Obama new cause for poverty in America?

[KrazyHorse]

A financial company is NOTHING LIKE a unified team. Instead, they emphasize individual responsibility for smaller units. Paying people based on how the whole company does is not a good idea, because it creates free rider problems.

If one guy's unit does really well while some other guy's unit does really poorly then holding the good performer responsible for the poor performer's failures is counterproductive. It destroys the rationale for performance based pay.

Unlike workers in many other parts of the economy, financial sector professionals live and die on their own performance. I wouldn't expect a union lawyer to understand that.

[MRT144]

The only problem I have with very, very high rates of taxation on high incomes is an empirical one. The question is what the labor supply curve looks like at that high a level of income. It's fairly obvious that, at least in the short run, the US is NOT currently on the wrong side of the Laffer curve for these incomes (though it may have been when the top federal marginal rates were at or above 70%). However, as you get higher and higher up in marginal rates you begin to destroy x$ in economic activity for every dollar in additional revenue you collect, where x is much more than one. Also, it should be noted that there are parts of the income distribution which are likely on the wrong side of the curve, once benefit phase-out is accounted for.

On the other hand, I have a serious problem with capital gains taxation. Taxing capital gains introduces a distortion between saving and spending, and almost certainly significantly reduces long-run growth. Thankfully, IRAs provide an avoidance mechanism, but this is only a stopgap measure.

I also have a problem with really high taxation but when considering punitive options, this one seems a little less awful than simply putting a ceiling on compensation.

[MRT144]

Well, tell that to the people who have decided that fresh PhDs in serious subjects should toil away for between 40-50k for 6 years in order to get a low-probability shot at securing a faculty job paying 90k

Or if they go into tech industries, that these fresh PhDs should only get paid 70 or 80k, going up to 120k or so with 20 years experience.

**** that noise. I'm going where the money is.

How can you increase pay in the academic sector?

[DaShi]

Well, tell that to the people who have decided that fresh PhDs in serious subjects should toil away for between 40-50k for 6 years in order to get a low-probability shot at securing a faculty job paying 90k

Or if they go into tech industries, that these fresh PhDs should only get paid 70 or 80k, going up to 120k or so with 20 years experience.

**** that noise. I'm going where the money is.

This I agree with. PhDs are getting shafted for the time they spend in school, if they want to work in their fields.

[GePap]

What needs to be done to curb execise pay is empowering stockholders, whether individually or collectively. It is a travesty that top executives are generally the ones who chose board members, the very people who decide what management gets paid, and for the most part, those board members have no real fiduciary responsbility to the technical owners of the corporation, the stockholders. What we currently have is out of control entrenched management that suffers few if any losses even if they bankrupt the shareholders.

As such, laws should be change to give shareholders greater control over picking the board members and removing them if necessary, pay packages have to be completely transparent and available for scrutiny by shareholders and shareholders should have the power to deny any pay agreements made by the boards. Then, the laws regarding large institutional investors should be changed, at a minimum this should be the case for pension plans and large mutual funds into which a lot of money is placed by individuals who have no real ability to keep an eye on the corporations their money is going towards. These funds should be made more responsible and at least pension funds should not be allowed to invest money in any corporation with pay packages in which management is either not on the hook for loses or is given some sort of golden parachute. Imagine if the hundreds of billions in pension funds could not be used to propr up companies in which top execs. were to be held blameless for their failures - it would get a lot of corporations to stop providing perverse incentives.

[KrazyHorse]

How can you increase pay in the academic sector?

I don't know if there is a reasonable way. Too many academics want to do academic research with almost no regard for pay, so the pay gets driven down. Those of us without strong preferences get to make out financially due to that choice.

Unlike DanS, I DON'T believe that too many smart people go into finance. The 50s and 60s are long gone. Financial services is and should be a major part of an economy which continuously grows more complex and larger.

[KrazyHorse]

I have no problem with corporate structures that allow shareholders to vote on WHATEVER aspects of pay they want to. I am ambivalent about forcing companies to write this into their bylaws. I am certainly against disadvantaging pension plans by prohibiting them by law from investing in companies organized differently. What if it turns out that current levels of stockholder control on pay are better than more detailed control (say, because the stockholders are not as informed as the directors)? Why are you in favour of crippling pension plans?

[DanS]

However, a good chunk of the banking industry was negligent in its fiduciary duties

Really? How do you know that?

I think there is considerably less mystery here than you are letting on. Dude, our largest bank had half of its assets hidden off the fvcking balance sheet!

It was dishonesty. Negligence.

