No Dave, it's you who takes issue with many of my posts, even when they are perfectly logical and make good sense. In this case you said the following to Alex:
"So what's your po "That the guy got a huge severance package despite performing poorly? I don't think Alex mentioned GE."
The point I made was simple and logical. It was neither clueless nor contrary.
Chris
Well, given that a CEO's actions can easiy make or break a company, I really don't have a problem with a _good_ one being rewarded well. It's what I'm hiring them to do after all (as a shareholder).
No, he was one of 3 in line to replace Jack Welch as head of GE back in
2001. It went to Immelt, which in my opinion as someone who spent quite a bit of time researching it at the time, was the correct choice.
Actually, my opinions have mostly been centered around good CEOs being worth paying well, and how Nardelli was the right person to _not_ get the top GE spot.
And yet he was passed over, largely because of the "does not play well with others" aspects.
There are lots of ex-GE managers out there. John Trani went to Stanley Tools, I don't know if he's still there. It's a great way to build leadership, at any level, for those who choose that path.
Yet oddly enough, the mass layoffs I've seen at GE are done by department or project, not by review process. So it works both ways. And the problem often is, by putting on the "get rid fo the dead wood" pressure, often the only effect is that the good people who are left, get overworked, burned out, and find a better job elsewhere.
I never met Jack but Immelt came from Medical Systems, where made frequent visits around the HQ/XRay/Nuclear/PET building complex. He's "real people". Approachable.
Yes, GE as an organization really has their stuff together. From an IT perspective, there are things in place that initially seem overengineered, heavy, or overly expensive, but the economies of having infrastructure in place, robust, and that _just works_ certainly makes doing the actual job easier. I think that's what GE does well - build good infrastructure so the projects can go easier. In small companies (I spent 4.5 years away from GE, and came back), when you first have to cut down the trees and build a road, or sometimes even explain what a road is and why it's useful, it slows down trying to get from A to B.
Right, Chris, _I_ mentioned GE. As in, they didn't promote the guy for good reasons.
===================== Much of the problem can be traced to allowing two type of "money," i.e. "real" and "virtual" to circulate in the economy.
The Officers and Directors of a corporation and the creditors generally demand (and receive) payment in "real" dollars. Much of the remaining corporate income and increasing assets are therefore the "virtual" dollars, existing only as dodgey accounting hypotheticals (pencil whipping), such as "mark to myth" derivative and inventory valuation, including capitalized R&D and the ever-popular "goodwill".
Even when the Officers and Directors are compensated in what appears to be virtual money, such as stock options, in many cases this is rapidly converted into (and may even have been) real money through various subterfuges such as "back dating" to insure these are "in the money." Such practices not only defraud the corporate owners [stockholders] but are also IMNSHO a form of stock market/securities fraud. [FWIW -- under the old legal theory of "master-servant" the profit the Officers/Directors made through the backdated stock options appears to actually belong to the corporation. Don't hold your breath waiting for any recovery.]
When the actual coin-of-the-realm cash earnings are examined, rather than the BS "operating earnings," "IBITDA earnings," and "earnings before expenses" commonly flogged to the great unwashed, it can be seen that in too many cases the Officers and Directors have appropriated *A*L*L* the cash/real income and in many cases are dipping into the cash reserves, and borrowing against the fixed assets [ala Ford].
Sir Thomas Gresham noted c.1575 "bad money drives out good money." In the United States, monetized silver drove out gold [think William Jennings Bryant], then the Treasury greenback drove out silver, after which the Federal Reserve noted drove out the Treasury greenbacks, and we are in the process of driving out the Federal Reserve notes with virtual money.
Note that virtual money, like virtual subatomic particles, comes into existence from nothing, and like virtual particles also disappears back into nothing.
Unka' George [George McDuffee] ............................... On Theory: Delight at having understood a very abstract and obscure system leads most people to believe in the truth of what it demonstrates.
G. C. Lichtenberg (1742-99), German physicist, philosopher. Aphorisms "Notebook J," aph. 77 (written 1765-99; tr. by R. J. Hollingdale, 1990).
================== And another person realizes that the Emperor has no clothes on.
Why would they look at the compensation amounts?
