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Thread: Administration: Rein in pay in US private sector

  1. #71
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    Re: Administration: Rein in pay in US private sector

    Quote Originally Posted by MrVicchio View Post

    Does it bother you that he's right?

    Interestingly enough, a number of companies are moving towards this. Several companies have always done performance pay through long term criteria.

    I'd be interested to see what Kandahar and his MBA have to say given the sheer lack of people with business backgrounds here.

    AIG's London office where most of the CDS were made had a pay system where the London office kept 50% of its profits and sent the rest to the AIG HQ. Thus, driving them towards incentives to ignore the long term implications of the companies they were giving CDS to and focus on the pure short term bottom line. The focus was sell, sell, sell. Long term steady performance with little or no losses was not the key. Before regional banks went bonkers, many had performance pay packages where CEOs were paid according to how well a bank did over a course of several years. Stock options with time lines five, ten, fifteen years down the line also attempt to fix this. Anyone who's worked in a manufacturing plant will tell you that managers who are paid on sales will push products on customers while telling them they can return them later. How does that help the company's long term growth when all the manager is focused on is short term sales?

    In my realm, that's channel stuffing, and it's highly illegal. But that's what you get when you focus on short term selling and ignore long term performance.
    "If your opponent is of choleric temperament, seek to irritate him." - Sun Tzu

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    Re: Administration: Rein in pay in US private sector

    Quote Originally Posted by celticlord View Post
    Read Akerlof's paper.
    Fair enough. I may do so at some point..what you mention does sound like an interesting theory.
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  3. #73
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    Re: Administration: Rein in pay in US private sector

    Quote Originally Posted by Analyst View Post
    I'm curious about something. What do you make of the current financial crisis, and what do you think caused it in the first place?
    Malinvestment because of the Fed, overregulation, expectation of government intervention.

    It seems that many folks are ignoring the fact that the industry failed to self-regulate (ie, AIG). When greed starts driving the market and subsequently causes widespread economic chaos, what's the government supposed to do? Stand back and watch as every person who has a 401(k) account loses 35%-50% of it? These are not made up percentages by the way..I am a pension analyst and this is a reasonable range based on the large numbers of gain/loss calculations I've performed since the crisis hit.
    You can't just claim greed without saying how greed caused it. Also, what was the impact of the Fed's artificially low interest rates and what about the CRA? Were these all greed?

    However, I feel like every time this sort of issue is brought up, proponents of a pure free market seem to gloss over this major issue: the government didn't go to the companies offering to buy them out. They came to the government - and, many of them did it to request that the government save them from a mess that they themselves created! It's with jaw-dropping disbelief I read comments about how terrible government is at managing companies - right, like these companies did such a bang-up job on their own?
    These companies went to the government, and the government gave them what they wanted. That's the problem.

    They shouldn't have received one red cent in my opinion, but since the government did pay up it now has every right to set restrictions and have a say in how those companies are run. Yes, even after the fact. I'd have kicked ALL of the CEO's and the entire executive group of these failed companies out on their keisters - frankly, I thought they were treated with far more concern than they deserved. They are fortunate to still exist at all.
    They can only do what was allowed them in the original loan contract. Anything else is a breach of contract and immoral.

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  4. #74
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    Re: Administration: Rein in pay in US private sector

    Quote Originally Posted by obvious Child View Post

    Does it bother you that he's right?
    He's not right. It's not his place to say what private companies should do.
    Quote Originally Posted by obvious Child View Post
    Interestingly enough, a number of companies are moving towards this. Several companies have always done performance pay through long term criteria.

    I'd be interested to see what Kandahar and his MBA have to say given the sheer lack of people with business backgrounds here.

    AIG's London office where most of the CDS were made had a pay system where the London office kept 50% of its profits and sent the rest to the AIG HQ. Thus, driving them towards incentives to ignore the long term implications of the companies they were giving CDS to and focus on the pure short term bottom line. The focus was sell, sell, sell. Long term steady performance with little or no losses was not the key. Before regional banks went bonkers, many had performance pay packages where CEOs were paid according to how well a bank did over a course of several years. Stock options with time lines five, ten, fifteen years down the line also attempt to fix this. Anyone who's worked in a manufacturing plant will tell you that managers who are paid on sales will push products on customers while telling them they can return them later. How does that help the company's long term growth when all the manager is focused on is short term sales?

    In my realm, that's channel stuffing, and it's highly illegal. But that's what you get when you focus on short term selling and ignore long term performance.
    That's the problem for the Company, not the US Government.
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  5. #75
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    Re: Administration: Rein in pay in US private sector

    Quote Originally Posted by MrVicchio View Post
    He's not right. It's not his place to say what private companies should do.
    Come again?

    So you're saying that emphasis on long term performance as a measure of pay is not correct over emphasis on short term performance as a measure of pay?

    Obama is dead right on favoring long term performance as a measure of pay as being better than short term performance.

    I'd ask you for a reason why he's wrong, but I know you will not have anything substantial to say and it's likely you don't understand the differences. So I won't.

    His place to say and his statements are two different things. It's not his place to say it in general. But that does not change that what he said was correct. Short term pay systems have been linked to all kind of fraud. Long term performance measures generally do not have that kind of problem.

    That's the problem for the Company, not the US Government
    It is when it leads to AIG's problem. If we have to bail you out because your performance measures all favored short term which directly caused to your problems, we have a right to at least inform you of your screw ups and suggest some advice.
    "If your opponent is of choleric temperament, seek to irritate him." - Sun Tzu

  6. #76
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    Re: Administration: Rein in pay in US private sector

    Does anyone realistically believe that if GM folded someone else(s) would not start picking up the bits..

    Would it be a blow to the economy..well duh yes but unlike this the US Government wouldn't be spending&spending&spending&spending on top of it... with ceo Obama appointing "czars" left and right.

    Obama’s Czars Breed Chain-of-Command Confusion:
    Cindy Skrzycki March 17 (Bloomberg) --
    President Barack Obama’s decision to place czars above Cabinet-level agencies presents dangers beyond confusion over who’s in charge and an organizational chart that looks like pasta carbonara.

    There’s also the potential for a constitutional crisis.

    Obama’s czars, the most ever appointed by an administration, are likely to have the authority to influence or make decisions for Cabinet-level agencies. Yet they aren’t confirmed by Congress and don’t have to respond to pesky requests to testify before oversight committees.
    Obama?s Czars Breed Chain-of-Command Confusion: Cindy Skrzycki - Bloomberg.com
    Obama names performance and technology czars
    Posted: 06:15 AM ET

    From CNN Associate Producer Martina Stewart

    WASHINGTON (CNN) – President Obama named two additional members of his executive team Saturday.
    CNN Political Ticker: All politics, all the time Blog Archive - Obama names performance and technology czars - Blogs from CNN.com

    on and on...czars..spending and czars..he even named a payment czar just yesterday...
    Last edited by Triad; 06-12-09 at 04:37 AM.

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