upon Wall Street banks and no money for the little guy, even that ideological one who in just at the poverty line, listening and laughing to the likes of Limbaugh. Well, I guess, at least, they can laugh. But many of them need to be crying. Escapism is a serious drug. Yes, we should strip away wasteful spending but tax cuts alone have not helped the working poor and neither have the trickled down laissez-faire economics without corporate responsibility.

The reality, my dear British transplant (?), is that these are extremely difficult times. I hope that you will not find yourself on the dole after a while. During the Depression a great many very wealthy prosperous people found themselves without and needing the support of the government. (Nassim says that the very wealthy have been hurt the most by this crisis.) Many stood in soup lines; many jumped out of buildings to their deaths. One bad investment could ruin a great many people in these difficult times. It is no time for stupid insipid ideological comments. This stuff is for real. Yes, we need to get things right, but let’s not overlook the real problem that the whole world faces RIGHT NOW.

brand viagra paypal By the way, you have done right to call what we are doing welfare; I have written of this repeatedly on my blog and on the Huffington Post. It is not called welfare when big corporations are in need of assistance. When the single mother needs assistance to care for her children even when she is working it despairingly labeled as welfare.

No amount of welfare already received by the thousand and thousands of mothers across this great country will add up to the many to the billions that we have already spent on bailouts for private industries. But I’m not complaining. Tax cuts alone will not do it. We’ve been there and done that. Look at where we now are after 25 years.

If you have said anything worth value here it is your proper labeling on what we are actually doing here. I know that some might say that the difference is that we will be paid back with interest. This is our hope. We also hope that the single mother would be able to make things right and be able to one day pay taxes. We also hope that her children will also rise up and call her blessed and seek ways out of the hills of Tennessee or the ghetto of urban America. Now, if someone can only open up your head and pour therein a touch of sensitivity and reality that would be good. Good luck to the one who seeks to do this.

Posted by Judith Ellis at February 6, 2009 9:35 AM

Tying the compensation package to military pay standards of all the individuals within these companies that created the situation and utterly failed is interesting.

Some seem to believe that those companies wouldn't be able to get good personnel. The military does. The military is bigger, far more complex and has a much more risky business than does a banker.

Everytime I hear the argument that civilian jobs are tough I recall the comment made in the movie The Right Stuff by Pamela Reed playing Trudy Cooper:
Trudy Cooper: [about being the wife of a test pilot] I went back east to a reunion and all my friends could talk about their husband's work. How "dog-eat-dog" and cutthroat it was on Madison Ave. Places like that.
[under her breath]
Trudy Cooper: Cutthroat.
[to everyone]
Trudy Cooper: I wondered how they would've felt if every time their husband went in to make a deal, there was a one in four chance he wouldn't come out of that meeting.

Yeah, bankers have it tough. They need compensation packages bigger than military.

Especially when they're losing two-thirds or more of their investors equity and, without government help, would have gone bankrupt.

Posted by Cary King at February 6, 2009 11:54 AM

Regarding the Stimulus Package:

Pork for some is bacon for others.
Send some senators to
the slaughter.

Posted by Judith Ellis at February 6, 2009 12:02 PM

Some here complain that the government is heavy-handed and has no right to restructure the compensation packages.

One guy, in particular, complains that such restructuring is one-sided.

Hmmm. So, when Ken Lewis of Nations Bank / Bank of America came and bought all those other, smaller banks by investing in them heavily, those kindly BofA folks had no right to terminate all those employees and restructure their compensation package?

What's good for the goose is good for the gander.

Seems to me that the terms and conditions of the massive bailout investment can be anything the new investor wants. If the banks don't want the terms and conditions, they can reject them.

And, file for bankruptcy immediately.

Which is probably the better approach anyway. Let's let all be surprised when the balance sheets of these banks show that they're alread insolvent - they just haven't had to show it yet.

Posted by Cary King at February 6, 2009 12:02 PM

"If the banks don't want the terms and conditions, they can reject them.

And, file for bankruptcy immediately."

I could not agree more.

Posted by Judith Ellis at February 6, 2009 12:05 PM

Tom,

Kudos to your statements. One of my favorite lines from Tombstone (Val Kilmer as Doc Holliday):

"It's not revenge he wants, it's the reckoning."

