HERE IS WHAT'S WRONG WITH BUSINESS.

[joshzz]

The headlines make it clear, "Tribune proposes paying senior executives an additional $15 million"

Big Business in America is corrupt and causing the downfall of this nation.

Tribune is a large media company that is deep debt and in bankruptcy. Instead of trying to fix the problem and get back on track with a new, greater vision, the corrupt and I do mean corrupt executives have decided to pay themselves huge bonuses during a time of major crisis - Indeed the company is experiencing the worst crisis in its history.

This is what is wrong with the large companies, not just media - Executives have no allegiance to the companies they serve - It is like the captain of a ship and his crew stealing the life rafts while watching their ship and passengers sink to the bottom of the ocean.
Greed will hasten the demise of the Tribune and this nation.

 

[Goat Rodeo Cowboy]

I could have penned that same rant a few years ago, Josh.

I still have some misgivings about the size of some paychecks, but here is the story that changed my thinking.

Good friend of mine had a really great job. For all I know he could have ended up eventually owning the company. But he resigned one day to take a different job.

The bankruptcy trustees of Adelphia (cable) obtained permission from the bankruptcy court to reinvent the company. They hired a man to lead the task at pay levels that boggled my mind.

That man was able to call six or eight very capable people who had enough trust and faith in the first man to quit their super-substantial jobs and come join in the task.

One of those very capable people called my friend and said: "I need you!" My friend had a long, long, long list of reasons why he should not make such a change. But in the end he had enough trust and faith in the friend who called him, and faith and trust in the first man that he accepted the assignment.

Each of the first 6 or 8 had to get on the phone and recruit people in their particular specialty.

Was the first man smarter than me or you? I don't know. Never met him. Did he know more about the cable industry that your or me? Maybe. Probably.

Did the first man know more about dragging a sick corporation out of the ditch and getting it back on it's feet than you or me? Apparently because that got the company upright again, broke it in two and sold it off to two buyers.

The first man didn't get the big, big, big bucks because he knew how to string cables from pole to pole and how to sign up customers for cable service.

His paycheck was based on the fact that people trusted him. People in the industry that would come to work for him under shaky and unknown circumstances. People in the investment banking industry trusted him. People in government regulatory agencies knew him and trusted him.

How do you put a value on a Pied Piper who can gather together a winning team?

(Sorry. I don't have a good story why we pay big bucks to guys running companies that fail, companies that see their best talents leaving for greener pastures)

 

[SirRoxalot]

For too many executives, the paycheck and/or bonus is just a way of saying "mine's bigger than yours". It doesn't affect their lifestyles, their retirement, or their performance.

What's forgotten is that every million dollars that goes into an executive bonus means 10-15 jobs for the people that actually produce the product. That's 10-15 families that have to find employment elsewhere, move to a different field, or do without. Those 10-15 people are going to spend those paychecks on food, clothing, and shelter, and that money is usually going to circulate a lot faster than the million dollar bonus check.

The US pays top executives far more propotionally than any other country in the world. Boards of directors that approve that type of salary structure are populated by overpaid executives from other companies in a "you scratch my back, and I'll scratch yours" scenario.

 

[Goat Rodeo Cowboy]

For too many executives, the paycheck and/or bonus is just a way of saying "mine's bigger than yours". It doesn't affect their lifestyles, their retirement, or their performance.

What's forgotten is that every million dollars that goes into an executive bonus means 10-15 jobs for the people that actually produce the product. That's 10-15 families that have to find employment elsewhere, move to a different field, or do without. Those 10-15 people are going to spend those paychecks on food, clothing, and shelter, and that money is usually going to circulate a lot faster than the million dollar bonus check.

I tend to be on your side of the argument.... but you may have to rethink the logic you use to show how wrong it is.

A few years ago we were vacationing in Michigan and we found ourselves walking through the quaint little lakeside village of Saugatuck. And as we strolled down through the docks we came across a couple of obscenely opulent motor-yachts that could only be owned by people who fit the income levels you described above.

Here is what caught my attention: like a small swarm of bees all of the people were catering food to the yacht, emptying the ingredients of the tank below the head, putting fuel in the tanks. The owners of the boats were apparently inside the very nice restaurant where food servers, cooks, bartenders and others were looking after their needs. I suspect before they pulled anchor and sailed away they may have dropped a few dollars with the retailers a block away who displayed an array of souvenirs and flashy clothing. The 10 or 12 people back in Chicago that didn't get a factory job making widgets seemed to all be working away in Saugatuck.