You need to read a good analysis of how retirement and mutual funds actually work. I suggest John Brogle's "The Battle for the Soul of Capitalism." (ISBN 0-300-10990-3) Brogle is not a liberal but the founder and former CEO of the Vanguard fund group. goto:
There is considerable self-dealing in that the trustees for the fund and the officers of the management corporation are generally the same individuals. [Think "setting the fox to guard the hen house."]
Unka' George [George McDuffee] ............................... On Theory: Delight at having understood a very abstract and obscure system leads most people to believe in the truth of what it demonstrates.
G. C. Lichtenberg (1742-99), German physicist, philosopher. Aphorisms "Notebook J," aph. 77 (written 1765-99; tr. by R. J. Hollingdale, 1990).
=============== Sounds like somebody already got to the judge....
Unka' George [George McDuffee] ............................... On Theory: Delight at having understood a very abstract and obscure system leads most people to believe in the truth of what it demonstrates.
G. C. Lichtenberg (1742-99), German physicist, philosopher. Aphorisms "Notebook J," aph. 77 (written 1765-99; tr. by R. J. Hollingdale, 1990).
Heh!
All part of the legal counterfeiting at the hands of our government-----a government that is-------- us?
Some pretty bright people must have been involved with this pyramid scheme-------but, it, to me, appears to be coming to an end.
Harold
Governments generally issue what I call real money, although they are rapidly segueing into the virtual side, for example the so-called "trust fund accounts" for social security, which have not one cent of real money in them.
Inflation of the currency has always been a problem, even when actual metal such as gold and silver was in circulation. The silver content of the Roman Dinarious fell along with the power of Rome until both hit zero. See:
In the past the King took a very dim view of any attempt to get a piece of his action by independent counterfeiting. The recent development of the ability of many private companies ability generate virtual money in operationally unlimited amounts [think Enron] is something new. In the past this has been limited to the Federal Reserve Banking System with its ability to monetize the Federal debt by issuing 10 Federal Reserve dollars against every dollar of Federal debt they "owned," which they purchased with the Federal Reserve dollars they generated in the last cycle.
Useful (but dangerous) practices such as "fractional banking" are controlled in areas of US jurisdiction through minimum capital reserve requirements, but this does not appear to apply to non-banking financial institutions. Many of our corporations such as GMC no longer derive the bulk of their income through value-added manufacturing but rather through financial speculation, manipulation and profiteering [think credit cards], generally involving the conversion of the customer's/consumer's real money to virtual money with increased face value (for an apparent profit), and the disappearance of their real money.
The closest historical parallel I can think of is the Dutch Tulip mania. See:
Unka' George [George McDuffee] ............................... On Theory: Delight at having understood a very abstract and obscure system leads most people to believe in the truth of what it demonstrates.
G. C. Lichtenberg (1742-99), German physicist, philosopher. Aphorisms "Notebook J," aph. 77 (written 1765-99; tr. by R. J. Hollingdale, 1990).
Gee, you would think there is a double standard for workers and management. The CEO of HD gets 150 million in salary over six years when the company does poorly and the stock loses 20%. Then they let him go with another 200 million in compensation. That's easily over 300 million over a six year period when, by any standard, his performance was lousy. So much for paying for top quality leadership.
At the same time the company is chiseling it's employees as pointed out above. It's clear as a bell that there is one scale of pay for top management and another for ordinary workers. Top managers don't even need to do the job to get obscene pay and ordinary workers are asked to give up benefits and to subsidize the business. Something wrong here. With that kind of inequity you would think workers would actually complain. But nope, instead many workers have nothing but admiration for the salaries of the top management. It makes me think those folks would actually like it if you beat them on a regular basis and would pay you to do it. It's no wonder the working class is taking it on the chin. No matter how badly the upper class abuses them they do nothing. That sure wasn't the case in the 1930s. So I guess it's true that American workers ain't what they used to be. They used to have spines. Now they don't.
Hawke
On Sat, 6 Jan 2007 20:54:11 -0800, with neither quill nor qualm, "Hawke" quickly quoth:
Really.
That's because too many of them aspire to those very positions and want the dough to be there when they get there. The tendency is from pure avarice.