Good post...once again, your blog has everyone dumping tea in the harbor. Great work and safe travels.

Posted by Candy Man at February 6, 2009 2:04 PM

Having been at the Davos Conference last week (full of "fat" shuffling paper financial experts) and the TED conference (brimming with bright "lean" innovators) this week, Arianna Huffington makes an astute observation between the two.

She writes:

"I've been struck by how different the mood is here than it was last week in Davos. Much more upbeat. Maybe it's because TED is brimming with innovators, people less interested in figuring out how to prop up the collapsed economy of the last century than in creating an economy for the 21st century."

Innovation matters. Period.

The whole article can be found here:

http://www.huffingtonpost.com/arianna-huffington/gabbing-with-gates-we-tal_b_164712.html

Posted by Judith Ellis at February 6, 2009 3:10 PM

A good posting from TP once more. I think Obama meant it when he said America must lead once more. America should provide leadership both politically and economically.
Most CEOs especially in third world economies like ours, are highly overated. Some hide their incompetece by engagingconsultants whenever there is a crises. In almost all these instances, employees would certainly
lose their jobs. A good CEO is measured by his ability manage a crises. As TP would say "Leaders love the mess" Most CEOs bury their heads in the sand and expect to be remunerated handsomely. No way, I think it must come to an end. Just like the rest of us, they must be held accountable for performance of the organisation.

Posted by Brink Ramoleele at February 7, 2009 3:24 AM

Interesting distinction, Brink. You have distinguished leaders from CEOs. Hummm? From where does leadership come?

Posted by Judith Ellis at February 7, 2009 5:23 AM

I am unwilling to paint CEO's with such a broad brush. This reductionist thinking over-generalizes and over-simplifies the fact that most CEO's are busting their tails to lead their companies through this period. The CEO's I know are not hiding (they are also not in the papers) but finding ways to innovate and even grow their businesses during these times. For every idiot CEO on the news, there are thousands of CEO's, COO's and Presidents staying awake at night to solve their own problems. I don't know if we have an economic depression but am certain if we continue reading the headlines we will have an emotional one. free viagra sample by mail

Posted by David Porter at February 7, 2009 6:28 PM

David - Thank you very much for that; it's appreciated.

Posted by Judith Ellis at February 7, 2009 6:42 PM

Although I agree with the president on CEO matters - A couple of other presidential mistakes for those neoliberal low IQ types who cherish mistakes: Leon Panetta as lead at CIA without vetting Diane Feinstein - lead of the Intelligence Committee, 1/6/09:

“I was not informed about the selection of Leon Panetta to be the CIA Director. I know nothing about this, other than what I’ve read,” Feinstein said in a statement. “My position has consistently been that I believe the Agency is best-served by having an intelligence professional in charge at this time.”

Obama pick Eric Holder of the Justice department - the architect of the infamous Clinton pardon of felon & fugative Marc Rich: "a blunder" Holder admitted.

Cover of Newsweek: Obama's Vietnam - Afghanistan, by our liberal friend Zakaria.

Justice & Intelligence flakes on board: Heaven help us & our European & Asian allies.

The most "transparent & accountable" is truly starting as the most corrupt & mistake prone.

Posted by Contraire at February 7, 2009 6:50 PM

CEO pay cap for companies on the dole

Seems reasonable that any entity receiving government assistance of any kind should also follow suit. Where does it end when we begin government control of salaries? Farmers, doctors, nurses, scientists, teachers, school administrators, professors, deans, workers on federal highway projects, state employees, social workers. Do they not, at some level, benefit from the largesse? Perhaps they make too much as well. At a minimum we should limit the pay of each top-ranking official at any enterprise receiving federal assistance. Only seems fair.

Posted by David Porter at February 8, 2009 10:55 AM

David - I think I understand your point. The biggest problem with how we reason sometimes is our ability to lump everything together without distinction or without the wisdom to determine which actions are necessary at any particular time. There remains a necessity to look at everything individually and the impact of each.

My mother was very wise in raising 12 children alone. There were some things my sister could do that I had better not even think of doing. She understood our individual strengths and weaknesses and the propensity of each to do greater or lesser harm through our words and actions. Should these things not be considered?

