If you think CEO compensation is getting out of control please

[valuecfa]

send this form (pre-filled for you) to your senators for this session. It will automatically generate the letter and find the senator in your area. Just fill out your name, email, and address if you agree with the letter.

 

http://www.unionvoice.org/campaign/paywatch_say_on_pay

 

I get sick to my stomach when a compensation committee awards outrageous compensation plans (including insanely dillutive options plans) especially during periods of mediocre or poor performance sometimes in the 30-80 million range per year. I think it should be up to the owners (shareholders) to decide on how much and in what form to pay their executives.

 

There are so many great companies out there that i would love to own, yet they have anywhere from 10-25% of future shares outstanding in the form of options. This practice is beginning to become the norm, not the exception.

 

Please write your senators. It will take no more than  30 seconds of your time.

 

Please fill out the from linked above if interested in taking a stance. Thanks.

 

 

[watsa_is_a_randian_hero]

"I think it should be up to the owners (shareholders) to decide on how much and in what form to pay their executives."

 

No offense, but it is up to the shareholders.  Do you vote your proxies?  If you don't like the comp committee, then vote them out.  If you don't succeed, then sell the stock.  Nobody holds a gun to you head to make you buy a stock.

[valuecfa]

I know you mean know offense, but i figured i would get a response like the following:

--"Nobody holds a gun to you head to make you buy a stock."

This is like saying don't go to Central Park at night, because lots of thefts have taken place there. Instead of saying lets take care of the theft problem.

 

Many companies don't even have a "say on pay" policy, while some have adopted it early.

 

The U.K. already has comprehensive and mandatory say-on-pay laws, but in the U.S., corporate governance traditions are different. Scott Fenn, managing director of policy at Proxy Governance, says blanket legislation is misguided. "We take a more nuanced approach," he says. Responsibility lies with the board of directors, rather than the shareholders, to make the right choice.

 

U.S. shareholders now only have a voice on the compensation of chief executives if the board of directors choose to put it to a ballot during proxy season. Such a vote is a shareholder advisory vote. It's non-binding and does no more, beyond potential public embarrassment, than give a board the option to reconsider a pay package already approved. Directors aren't obliged to change a cent, regardless of the outcome of the shareholder vote.

 

 

RiskMetrics Group, a research and management consulting firm, found 74 companies, including GE, Valero, and Apple that had a say-on-pay vote this year, though in most cases, shareholders had to have held at least $2,000 worth of stock in their company for at least a year to be eligible to vote.

 

Source of quotes, for clarity: http://www.forbes.com/2008/11/11/say-on-pay-lead-compensation-cx_mk_1110corpgovernance.html

[watsa_is_a_randian_hero]

It doesn't matter if they have a "say on pay" policy."  You still vote the BOD in, and the BOD has a compensation committee that determines compensation.

 

If you don't like a company's compensation policy, then don't buy the stock. End of story.  This isn't communist Russia.

[ubuy2wron]

Actualy what passes for corporate democracy in North America is like communist Russia. If you base corp compensation as the only basis to buy shares ,BRKA and FFH are the only companies that pass the smell test.

[Partner24]

BRKA and FFH are the only companies that pass the smell test

 

Well, not bad places to invest! But these are not the only ones executives that have pretty decent salaries.

 

Cheers!

[valuecfa]

This isn't communist Russia.

 

Giving the owners of a company more say in who they hire.

 

 

Communist? , lol.

 

 

[sfwusc]

Well.  I don't think shareholders get anywhere close to a fair shake on exc pay.  Also, there is no way the pay packages are fair.

 

The revenues and profits created (if any) by the CEO for the most part don't make the package worth for the shareholders.  There are some that do, but for the most part they don't.

 

Any one think Ken Lewis is worth what he makes?    There are a lot of people that can run these companies. It isn't like say finding a defensive SS or 3rd basemen that can hit 40+ homeruns as your pool is very small.  Plus that person brings in enough money to justify his pay.

 

 

So if they aren't worth it, then why do they make it?  Well, bc there is no check and balance on it.  The board doesn't face reelection.  Yea they send a proxy out, but it always has 9 people for 9 seats.  Funny how those 9 always win unless someone sends out another proxy on their own dime. 

 

So think about it.....  The company shareholders spend money to reelect the current board, but if shareholders want to fight for a different board ---- they have to pay for the company proxy and their proxy.    How is that fair?  It isn't.  The system is crap.

 

You can sell, but the stock might still be a good investment.  Why should be you be happy about having a good investment if people are still robbing you and screwing you.  If some secretary is getting pushed by some executive  to sleep with him, then we don't tell her ---  You can either leave the good job or put up with it.