I recall some furniture Andy D. built for those types. I hear there's good money in it. ;)
Given those we now have in management--both privately and governmentally--I'm sure you're right.
--============================================-- Growing old is mandatory; growing up is optional. ---
An idea that companies need to pay so much, to attract bright and motivated people to lead them, is ridiculous. I own some shares of Berkshire Hathaway, so I often read Buffett's writings, and I agree with him 100% on executive pay. These excesses happen because there is no one to say no to the greedy CEOs. Compensation consultants make the problem worse, not better.
i
============================ This is yet again a demonstration of the law of unintended consequences.
As a result of the "greenmail," hostile take over bids, etc.
1970s-1990s, some of the best legal minds devised a series of measures designed to insulate corporations from their stockholders.FWIW - while the greenmail efforts, and hostile takeovers were largely derided in the press at the time, later analysis indicates these did have the positive result that corporations setting on enormous piles of cash were forced to remit this to the actual owners, i.e. the stockholders. This had several good results: it reduced the temptation of the Officers and Directors to engage in hare-brained get-rich-quick schemes; It reduced the amount of cash on hand available for bonuses/skimming; and it put the money back into circulation, making it taxable. Does anyone remember the film "Barbarians at the Gates" with James Garner and the famous line "Why would I want to give these people any money? [The stockholders] I don't even know these people."?
The implementation of measures such as staggered terms for the directors, poison pills, different classes of stock with limited voting rights, has operationally made the Directors, and thus the Officers of the corporation beyond the reach of the stockholders under normal circumstances. To a slight degree Directors still remain liable for mis-, mal-, and nonfeasance in their fiduciary duties, but this is a long shot unless you have deep pockets and an Elliot Spitizer on your side. Officers & Directors insurance weakens even this slight leverage. Consider that no member of the Board of Directors of Enron was ever indicted or tried, let alone convicted.
However there is an even more serious aspect to this than simply looting the coporations/stockholders. The political organization of the United States is a representative democracy, or republic. History clearly shows this is a viable government only for a reasonably homogenous population, at least the segment with a vote. With the expansion of suffrage to almost all adult citizens, it is a sure recipe for disaster to allow the establishment and expansion of a ruling elite having no connection with, nor concern for, the vast majority of people. This is not to say they are bad or callous, but rather they are isolated/insulated by their money. Warren Buffet and Sam Walton show this is not an automatic result of wealth, but it is a likely condition.
History shows some likely outcomes of this isolation and alienation such as: The French Revolution; The American Civil War; The Russian Revolution; and all the very unpleasant consequences these produced. Thus, it is in everyone's interest to get this problem corrected, even the moneyed elite.
Unka' George [George McDuffee] ............................... On Theory: Delight at having understood a very abstract and obscure system leads most people to believe in the truth of what it demonstrates.
G. C. Lichtenberg (1742-99), German physicist, philosopher. Aphorisms "Notebook J," aph. 77 (written 1765-99; tr. by R. J. Hollingdale, 1990).
He did not get a huge severance package. What he got was what he was promised when he started to work for Home Depot.
Dan
Lousy? HD earnings per share have risen 20 percent annually under his leadership, that is not lousy, that is outstanding, a CEO can't control short term stock price, he can only control earnings, and he did.
GE's stock prices has been static for the last 6 years, but earnings have increased every year, but if the company is not in favor with wallstreet, the stock won't go up.
================== Which earnings are we talking about? "Operating Earnings?" "EBIDTA Earnings?" "Earnings before Expenses?" Earnings are an accountants' wet dream and can be "adjusted" to anything you want. The number of importance is "net cash earnings. Only two things count for today's shareholder. Stock price and dividends. Everything else is simply MBA bull s**t.
For the increasingly rare investor, the long-term viability of the business as a going concern *M*A*Y* also be of interest, particularly if they are an employee or retiree of the company.
Unka' George [George McDuffee] ............................... On Theory: Delight at having understood a very abstract and obscure system leads most people to believe in the truth of what it demonstrates.
G. C. Lichtenberg (1742-99), German physicist, philosopher. Aphorisms "Notebook J," aph. 77 (written 1765-99; tr. by R. J. Hollingdale, 1990).
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