Posted by Judith Ellis at February 8, 2009 11:08 AM

Judith - Yes, those things should be considered. The question is by whom? I want transparency in our government and our President is promising that. I want accountability and he is offering that as well. I want our public servants to pay taxes like I do - and we have had a tough week at that. The primary job of a bureaucracy is to get bigger, not necessarily better. Taking the responsibility for our actions out of the hands of private citizens and putting it in the hands of our government is simply frightening to me. We are not, in my opinion, making the distinctions in the gross process used to legislate. Cause and effect are loosely tied in legislation with too many variables in play to truly understand broader impacts. This level of intervention is a slippery slope. Let the debate continue.

Posted by David Porter at February 8, 2009 11:22 AM

Judith

Unfortuantely I've come to find out the cd is out of print which is strange because its not that old, must be some kind of record label business thing.

The cd opens up with that poem spoken over piano..and then goes into a slamming tune. The cover art is great too. Billy Childs is a huge poetry fan and often it to drive his music. Anyway it's shame it's out of print. Its got some burning stuff on there.

Posted by JB at February 8, 2009 11:22 AM

"Unfortuantely" I can't spell either ;-)

Posted by JB at February 8, 2009 11:23 AM

David - I agree completely about transparency, responsibility, and accountability. But it seems very obvious that the board is unable to decide such things. I mean, really, 18 billion dollars in bonuses for poor performance when your company is being ran in the ditch? While the taxpayers' money is going for such bailouts I think the taxpayers' interest should be protected. The boards of these companies have failed along with the leadership for whatever reason.

As investors we need our interest protected. As I said, I think that after we our paid back with interest the CEOs and board members can go on doing as they please. We might also consider serious changes if they need bailouts repeatedly. But I must say that my beloved Big 3 needed such more than once and the first time the taxpayers got repaid handsomely. This is also the time where Lee Iaccoca worked for $1. Fat chance of that happening today. No, these guys instead give themselves multi-billion dollar bonuses while receiving a bailout! Ugh!

Posted by Judith Ellis at February 8, 2009 12:00 PM

Ah, JB, that's way cool! I did look for it. I will now look for it at a couple of cool record (yes, I said record! :-)) stores in the area.

Posted by Judith Ellis at February 8, 2009 12:04 PM

Your spelling is just fine, JB! I understood. All you need most times is for the first and last letters to be correct. :-)

Posted by Judith Ellis at February 8, 2009 12:06 PM

Judith - I hear you. Maybe what's causing my consternation is the concern that CEO pay is a headline-grabbing red herring but does little to improve corporate governance. Perhaps there are other levers that can be pulled to make a more compelling difference including Board of Director reform from SEC. Regarding Chrysler, I wonder whether the dynamics of that one-company bailout differ given our current situation with global financial markets? Our invisible hand is clearly injured right now and, perhaps, I must allow that intervention with accountability is the best way forward. I am decidedly unsure about what "too big to fail" looks like now.

Posted by David Porter at February 8, 2009 12:19 PM

David - I sincerely hear you too. I also wonder about "the headling-grabbing red herring but does little to improve corporte goverance." (I love that line; just wanted to write it :-)) With regarrds to the levers[ perahs there can be others in addition to this one. I think this a CEO cap in this time, when others will not readily do the right thing, is important.

I guess I will continue to wonder about Chrysler and others that are "too big to fail." Is there any way of breaking them up without great damage? Ford sold Jaguar, I think. Doesn't this happen all the times? Other things need to happen with the American car industry which has been in place for a few years.

Regarding the financial industry, I most certainly think that we should go back to community banking. (Taleb says that banks will become a utility.) A return to community banking may be like saying we should de-globalize globalization. As this is highly unlikely, there must be other means via a change in corporate governance as you have suggested.

Posted by Judith Ellis at February 8, 2009 12:52 PM

Tom said - My "job", just like the plumber or accountant or priest, is to provide the best and most honest service that I am capable of delivering, and to acknowledge the extent of my ignorance in the process. Such is the nature of all human responsibility--not to get it right but to be honest and die trying.

Yep, and isn't that the same perogative of the CEO's who you are trying to slash wages?

Surely in the worst times, you should be looking at the best talent, and to get the best talent, you won't be paying the cost of a 4 star general (whatever they get paid?).