 

That is the point.  The company is owned by shareholders not the board.  If the shareholders want to do something, then the board needs to do it.  NRG is a good example over 50% of the shares have been tendered to EXC, but NRG's board won't even talk to EXC.  How the heck does that work?  So now they are going to have a big proxy fight and maybe cause the debt to come due.  Why, bc the NRG board can do what they want and say screw the shareholders... until another big cat said no screw you.

 

 

Any shareholder should be able to put forth a person for the board assuming some level of ownership say an amount equal to the amount of the smallest ownership % of a current board member.  The proxy shouldn't have a slate already picked out.  The shareholders should pick without having the current boards say just reelect all of us.

 

-SWUSC

[Partner24]

Give more powers to the owners of a public company is far from being communism...

 

What about the idea of give the right to the shareholders to vote on the salary of their executives (especially the CEO of their company)? It would cut the middlemen (compensation commitee).

 

 

[watsa_is_a_randian_hero]

"Giving the owners of a company more say in who they hire.

 

 

Communist? , lol."

 

 

You are the one advocating for government intervention with respect to compensation.

 

I am saying it ALREADY IS IN THE HANDS OF THE SHAREHOLDERS.  Jeez, I know for sure that the CFA program tells you that you should vote your proxies.  If you don't like a company's comp structure, sell it. 

 

This whole argument is stupid.  You ARE advocating for communist russia.  Its the same as when people say Lebron James is paid too much.  If you don't like it, don't buy the tickets or watch the games on tv.  If you don't like executive comp, then don't buy the stock.

[valuecfa]

I am saying it ALREADY IS IN THE HANDS OF THE SHAREHOLDERS

 

You are the one advocating for government intervention with respect to compensation.

 

You obviously haven't studied this issue much. This is not the case, on an annual revision basis, and through all companies, and with respect to golden parachutes and golden coffins. They ran a special on CNBC this morning that explains it a bit for you. I suggest taking a look at the replay. Or u can just read the house bill and ammendment thrown in by for Barrack Obamma.

 

And how u relate this to communist russisa, is retarded.

 

I'm advocating shareholder rights, not government rights. This bill doesn't relate to AIG bonus tax (which i'm against or pay caps, or any other crazy stuff like that). It is simply advocating increased shareholder voice, as opposed to the way the proxy system is currently organized.

 

You ARE advocating for communist russia.  Its the same as when people say Lebron James is paid too much.  If you don't like it, don't buy the tickets or watch the games on tv.  If you don't like executive comp, then don't buy the stock.

 

You obviously can't grasp what this bill is in reference to. 

If you don't like Crack don't buy it, but don't try to stop people from selling crack.- This is the type of arguement you are trying to make. Or better yet,

 

Before they passed the Securities and Exchange Act and manipulation was rampant, would you say, -Just don't invest in the Stock Market, there is no reason to fix it, just don't invest in it if u don't like it.-

[watsa_is_a_randian_hero]

"You obviously haven't studied this issue much."

 

I have considered the issue extensively, on a philosophical level.  Its a matter of individual rights.  If you've figured out a way to be paid $30mm, you should be able to earn it.

 

There have been numerous studies that have shown companies with poor corporate governance have higher costs of capital.  The free markets allocate capital to companies with better corporate governance measures.  One study from the 90's showed that the announcement of a private jet for executives had a -2% effect on a stock price. 

 

If you think there are no options to own a diversified portfolio of equities, than buy treasury bonds.  If you are unhappy with the returns of treasuries, than think about that.  That very fact is an indication that executives in general might be compensated at a level they deserve.

 

Sure, there is an agent-principal conflict.  But if you are concerned, than invest in companies with better corporate governance, or require a great required rate of return.  There are more than just FFH & BRK.  I can prove it.  Every year, BRK manages to a half dozen companies, all with great corporate governance.  How come warren has no problem investing his money?  Warren invested in Goldman and GE, both with extremely highly paid employees and executives.

[valuecfa]

Jeez, I know for sure that the CFA program tells you that you should vote your proxies.

 

Apparently you aren't aware of the CFA program's stance on the 'Say on Pay' Bill

 

Here is what they have to say:

 

Kurt Schacht, Managing Director of the CFA Institute Centre, said, “knowing such a vote will be taken sharpens directors’ attention to and explanation of executive compensation practices. Investors are tired of learning after the fact about ‘golden parachutes’ and executives whose pay isn’t tied to performance.”

 

http://www.thecro.com/node/462

 

AND

 

“Shareholders are recognizing that, when chairmen of compensation committees understand that their decisions will be subject to a vote of confidence, they try harder to get it right,” said Stephen M. Davis, project director at the Millstein Center for Corporate Governance and Performance at Yale.

 

A result, said Scott A. Fenn, managing director of policy for the proxy advisory firm Proxy Governance, is that “say on pay is the issue that’s resonating most with shareholders this year.”

