GM Spirals the Drain (Part 2)

[KrazyHorse]

Reading the abstract I'm assuming you're trying to prove that CEO pay and company performance are weakly correlated (if at all).

I am more than willing to grant that, as previously stated. However:

a) I am not sure how you are suggesting that we "fix" this. What steps can government take which will not result in all sorts of problems which outweigh the relatively minor benefits?

b) Why is this my problem? I'm not the one paying the CEOs. My wife owns some stock market assets, and I suppose that high CEO pay in general raises the price of all goods and services, but this really is a minor part of the cost of living

[KrazyHorse]

Originally posted by Jon Miller


It is the Board of Directors who determine the pay. Yeah, that is the 'elite' of the stockholders, but they are also the ones whose interest it is to increase CEO pay.

Even Buffet agrees:

http://www.thecorporatecounsel.net/blog/archive/001402.html

JM

The Board is CHOSEN by the stockholders, and can be REMOVED by them!!!

[DanS]

I propose that this discussion be moved to another thread. It doesn't have anything to do with the bailout, or even GM broadly construed.

GM doesn't have normal stockholders. They've all been run off, penniless.

[KrazyHorse]

Again, the major marginal cost of not exercising pay restraint falls on the stockholders. Therefore they are the ones who should control the pay. Which they do. Now you can claim that stockholders should do so more directly to avoid the agency problems inherent in adding levels between them and the decision, but if it were a major issue you would expect to see large numbers of companies being forced to do this by their stockholders. In reality, giving too much pay to a CEO only affects the company's bottom line in a minor way, so stockholders just don't care very much. And if the people on whom most of the impact falls don't care then why should I?

[Jon Miller]

Originally posted by KrazyHorse


As an example of what?

Could you please summarize what point that paper demonstrates so that I don't have to read it and figure out what you mean by posting it?

It shows that the pay of CEOs have increased far greater then the pay of workers. It shows that the US CEO is payed much more then most nations CEO (the closest one is Brazil). It shows that the CEO compensation has also increased as a percent of shareholder wealth (When the stock price goes up, the CEO is given more then before).

JM

[KrazyHorse]

Originally posted by DanS
I propose that this discussion be moved to another thread. It doesn't have anything to do with the bailout, or even GM broadly construed.

GM doesn't have normal stockholders. They've all been run off.

This is true. But the claim that executive pay is somehow a major issue is often repeated in the context of GM.

Is it really that annoying for you to read through these posts? Because the rest of this thread is mostly just a bunch of people cheering or booing the bailout.

[KrazyHorse]

Originally posted by Jon Miller


It shows that the pay of CEOs have increased far greater then the pay of workers. It shows that the US CEO is payed much more then most nations CEO (the closest one is Brazil). It shows that the CEO compensation has also increased as a percent of shareholder wealth (When the stock price goes up, the CEO is given more then before).

JM

So what? What does this demonstrate?

[Jon Miller]

Originally posted by KrazyHorse


The Board is CHOSEN by the stockholders, and can be REMOVED by them!!!

But does the stockholders no eachother personally, excluding big players? We hardly know our presidential candidates and congressmen. The board of directors of a company end up being the major stockholders plus a couple of watchdog people.

In this group, which is the same group that CEOs are often in, there isn't much need for restraint.

JM

[DanS]

It is moderately annoying to read through it. However, the topic is complicated enough to warrant its own thread. As a thread critic, I can say it's not getting very good treatment here. Maybe it would get better treatment as a standalone.

[Jon Miller]

Originally posted by KrazyHorse


So what? What does this demonstrate?

That the current way of doing things results in a higher CEO pay then what is needed. This results in less profit for the corporation (a bad thing), and more income for the elite few (also a bad thing). The only reason it is voted into place is because the elite few are the ones doing the voting.

JM

[KrazyHorse]

But does the stockholders no eachother personally, excluding big players? We hardly know our presidential candidates and congressmen. The board of directors of a company end up being the major stockholders plus a couple of watchdog people.

In this group, which is the same group that CEOs are often in, there isn't much need for restraint.

If most of the stockholdings are represented on the board then most of the pay to CEOs comes directly from people ON THE BOARD. They are paying the CEOs with their own money!

[KrazyHorse]

All right. I'll make a new thread.

[Jon Miller]

Originally posted by KrazyHorse

But does the stockholders no eachother personally, excluding big players? We hardly know our presidential candidates and congressmen. The board of directors of a company end up being the major stockholders plus a couple of watchdog people.

In this group, which is the same group that CEOs are often in, there isn't much need for restraint.

If most of the stockholdings are represented on the board then most of the pay to CEOs comes directly from people ON THE BOARD. They are paying the CEOs with their own money!

The big stockholders != most of the stockholdings.

Millions of people hold stock in this country.

JM

[KrazyHorse]

please post anything further in http://apolyton.net/forums/showthrea...hreadid=182504

[Dinner]

As DanS previously said our "unitary executive" as Cheney likes to call Bush has changed his mind and is now thinking about using the TARP funds to fund the bailout.

BTW it is unfair to say the union was unwilling to make concessions. They unilaterally gave up the Jobs Bank (where workers still got paid even if laid off) and that was a major concession. I further suspect that in negotiations they will concede to take GM stock instead of cash as the 2009 and 2010 pension and health care fund payments. Then GM will be in pretty good shape.

Total costs per employee per hour will then be $55 per hour vs $46 per hour average at the nonunion Japanese. I also agree with John Miller that in order to lower that $55 per employee per hour figure both blue and white collar workers will have to take a pay and/or benefits cut and not just blue collar alone. Remember the exempt employees aren't just the CEO but also lots of engineers and MBAs who also must be factored in.