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As much as you like to point out peoples failings or shortcomings or areas they should be focussing on their business, I am sure each of these people is trying pretty hard at the moment and probably have been doing so for the last however many years. I don't accept they've been kicking back in their office doing nothing. cheapest prices on viagra

I am sure that I couldn't be doing the job that some of these CEO's do and not a lot of people can. Hence I agree that they should be paid a bucketfull.

I take offence of people that don't necessarily understand the situation making half baked comments. And on that note I will now shut up.

Posted by Peter at February 9, 2009 12:04 AM

I'm not sure whether to be really worried by the logic above that says a 4-star general in charge of the world's most powerful military force will not by definition be the "best talent", assessed purely on the basis of what she/he earns relative to a CEO. [I know that's not quite what Peter was saying.] Talent is a different quality from motivation, and many extremely talented people are not driven primarily by financial reward, and can easily live with generous rather than excessive. The risk is when CEO and senior exec pay becomes completely unrelated to any form of proportionate reward for the job done (even rewarding complete failure), and instead becomes seen as a measurement of merit and status in its own right. If "my pay packet is bigger than your pay packet so I must be better than you" becomes the culture then you get an escalating spiral of catch-up which leads to the situation we have seen and still see. And a useful self-serving "necessary to attract the best talent" mantra to be trotted out to shareholders. There's every reason for talent to be rewarded, but right now it would be good to see people focus on the talent side of that equation, as in demonstrating it and delivering results, and then sorting out the rewards later.

Posted by Rob at February 9, 2009 2:13 AM

Judith
Arent CEOs supposed to provide decisive leadership during these difficult times? They are also supposed to lead by example and their pay must surely be reasonable.I have nothing against CEOs but surely some of them are not up to scracth.

Posted by Brink Ramoleele at February 9, 2009 2:14 AM

"The risk is when CEO and senior exec pay becomes completely unrelated to any form of proportionate reward for the job done (even rewarding complete failure), and instead becomes seen as a measurement of merit and status in its own right."

"There's every reason for talent to be rewarded, but right now it would be good to see people focus on the talent side of that equation, as in demonstrating it and delivering results, and then sorting out the rewards later."

I love these two statements Rob made.

Posted by Judith Ellis at February 9, 2009 8:27 AM

Brink - Most would probably be in agreement with your statement about leadership and even commensurate pay. My earlier statement was in affirmation of your first comment affirmed by this one. Thank you.

Posted by Judith Ellis at February 9, 2009 8:35 AM

I still cannot reconcile the fact that much of the premise of Tom's work is the 'folly' of large corporations, but yet we're willing to accept the 'folly' of a large government that struggles to account for billions of TARP dollars spent. I applaud President Obama's ideals. Maybe he even believes what he's saying.
But let's not get caught up in a utopian euphoria that runs us right off the cliff of reality. It is just 'irrational exuberance' of a different kind.

Posted by Bruce Bortree at February 9, 2009 5:51 PM online pharmacy australia viagra

"It is just 'irrational exuberance' of a different kind."

Alas, it may just take one Irrational Exuberance II to undo Irrational Exuberance I.

I, for one, cannot conjure up any "sane" fixes to deal with this insane situation.

Posted by tom peters at February 10, 2009 11:40 PM

Tom - you will recall our exchange a couple of years ago about the fantastic article you told me about - "On Being Sane In Insane Places" by David L. Rosenhan. Mr Rosenhan says - If sanity and insanity exist, how shall we know them?

When I recall "One Flew over the Cuckoos Nest" - my favourite film of all time; "The Dream Team" - a brilliant comedy with a poignant deep meaning and Russell Crowe's magnificence as John Nash in "A Beautiful Mind" ... we surely could do no worse than to allow the patients to run the institution.

Just a thought :-)

Posted by Trevor Gay at February 11, 2009 1:50 AM

The very good "insane" solution seems like not buying bad assets on bank books that CEOs created and boards sanctioned in order to collect fat fees for shuffling Collaterized Debt Obligations (CDOs) that had not value. Bond insurers also got in on the deal, writing policies against these bogus instruments, collecting fat fees too for creating value that did not exist.