 

http://www.nytimes.com/2008/04/06/business/06say.html?_r=1

 

 

[valuecfa]

Randian wrote: Sure, there is an agent-principal conflict.  But if you are concerned, than invest in companies with better corporate governance, or require a great required rate of return.  There are more than just FFH & BRK.  I can prove it.  Every year, BRK manages to a half dozen companies, all with great corporate governance.  How come warren has no problem investing his money?  Warren invested in Goldman and GE, both with extremely highly paid employees and executives.

 

Randian, I really could keep picking apart all of your comments, but i have other things to do. Why allow companies continue poor corporate governance? Why provide the argument, to look to invest elsewhere? Why not just fix the problem? Of course there are some companies out there with good corporate governance. That is not the point. As far as Warren Buffets thoughts on the issue:

 

This is what Warren has to say:

http://articles.wallstraits.net/articles/1372

Too often, executive compensation in the U.S. is ridiculously out of line with performance. That won't change, moreover, because the deck is stacked against investors when it comes to the CEO's pay. The upshot is that a mediocre-or-worse CEO-- aided by his handpicked VP of human relations and a consultant from the ever-accommodating firm of Ratchet, Ratchet and Bingo-- all too often receives gobs of money from an ill-designed compensation arrangement.

 

It doesn't have to be this way: It's child's play for a board to design options that give effect to the automatic build-up in value that occurs when earnings are retained. But-- surprise, surprise-- options of that kind are almost never issued. Indeed, the very thought of options with strike prices that are adjusted for retained earnings seems foreign to compensation "experts," who are nevertheless encyclopedic about every management-friendly plan that exists. ("Whose bread I eat, his song I sing.")

 

Getting fired can produce a particularly bountiful payday for a CEO. Indeed, he can "earn" more in that single day, while cleaning out his desk, than an American worker earns in a lifetime of cleaning toilets. Forget the old maxim about nothing succeeding like success: Today, in the executive suite, the all-too-prevalent rule is that nothing succeeds like failure.

 

Huge severance payments, lavish perks and outsized payments for ho-hum performance often occur because comp committees have become slaves to comparative data. The drill is simple: Three or so directors-- not chosen by chance-- are bombarded for a few hours before a board meeting with pay statistics that perpetually ratchet upwards. Additionally, the committee is told about new perks that other managers are receiving. In this manner, outlandish "goodies" are showered upon CEOs simply because of a corporate version of the argument we all used when children: "But, Mom, all the other kids have one." When comp committees follow this "logic," yesterday's most egregious excess becomes today's baseline

 

 

Okay, if i haven't made my point with u after all this back and forth, then i never will.

 

But thanks, for bringing the issue to discussion.

 

 

P.S.~ Don't forget to fill out the form, in the link at the top of this thread, if you agree with the bill and want to send a computer generated letter to your senators. It only takes a few seconds.

-Wait a minute. (Randian hero)Aren't you Canadian? You can't participate anyway, lol.

[watsa_is_a_randian_hero]

My point is that there are plenty of companies that do have good governance.  Warren commented that many don't.  You don't see him investing in those.  Your comment was you were complaining you couldn't find any other companies to invest in besides FFH & BRK that had good governance.  Maybe you aren't looking hard enough and should try doing more extensive research. 

 

High pay does not = Good governance

 

There is this thing called supply and demand, and this other thing called free markets.  Some people believe they do a good job of allocating capital.  They are called CAPITALISTS.  There is a supply and demand for CEOs, with very limited supply.  Go higher joe the plumber to manage GE if you have a problem with it.

[UhuruPeak]

Sign of the times?  I am seeing more threads (at least 3 in the past week alone) where 2 or more contributors become aggressive, snappy and/or less than courteous with one another.

 

 

 

Perhaps we should all take a step back & breathe...

[watsa_is_a_randian_hero]

BTW...I am not canadian - I just saw that now.

[watsa_is_a_randian_hero]

UhuruPeak is right. 

 

Intelligent debate is good - but we should not forget the principles of this board.  Sorry for coming off insulting before. 

 

I know where you are coming from - and I WOULD SUPPORT it - if it were a shareholder measure.  I DO NOT support enacting a law that forces companies to do so.  If its a large enough issue, shareholders should put it up to vote to change corporate charters so that compensation is voted on.  This has already happened at a few companies

[watsa_is_a_randian_hero]

BTW - Here is where I DO SUPPORT a compensation law being enacted.

 

Nassim Taleb argues (and I agree with him) that large systemically important financials should become like heavily regulated utilities.  Society should no longer tolerate capitalism on the upside and socialism on the downside.  Where pure capitalism FAILS, in an instance such as this, I do support a law that would force large, systemically important financials to have compensation policies for executives focused on the long term.

 

Perhaps no more options, only restricted shares, that must be held for 10+ years from when issued.