I doubt if very many of the over paid executives ever come home on Friday and say to the wife: "Mix up a couple of drinks and come on out back. I got my bonus today and there is an extra million I have no idea what to do with so let's set it on fire and watch it burn."

Besides water and boats, one of my other passions has been airports and planes. And when I travel I am likely to take in those vacation land airports. Same fire drill. A small swarm of worker bees descent on the incoming craft refilling the galley with catered food, dumping what is in those tanks under the toilet, dispensing aviation fuel and other essential services.

So do big bonuses actually eliminate jobs.... or just relocate them?

 

[SirRoxalot]

The "swarms of worker bees" whom you reference are typically making service industry wages, with few benefits. Too many are in that neverland of "not enough to live, but too much to collect benefits". So, you're looking at (hopefully) the lower-paid side of the two-income family.

The yacht owner paid big money for the yacht, burns a lot of fuel, pays docking fees, and drops a few hundred on catering. The people doing the work will be putting ALL their money into food, clothing, and shelter. The impact is much more immediate on the local economy, and is continuous, not a one-time-only. Not only that, but that continuous flow of money helps other people build a stronger local economy providing that food, clothing, and shelter.

From an economics standpoint, a lot of customers over a wider market is a more stable growth environment than a few customers walking through the door and dropping big money in fewer markets intermittently. And that's without considering a benefit to the lifestyle of many people as opposed to benefitting the lifestyle of very few.

 

[gr8oldies]

Here's the problem. Yes, you can eliminate the CEO and divide his salary among all the workers, maybe giving them $2 an hour. Meanwhile the CEO goes to work for an overseas company and kicks your company's butt since you decided to put the pizza boy in charge.

 

[joshzz]

Hi gr8oldies,

I respectfully disagree with you.

Look at what's happening at the Tribune - the corporate executives are gutting the company by stealing what's left of it and giving it as bonuses to themselves.

That's what the GIANTS OF CORPORATE America are doing - the very idea that they have such great wisdom is silly.

Let all the AIG types go overseas -

A worthy CEO is not going to do that - In fact, a good CEO will lead modestly and expect the same of his employees -

It is my hope that America, specifically the middle class, will wake up and realize that this is our country, and take it from the corporate elite that have run this nation into the ground- we have the power as long as we have the right to vote- we just need the vision.

 

[landtuna]

It is my hope that America, specifically the middle class, will wake up and realize that this is our country, and take it from the corporate elite that have run this nation into the ground- we have the power as long as we have the right to vote- we just need the vision.

Would you mind explaining to this student of history exactly how the right to vote is capable of removing corporate officers from their posts? I'm assuming you meant the political vote and not a stockholder vote.

 

[Goat Rodeo Cowboy]

Hi gr8oldies,

I respectfully disagree with you.

Hi josh

I respectfully disagree with you.

Conventional wisdom has it that the middle class is disappearing. If there is any truth to this concept, who is going to lead this revolution at the ballot box?

 

[gr8oldies]

Let me put it another way. For a time "we" owned AIG and others. "We" want "our" money back with interest. Do we want someone in there who gives us our best chance of getting our money back (who is going to command commesurate pay) or say that we can pay $50000 a year and promote a recent graduate to run a multinational company? That person would be in so far over his head it would be tragic, but by golly, we got a cheap CEO. Meanwhile the CEO we fired is working for the competition and finishing "us" up.
So is a centrally planned economy what you all want? Washington sets pay rates for everyone? We're well on our way. When Obamacare kicks in the middle class will be gone.

 

[quadraphonic]

I don't like the fact that so many CEO's make 200x times the average worker. I wish it were more equal, but it never will be.

I've always heard it said that "you're worth whatever you can get somebody to pay you." And if you make $X, you have to produce $X of benefits, or they'll find someone else to take your place.

I don't see how CEO pay is "what's wrong with business" it's just "how business is done."

You can't change CEO pay without changing the system. Then again, transforming the system is a stated goal of the current administration, so in 10 years, there will be posts on the internet [if we're allowed] saying "This is what's wrong with business: there are upper limits on your earnings."

 

[Goat Rodeo Cowboy]

I don't see how CEO pay is "what's wrong with business" it's just "how business is done."

I suspect that back in the late 1800's when someone complained that Mr. Rockefeller had an unfair monopoly on the petroleum business, some one piped up: "it's just 'how business is done.' "

But we as a nation came to the point that we said: "No that is NOT how it is going to be done here." and we establish anti-trust laws to bring things back into some kind of perceived sanity.