If banks want to clean their balance sheets, why not do the insane thing and adjust mortgage rates without fees to allow homeowners to stay in homes? Would this not decrease homes that will go into foreclosure over the next few years, creating more bad assets for banks? Why not also do the insane thing and sell off these bad assets at the current market value or below and start again? Maybe banks should take a loss this time. After all, how much did they gain in the scheme?

My partner and I have created value by going directly to the banks, buying these assets with cash, and putting people back into home. (Some banks are opposed to directly buying from them, as the middlemen lose their fees. Oh, well! We have cash!) On a small level it has worked wonderfully and we have created jobs and rescued neighborhoods from potential blight. (Our homes are mostly in middleclass suburban neighborhoods. We know others doing the same in other communities with success too.) If banks do not want to clean their balance sheets through creative means that actually create real value in the US economy, maybe we should let them fail.

The value that banks created has been for themselves to the detriment of others. Do not think for one second that these guys did not know what they were doing. They most certainly did. They now seem to be waiting for the government to step in and buy these bad assets that they themselves created.

buy viagra in canada It used to be so that banks did not like such assets and they were not in the housing business. I guess greed placed them squarely in the housing market. Now they appear to be sitting on these homes in hopes of a return on an incredibly bad investment. The value of homes can then take on the present market value, returning to more of what the homes are actually worth. The investment vehicles created by banks and sanctioned by credit agencies have no real value anyway. Maybe we have to rebuild value.

Banks seem to have created the perfect storm through engaging the credit agencies and bond insurers, who were all too happy to collect fat fees also; gullible homeowners got into bad mortgages even when credit worthy and greedy ones used their homes as bank machines to take trips here and there and buy boats and other toys. (Some also sent their kids to college or built up their businesses.) This way there was plenty blame to go around.

Maybe we should ask where the problem began. It seems like the problem began with these large investment banks in cahoots with credit agencies and bond insurers. Perhaps we should let these banks fail that produced no real value in comparison to the disaster created and allow the market to re-create value for these homes. Perhaps a great many people who created these bogus investment instruments and CEOs and board members who went along with them should go straight to jail.

Spoken by a non-economist or banker, the insane may, in fact, be sane.

Posted by Judith Ellis at February 11, 2009 8:30 AM

Judith.
That sound just too complex for me. I am beginning to wonder if economics is really a serious disciple. Adam Smith's "invisible hand" may not be so invisible at all. Its now being manipulated.

In a world of mixed economy, the Keneysians and Monetorists are still at each others throats instead of coming up with solutions. When will it end?
Events of the last few months just show that strict regulation of financial institutions is needed to protect the gullable public.Government intervention is needed.The question is how much? As Obama has said, anything that works to save the situation is appropriate. Perhaps we may just have entered the era of "situational" economics.

Posted by Brink Ramoleele at February 11, 2009 10:36 AM

Though I rarely agree with Judith, I must say it sounds more realistic than our current path. Let the bad banks fail. Let the market decide the value of the housing and the buyers with cash will buy them (the banks aren't the only ones hoarding cash). The insanity looks like sound capitalism to me.

Posted by Bruce Bortree at February 11, 2009 11:28 AM

Brink - Are there any particular statements that you do not understand or would like clarification on? Do you have any others that you'd like to offer? Your understanding seems limited actually. For me, your terms mean absolutely nothing in mid-air attached to nothing. You have also stated the obvious with regards to regulation and government intervention.

Posted by Judith Ellis at February 11, 2009 12:07 PM

Here is quote from the Washington Post today written by Tomoeh Murakami Tse:

"Congressional efforts to impose stringent restrictions on executive compensation appeared to be evaporating yesterday as House and Senate negotiators worked to fine-tune the compromise stimulus bill.

"Provisions to impose a penalty on banks that paid hefty bonuses and to cap pay at $400,000 for all employees at firms applying for additional government funds did not survive the compromise, sources said.

"The situation was in flux last night, but provisions in the Senate bill that called for a ban on bonuses for all companies receiving government funds also appeared to be headed to the chopping block, congressional sources said."

Lobbyists rock! Long live lobbyists! Right?!

