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Author Topic:   Executive Pay - Good Capitalism Bad Capitalism?
Straggler
Member
Posts: 9968
From: London England
Joined: 09-30-2006
Member Rating: 1.7


Message 1 of 12 (647231)
01-08-2012 6:50 PM


Here in the UK the 3 main politcal parties are tripping over themselves to be seen as the implementors of executive pay restraint.

Conservative prime minister David Cameron has described top pay of executives and bankers as a "market failure" Link

Is he right?

Are the salaries of the economic elite out of control and in need of regulation?

Or should the unrestrained market decide what is, or is not, acceptable without state comment or interference?

In the wider context - What is 'Good capialism' and what is 'Bad Capitalism' and who (if anyone) decides which is which?


Replies to this message:
 Message 2 by crashfrog, posted 01-08-2012 6:55 PM Straggler has responded
 Message 4 by cavediver, posted 01-09-2012 3:16 PM Straggler has responded

  
crashfrog
Inactive Member


(4)
Message 2 of 12 (647232)
01-08-2012 6:55 PM
Reply to: Message 1 by Straggler
01-08-2012 6:50 PM


Or should the unrestrained market decide what is, or is not, acceptable without state comment or interference?

Is the market deciding? These enormous CEO salaries are overwhelmingly the result of collusion between CEO's and executive compensation committees, who are usually also executives at the other companies the CEO in question serves on the compensation committee of.

Of course, the situation is much worse in the US.


This message is a reply to:
 Message 1 by Straggler, posted 01-08-2012 6:50 PM Straggler has responded

Replies to this message:
 Message 3 by Straggler, posted 01-08-2012 7:02 PM crashfrog has not yet responded

  
Straggler
Member
Posts: 9968
From: London England
Joined: 09-30-2006
Member Rating: 1.7


(1)
Message 3 of 12 (647234)
01-08-2012 7:02 PM
Reply to: Message 2 by crashfrog
01-08-2012 6:55 PM


Crash writes:

Is the market deciding?

Who is the market?

The currently colluding CEOs seem to think that they are the market in this regard. They may be wrong in some sense. But unless actually made to be wrong they are arguably "right" at least in market terms (given that they define the market).

So - I agree with you that they shouldn't be. But I would argue that the market is effectively rigged in their favour and that they rather self servingly define the market.


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cavediver
Member (Idle past 108 days)
Posts: 4129
From: UK
Joined: 06-16-2005


(1)
Message 4 of 12 (647394)
01-09-2012 3:16 PM
Reply to: Message 1 by Straggler
01-08-2012 6:50 PM


Are the salaries of the economic elite out of control and in need of regulation?

From my perspective:

Exec salaries are high because they need to compensate the execs for not being free to set up their own businesses which, if successful, could make them much wealtheir than any salary. A typical exec-candidate will be in a prime position to set up his own business: market knowledge, business experience, and a wealth of contacts. In fact, he will almost certainly have a bunch of peers who have done precisely that. The companies want execs with these skills and knowedge bases and need to make the exec position tempting compared to the entrepreneurial route.

I think the bull-markets of the late 90s and the dot-com boom were partially repsonsible for taking the above to a new level. There was stupid money around for those setting up tech companies, and the money you could making trading was equally staggering; the execs were looking relatively impoverished. I remember back then reading complaints concerning exec pay (~500,000) and thinking it odd that no-one knew what the real big salaries/bonuses were like (as in the traders making multiple million bonuses) So the exec remuneration started playing catch-up through the 2000s.


This message is a reply to:
 Message 1 by Straggler, posted 01-08-2012 6:50 PM Straggler has responded

Replies to this message:
 Message 8 by Straggler, posted 01-13-2012 5:08 PM cavediver has responded

  
jar
Member
Posts: 24775
From: Texas!!
Joined: 04-20-2004
Member Rating: 1.6


(5)
Message 5 of 12 (647411)
01-09-2012 4:05 PM


I think it is silly to even consider regulating or limiting compensation.

But I also think that it is in everyone's interest to make it difficult to create a "monied class" and so favor very high progressive taxation on all compensation as well as a very high progressive inheritance (as opposed to estate) tax.


Anyone so limited that they can only spell a word one way is severely handicapped!

  
Phat
Member
Posts: 7392
From: Denver,Colorado USA
Joined: 12-30-2003
Member Rating: 1.0


Message 6 of 12 (647836)
01-11-2012 2:35 PM


From A Union Perspective
I believe that these individuals are by and large grossly overpaid for the value (if much) that they provide to their corporations. Usually, it is labor that gets cut in order to trim expenses, even though we indirectly collect every nickel of profit that the corporation makes. (In my industry, at least) To me, it makes much more sense to chop ten million off of one salary rather than lay off 1000 people costing $10,000 too much in terms of labor. (yearly)

The American Dream has already been poisoned and taken over by the 1% U.S. monied class, and its about time that the blue collar workers reclaimed their justified share.


  
DC85
Member (Idle past 227 days)
Posts: 854
From: Richmond, Virginia USA
Joined: 05-06-2003


(4)
Message 7 of 12 (648054)
01-12-2012 11:55 PM


How is it that in the modern world it's ok for Executives to have salaries in the millions plus bonuses Even when the company does poorly? Then these same companies have the nerve to turn around and blame Labor costs a benefits?