[Imran Siddiqui]

Then, the laws regarding large institutional investors should be changed, at a minimum this should be the case for pension plans and large mutual funds into which a lot of money is placed by individuals who have no real ability to keep an eye on the corporations their money is going towards. These funds should be made more responsible and at least pension funds should not be allowed to invest money in any corporation with pay packages in which management is either not on the hook for loses or is given some sort of golden parachute. Imagine if the hundreds of billions in pension funds could not be used to propr up companies in which top execs. were to be held blameless for their failures - it would get a lot of corporations to stop providing perverse incentives.

So you want Mutual Fund companies to be forced not to invest in stocks of companies that may be profitable because they don't follow the proper organization? Most pension plans are of the 401(k) type. Those participants will choose the funds that have historically had the best earnings (ideally, most participants have little clue about these things). So you want the government to have a clearing list of companies that companies like Principal, John Hancock, etc, can have mutual funds (or at least a separate category of pension plan available mutual funds) invested in? All that will really do is drive down investment earnings.

[GePap]

I have no problem with corporate structures that allow shareholders to vote on WHATEVER aspects of pay they want to. I am ambivalent about forcing companies to write this into their bylaws. I am certainly against disadvantaging pension plans by prohibiting them by law from investing in companies organized differently. What if it turns out that current levels of stockholder control on pay are better than more detailed control (say, because the stockholders are not as informed as the directors)? Why are you in favour of crippling pension plans?

Given that the public is on the hook for pensions no matter how the funds do (since they are a guaranteed benefit), they should seek stability and safety above everything else, and I do believe that having a pay scheme that puts top management on the hook for loses would give management an incentive not to take excessive risks. The fiduciary resposiblity of the pension managers is to first make sure that there is enough to pay the promised benefits, then to seek to expand the fund as much as possible.

And looking around the current economic debris, I highly doubt that the current system of setting pay is in any way adequate. All the incentives are in short term profit, without any thought to long term stability.

[KrazyHorse]

Your views on portfolio construction are perhaps the most laughably retarded I've heard in weeks.



Portfolio managers can (and do) ALREADY reduce volatility by reducing the beta on their portfolios. However, if you force pensions to invest solely in corporations organized the way you like, then you reduce their ability to find the efficient risk/reward frontier (since they are restricted to a subset of the market rather than the market as a whole). Even worse, a legal restriction on pension plans would drive down yields in the segment of the market they ARE allowed to invest in. The CAPM provides ample basis for the idea that attempting to reduce risk by restricting the segment of the market you invest in is simply more expensive than reducing risk by allocating more to low-risk assets (money markets, short term corporate paper, gov't bonds, etc.)

None of this is to even mention the fact that your tired meme of pay being aligned with short-term gain rather than long-term gain is a blatant overgeneralization. There is absolutely no evidence that firms with higher levels of executive ownership have lower variance of return than do firms with lower levels, and in fact, there is evidence that the opposite may well be true (possibly because those people who choose to own their own employer's stock are more overly optimistic than those with smarter allocations).

[MRT144]

Pension managers are lazy, incompetent, easy to corrupt, and overly willing to cede decision making to a 3rd party who doesn't really care about assets under management (cause if they did how did pensions get the most ****ed up?). Pensions should be abolished.

[KrazyHorse]

Defined benefit pensions are retarded. Especially public ones. They're giant slush funds which let the employees opt out of the responsibility of thinking about their own futures and which let the corporations defer compensation for the future (a future in which they assume they'll be much bigger and more profitable than they are today).

The SS scheme is the worst example of this.

[Kuciwalker]

Defined benefit pensions are retarded. Especially public ones. They're giant slush funds which let the employees opt out of the responsibility of thinking about their own futures and which let the corporations defer compensation for the future (a future in which they assume they'll be much bigger and more profitable than they are today).

OTOH, they've provided my dad with many, many years of the kind of salaries Obama wants to tax.

Defined-benefit plans

[zakubandit]

I'll admit I didn't read 95% of the posts....honestly whats the point.

I am just spit balling here, but isn't it work and be paid? So Obama wants to cut 90% of the best 25 employees from...so they work hard and not get paid. Liberal thinking is that if someone works hard for x amount of years and eventually get to ^ positions. After obtaining this from your hard work and dedication you recieve $$$ for salary. Now the government wants to say you can't have $$$ but only $. And why? What is the justification? Beacuse consumers buy the products? Because they are successful? Because of all the money they make from whatever business they do makes them evil, even if said business is a major commodity? Why? What exactly justifies the government telling Mr. Jones who is 74 and worked for decade after decade to become CFO of Big Bucks Merchants that he does not deserve to make 6 or 7 figures a year?