[valuecfa]

BTW...I am not canadian - I just saw that now.

 

lol, Too bad.

 

There are too many loudmouth Americans on this board like me. j/k

 

Still buds.

 

If its a large enough issue, shareholders should put it up to vote to change corporate charters so that compensation is voted on.  This has already happened at a few companies

 

You and i know how difficult it is to get a board to listen to you if you are a major shareholder with clout, let alone a small one without clout.

 

Look at Ackman having to threaten the Target Corp. board with arbitration just to get an extra director on the board, even though Target's corporate charter already clearly allows another director through shareholder vote. Can you imagine what he would have to threaten them with to get them to lower their pay.

 

Good luck on Level 3.

[watsa_is_a_randian_hero]

"You and i know how difficult it is to get a board to listen to you if you are a major shareholder with clout, let alone a small one without clout."

 

Yeah, but this would all be solved if shareholders actually voted proxies.  So many institutions just vote with management recommendations.

[watsa_is_a_randian_hero]

BTW - I checked all the proxies of the dow, it took about 30 minutes, because i was interested.  Of the dow components 24 out of 30 had shareholder measures regarding compensation or other governance measures that could have been voted on this year.  This is evidence that shareholders have already been GIVEN the opportunity for change, but have DECLINED (because most institutions don't vote proxies).

 

These included:

 

AA - Share based comp approval

AXP -  Advisory (non-binding) vote approving executive compensation

BA - vote on a management proposal to approve an amendment to The Boeing Company 2003 Incentive Stock Plan

BAC -  Item 3: An advisory (non-binding) vote approving executive compensation; Item 5: advisory vote on executive compensation, Item 11; Consider a stockholder proposal regarding limits on executive compensation

C - approve Citi’s 2008 Executive Compensation

DD -  3 — STOCKHOLDER PROPOSAL ON SHAREHOLDER SAY ON EXECUTIVE PAY

DIS - Approval of an amendment to the Company’s Amended and Restated 2002 Executive Performance Plan

GE - Shareholder votes on both Executive Comp & golden parachutes

GM - Stockholder Proposal Regarding Performance-Based Equity Compensation & Stockholders proposal on advisory vote on comp

HD - Shareholder Proposal Regarding Management Bonuses & Shareholder Proposal Regarding executive Comp

IBM - Stockholder Proposal on Advisory Vote on Executive Compensation

JNJ -  ITEM 3:  SHAREHOLDER PROPOSAL ON ADVISORY VOTE ON EXECUTIVE COMPENSATION POLICIES AND DISCLOSURE

JPM - Advisory vote on executive compensation

KO - Vote on Comp

MMM - Vote on options vesting

MRK - Stockholder Proposal Concerning Management Compensation

MSFT - to approve material terms of the performance criteria under the Executive Officer Incentive Plan

PFE - 5. Shareholder Proposal regarding Advisory Vote on Executive Compensation

PG - Shareholder Proposal #2 - Advisory Vote on Executive Compensation

T- 8. Advisory vote on compensation.

VZ- Proposal against options

WMT -8. Advisory Vote on Executive Compensation and 6. Recoupment of Senior Executive Compensation Policy

XOM - Vote on Comp

 

The only ones that didn't have any measure were CAT, CVX, HPQ, INTC, KFT, MCD, UTX

 

[valuecfa]

Interesting, but as of right now at most companies, you can not revise a compensation package on an annual basis. Also, most companies don't allow a shareholder vote on some "hidden" compensation forms such as some perks, golden coffins, and golden parachutes, change of control packages. There are some firms out there that do allow votes on ALL of the above, however, they are few and far between.

 

In my opinion, this is the main issue i think this bill may at least help to solve:

Also, most companies don't allow a shareholder vote on some "hidden" compensation forms such as some perks, golden coffins, and golden parachutes, change of control packages.

[Guest Broxburnboy]

I'm not an American, but at the risk of speaking out of turn, I think that blanket rage at CEOs

is misdirected. The ruling oligarchy whose members are drawn from Wall Street and government

should be the object of any witch hunt.

 

Read the article below and sharpen up the pitchforks....

 

 

 

http://www.theatlantic.com/doc/200905/imf-advice

 

 

 

[valuecfa]

By the way, this one:

 

GE - Shareholder votes on both Executive Comp & golden parachutes

 

With the Golden parachute vote... this only recently became eligible to a shareholder vote (it was not previously the case, and it still isn't in nearly every company), when it was ONLY recently discovered about Jack Welch's parachute during the divorce proceedings. Shareholder had no idea as it was not disclosed or put to a vote.

 

If GE wasn't scandalized by this bad press, they still wouldn't authorize a shareholder vote for it. This is just one case in point, in which the bill will help solve.

 

http://money.cnn.com/2002/09/06/news/companies/welch_ge/