When did Bankruptcy come to be a way to protect a bonuses instead of real structure? Why is it always and only the fault of the "greedy" Unions?

American Airlines is the most recent to blame labor costs...

Am I the only on annoyed by this? Why don't THEY take a pay cut? Why do employees have to be the only ones to concede and sacrifice?

Edited by DC85, : No reason given.


Replies to this message:
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Straggler
Member
Posts: 9968
From: London England
Joined: 09-30-2006
Member Rating: 1.7


Message 8 of 12 (648184)
01-13-2012 5:08 PM
Reply to: Message 4 by cavediver
01-09-2012 3:16 PM


Cavey writes:

Exec salaries are high because they need to compensate the execs for not being free to set up their own businesses which, if successful, could make them much wealtheir than any salary.

IF successful.....

Isn't good capitalism about rewarding innovative and entrepreneurial risk taking?

Frankly - If these execs could all successfully start their own highly rewarding companies then they could contribute to the collective wealth of the nation far more effectively by doing so than by heading up the existing companies that they do. I think we should take measures to encourage them to leave these jobs and setup the sort of new companies that you are saying they would.

But it strikes me that the risk factor of taking a position in a FTSE 100 company (or equivalent) is far less than investing one's existing wealth in starting a new company.

The CEO of the multi-billion multi-national I work for spends most of his time on the golf course. He also conveniently arranges his globe trotting around various sporting events. He is in London for Wimbledon, Melbourne for the boxing day test, wherever for the champions league final and so on and so forth. No doubt he will be in Eastern Europe for the Euro football this summer and back in London well in time for the Olympics. Could he go off and have an equally comfortable and profitable life by risking his own money in his own startup company? I very much doubt it.

What we seem to have in place at the moment is privatised profit and socialised risk.


This message is a reply to:
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Replies to this message:
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frako
Member
Posts: 2402
From: slovenija
Joined: 09-04-2010


Message 9 of 12 (648187)
01-13-2012 5:51 PM
Reply to: Message 7 by DC85
01-12-2012 11:55 PM


Why don't THEY take a pay cut?

Um our former "Prime Minister" said he had a monthly wage of 3001 EUR (lied of course more in the 12 000 range plus benefits perks and 400 eur every time they have a session)and claimed he can barley survive on that salary if he dint have saved up funds he would go broke.

Now the only part i believe is that if he dint have saved up funds he would go broke because people with allot of cash flow tend to spend way more accumulating debt they have to pay off. A wage cut would would mean for a lot of them that they would have to sell their boat, or their mansion, and buy something they can afford, and that is a serious no no, its better that a few thousand live on the streets then them having to give up their Lamborghini.


Christianity, One woman's lie about an affair that got seriously out of hand

This message is a reply to:
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cavediver
Member (Idle past 108 days)
Posts: 4129
From: UK
Joined: 06-16-2005


Message 10 of 12 (648191)
01-13-2012 6:15 PM
Reply to: Message 8 by Straggler
01-13-2012 5:08 PM


But it strikes me that the risk factor of taking a position in a FTSE 100 company (or equivalent) is far less than investing one's existing wealth in starting a new company.

Very true. I have no real objection to the large rewards given for running a successful company, and I probably disagree with you that it would be better for good execs to be starting their own businesses instead of running existing corporations: I have seen large companies fail under bad leadership and the fallout is unpleasant to say the least.

But I strongly object to the golden parachutes and downside remuneration that seems to have become endemic. It is akin to the problems with trader bonuses encouraging excessive risk taking owing to a lack of downside consequences. This was something I tried to address long ago whilst advising banks in my role as a risk management consultant.


This message is a reply to:
 Message 8 by Straggler, posted 01-13-2012 5:08 PM Straggler has not yet responded

Replies to this message:
 Message 11 by crashfrog, posted 01-13-2012 7:36 PM cavediver has responded

  
crashfrog
Inactive Member


Message 11 of 12 (648194)
01-13-2012 7:36 PM
Reply to: Message 10 by cavediver
01-13-2012 6:15 PM


This was something I tried to address long ago whilst advising banks in my role as a risk management consultant.

How'd that turd in the punchbowl go over?


This message is a reply to:
 Message 10 by cavediver, posted 01-13-2012 6:15 PM cavediver has responded

Replies to this message:
 Message 12 by cavediver, posted 01-15-2012 4:31 AM crashfrog has not yet responded

  
cavediver
Member (Idle past 108 days)
Posts: 4129
From: UK
Joined: 06-16-2005


Message 12 of 12 (648382)
01-15-2012 4:31 AM
Reply to: Message 11 by crashfrog
01-13-2012 7:36 PM


How'd that turd in the punchbowl go over?

In the banks' risk departments, great.

But until risk departments are regarded as "profit-saving" centres and not just cost-centres merely there for the sake of compliance with the FSA/SEC, then don't expect too much...


This message is a reply to:
 Message 11 by crashfrog, posted 01-13-2012 7:36 PM crashfrog has not yet responded

  
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