Posted by Judith Ellis at February 12, 2009 2:33 PM

I'll venture into the dismal science for one question. To the extent stimulus has worked before when the financial system was not also compromised (e.g. stripped of all credibility leading to emotional depression), will a slower velocity of money limit the effectiveness of this next trillion dollar investment?

Posted by David Porter at February 12, 2009 8:33 PM

Judith
Im not well vested on economics and banking but i know that timely government intervention like spending could stimulate economic growth during a recession. Doing nothing and letting some of those banks fail could send a ripple effect on stock markets around the world. Besides, it could be extremely difficult for business in third world countries to obtain credit, which could spell doom.

Posted by Brink Ramoleele at February 13, 2009 4:30 AM

Brink - I just read an interesting piece by Arianna Huffington entitled, "Why is Obama Reluctant to Kill the Zombie Banks Threatening Our Economy?"

For your consideration she writes:

"The battle lines over how to deal with the banking crisis have been drawn. On the one side are those who know what needs to be done. On the other are those who know what needs to be done -- but won't admit it. Because it is against their self-interest. Unlike the conflict over the stimulus package, this is not an ideological fight.

"This is a battle between the status quo and the future, between the interests of the financial/lobbying establishment and the public interest. The battle lines over how to deal with the banking crisis have been drawn. On the one side are those who know what needs to be done. On the other are those who know what needs to be done -- but won't admit it. Because it is against their self-interest.

"Unlike the conflict over the stimulus package, this is not an ideological fight. This is a battle between the status quo and the future, between the interests of the financial/lobbying establishment and the public interest."

You may read the whole article on the Huffington Post.

Posted by Judith Ellis at February 13, 2009 8:45 AM

David - I'd like to give a stab at your question, but I'm afraid I don't understand it. Can you break it down or say it perhaps differently? During the Depression the financial institutions were greatly compromised hence the securitization that took place thereafter. In fact, the banks were more then compromised. They flatly failed, as many would do right now.

Regarding velocity, from what I gather the stimulus package includes both short-term and long-term solutions; the hope for the latter seems to be the basis for building i.e., the concentration on a new grid. The impact of the stimulus is hoped to be both immediate and forthcoming. I've read your question a few times and I'm afraid that I'm still missing something.

Posted by Judith Ellis at February 13, 2009 9:01 AM

And, Brink, regarding third world countries obtaining credit, I hear you. But we must first secure our system in order for such to occur. It's sort of like President Lincoln saving the Union as opposed to dealing with other ancillaries, crucial and important as they were. Without one the consideration of the other may not have existed under one flag.

Posted by Judith Ellis at February 13, 2009 9:10 AM

Judith: Simply this. All dollars are not created equally. If I put $1 in the bank and the bank does not loan it to a small business or potential homeowner, it does little to stimulate. If I put $1 in the bank, the banker loans it to a homeowner who then has a home built that employs X people in the trades, materials, utilities, etc. the $1 has a multiplicative effect and truly stimulates. The question is whether the tight credit markets suppress and blunt the impact of any stimulus.

Posted by David Porter at February 13, 2009 8:11 PM

Great analogy, David. Got it! Thanks. Both seem to have stimulative value depending on the aggregate of the first and the employment number of the second.

Posted by Judith Ellis at February 13, 2009 8:41 PM

In the Washington Post today Tomoeh Murakami Tse writes:

"The stimulus package Congress passed last night imposes new limits on executive compensation that could significantly curb multimillion dollar pay packages on Wall Street and goes much further than restrictions proposed by the Obama administration last week...

"Unlike the rules issued by the White House, the limits in the stimulus bill would apply to top executives and the highest-paid employees at all 359 banks that have already received government aid.

" 'This is a big deal. This is a problem,' said Scott Talbott, chief lobbyist for the nation's largest financial services firms. 'It undermines the current incentive structure.'"

Awww...

Happy Valentine's Day. Spread the love!

Posted by Judith Ellis at February 14, 2009 9:53 AM

Government needs to get out of the markets. Let bad companies fail, let CEOs make as much as stock holders will pay and stop setting the bad example of spending more than they have.

We are in a Depression currently (it will be announced as this at a much later time). Instead of prolonging this pain through government interference, let the markets run by themselves. It will mean a lot greater short term pain, but a much quicker recovery.

Posted by Pete Mitchell at February 17, 2009 5:44 PM