You don't have a problem with the present President. You have a quarrel with 125 years or more of Public Policy in the United States.

Some of us are looking not only at broadcasting, but at newspapers, magazines, the movie industry, the concert industry and wonder out loud: "Is it time for our nation to establish some specific Public Policy regarding how the financing and ownership of "free speech" should operate?

 

[gr8oldies]

Unless you are going to shut down the internet, that horse has left the barn.

 

[quadraphonic]

I don't see how CEO pay is "what's wrong with business" it's just "how business is done."

I suspect that back in the late 1800's when someone complained that Mr. Rockefeller had an unfair monopoly on the petroleum business, some one piped up: "it's just 'how business is done.' "

But we as a nation came to the point that we said: "No that is NOT how it is going to be done here." and we establish anti-trust laws to bring things back into some kind of perceived sanity.

You don't have a problem with the present President. You have a quarrel with 125 years or more of Public Policy in the United States.

Some of us are looking not only at broadcasting, but at newspapers, magazines, the movie industry, the concert industry and wonder out loud: "Is it time for our nation to establish some specific Public Policy regarding how the financing and ownership of "free speech" should operate?

My comment was really based on the fact that you can't limit what private companies pay CEOs without changing the system
than it was about establishing public policy to determine who owns the media and how they are run.

There's never been 125 years of public policy to limit CEOs or how they are paid. At least before "pay czars" have become involved.

Ownership and management are different things.

 

[Gatekeeper007]

Limit a CEO's income, now there an idea. Afraid they will go over seas, we should be so lucky. A true CEO makes more than the workers of course but he takes the bite with this economy too just like the workers do plan and simple. He doesn't get pay raises, stock opions, bonus, or anything else right now while things are in such bad shape. He hangs on tight does his job to the best of his ability and tries to keep his company or corporation a float in these troubled times, that is the mark of a true CEO, does he care about the workers under him? He better if he wants to keep a company a float and still be a CEO cause lets face it there are a lot of CEO's around too and not all of them are working right now. Are all CEO's good, of course not but a true CEO is not hard to spot but then neither is a bad one either.

 

[gr8oldies]

Yes, let's let them go to our overseas competitors and we'll put the pizza boy in charge. And see how long we last.

 

[SirRoxalot]

At least as long as Citadel & Regent...

 

[radioray]

I for one dont have a problem with paying succesful people big bucks (though I think 15 million or so per year is excessive for ANYONE, including athletes, and no, I dont think CEO can prove they are worth 15 million instead of, say, 5.5 per year).

But I have a problem with companies paying huge salaries for FAILURE.

This was in the NY Times today. Hope you have the time to read it.

Meanwhile, a single trader at Morgan Stanley, Howard Hubler, made a gigantic, wrong-way bet on the mortgage market, costing his firm some $9 billion in 2007 — the single largest loss a trader has ever incurred on Wall Street — and almost sending Morgan Stanley to a fate similar to that of Bear Stearns and Lehman. Yet Morgan Stanley allowed Hubler to resign quietly and, according to Michael Lewis’ book “The Big Short,” to walk off with a severance package worth “tens of millions of dollars.” There has been no talk of a criminal investigation into Hubler’s trading at Morgan Stanley or why they paid him so much money to go away.

By the end of October 2007, Merrill’s problems were so acute that the company wrote off $7.9 billion of Merrill’s inventory of collateralized debt obligations, or C.D.O.’s, and subprime-related mortgages. That figure was 75 percent greater than what Merrill had predicted earlier in the month. One week later, O’Neal resigned under pressure and received a severance package of around $161.5 million.

http://opinionator.blogs.nytimes.com/2010/05/27/will-wall-street-go-free/

 

[landtuna]

I for one dont have a problem with paying succesful people big bucks (though I think 15 million or so per year is excessive for ANYONE, including athletes, and no, I dont think CEO can prove they are worth 15 million instead of, say, 5.5 per year).

People earn big bucks because they make other people rich. This goes for stockholders, investors, other company officers and even run-of-the-mill employees.

But I have a problem with companies paying huge salaries for FAILURE.

The awarding of golden parachutes for failure should be taken up with the company's BoD by the primary shareholders. In most cases these people are being paid to go away quietly so something illegal or embarrassing is not made public.

 

[SirRoxalot]

So, what you're saying is that it's OK to scam both people and the system, do illegal and/or immoral things as long as they monetarily benefit a handful of people, and you'll get paid a lot of money to go away and keep your activities secret. Where do I sign up?

On second thought, nevermind. I have some scruples.