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CEOs lay off thousands, rake in millions

The problem is you're not listening. If the company's not making money due to the CEO's incompetence, how can that be making the shareholders money?

I think everyone who's making that same argument needs to really listen to what people such as you and I are saying here. It's not that we don't think CEOs should not be paid. In the end, they are employees, too. They were hired to do a job - lead their company to profitability. But it is clear using the two examples I've provided - HP and Johnson & Johnson - that did not happen. As such, IMHO, neither of these CEOs deserve the severage packages they walked away with because not only did their companies lose money under their leadership, but they cost employees their jobs while also walking away with millions for their mismanagement.
 
Since folks are arguing that business exist to make money, I went back and looked at the primary entity mentioned in the OP, Hewlett Packard (HPQ), and reviewed their stock over the last year. The company's stock has a 1-year change of -9.25% since Aug 2008. They reached a high in late-March of nearly 55 points (54.75) for the 52-week period, but since then have dropped to just over 40 points (40.34) when the markets closed on Friday (9/03/10).

A quote from the article in the OP reads:



Atleast where HP is concerned, the arguments for their CEO walking away with millions for underperforming does not hold water. He didn't make money for his company's shareholders. He lost them money, yet still managed to walk away with $24.2 million dollars!

Another company, Johnson & Johnson (JNJ):



Their 52-week high was 66.20 points; 1-year ago their stock was at 61 points. They closed 9/03/10 at 58.93. One-year change, -1.27. Not nearly as bad as HP, but still they company lost money for their shareholders.

How does underperforming and mismanaging their companies justify their multi-million dollar payouts?

And the argument someone made that the employees don't matter...!?! Of course they matter! These are the exact same people who Republicans are claiming the Bush tax-cuts will benefit the most because they will create jobs. So, I'll come right back to my same question:

"If tax cuts were so beneficial to job growth, why the hell are these companies losing jobs?"

Why is it that between these two well known American companies, they've posted a combined loss of
-10.52 points on the NASDAQ, cut 9,400 jobs yet their CEOs walked away with just under $50M in severage pay?

Not sure if people really want to look at the facts at HPQ. But if so, they will see that in fact from the time Hurd came on until the time he was let go the stock outperformed the market. Yoy may also want to remember that the date you use 9/3 is after he left. Part of the reason he the stock is down is because he left! Also since he is gone, HPQ got into a bidding war and probably overpaid for a rather small company. What they overpaid is probably more than the $24 million.

While I think that CEOs as a group are overpaid for their performance it seems ironic that people here talk about a rare case when most people thought that Hurd was a very effective CEO!?
 
What if the CEO hired turned a 60 billion dollar loss into a 20 billion dollar loss. That's 40 billion in savings. I'd say that's an achievement for which compensation is due.

Then the company's BoD & shareholders need to evaluate how that +$40 difference was made. Did it come at the expense of the employees (layoffs)? Or did it come because the company cut alot of excess waste (sold corporate jets, closed under utilized office space and consolidated same into more useful space or under one functional building), did upper management take pay-cuts or did the employees decide to do it to save the company the love working for?

You have to evaluate why that +$40M came to be before you can answer that question. I would say that if such came at the expense of their employees, then that CEO didn't look deep enough at other ways that same $40M could have be saved elsewhere especially in a down economy. Just as you and others have argued that the government needs to make budget cuts, same can be said for thise private business. But again, I say you have to know what the situation is and why the decisions where made to save that $40M before anyone can rightfully answer that question. I refuse to answer such blindly.
 
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Since folks are arguing that business exist to make money, I went back and looked at the primary entity mentioned in the OP, Hewlett Packard (HPQ), and reviewed their stock over the last year. The company's stock has a 1-year change of -9.25% since Aug 2008. They reached a high in late-March of nearly 55 points (54.75) for the 52-week period, but since then have dropped to just over 40 points (40.34) when the markets closed on Friday (9/03/10).

A quote from the article in the OP reads:



Atleast where HP is concerned, the arguments for their CEO walking away with millions for underperforming does not hold water. He didn't make money for his company's shareholders. He lost them money, yet still managed to walk away with $24.2 million dollars!

Another company, Johnson & Johnson (JNJ):

Why do you keep claiming that? I linked you to HP's profitability earlier in the thread.
 
Then they company's BoD & shareholders need to evaluate how that +$40 difference was made. Did it come at the expense of the employees (layoffs)? Or did it come because the company cut alot of excess waste (sold corporate jets, closed under utilized office space and consolidated same into more useful space or under one functional building), did upper management take pay-cuts or did the employees decide to do it to save the company the love working for?

You have to evaluate why that +$40M came to be before you can answer that question. I would say that if such came at the expense of their employees, then that CEO didn't look deep enough at other ways that same $40M could have be saved elsewhere especially in a down economy. Just as you and others have argued that the government needs to make budget cuts, same can be said for thise private business. But again, I say you have to know what the situation is and why the decisions where made to save that $40M before anyone can rightfully answer that question. I refuse to answer such blindly.

You seem to think that a company's health and profitability is measured by the number of people it employs. Sorry, but that isn't so. Jobs are incidental to business, not the point of it. Yet, you seem to think that a company exists to create them.
 
Not sure if people really want to look at the facts at HPQ. But if so, they will see that in fact from the time Hurd came on until the time he was let go the stock outperformed the market. Yoy may also want to remember that the date you use 9/3 is after he left. Part of the reason he the stock is down is because he left! Also since he is gone, HPQ got into a bidding war and probably overpaid for a rather small company. What they overpaid is probably more than the $24 million.
Thanks for providing this insight. My argument, of course, is based on the information provided. Your insight kinda changes my perspective alittle...if true....not alot, but some.

While I think that CEOs as a group are overpaid for their performance it seems ironic that people here talk about a rare case when most people thought that Hurd was a very effective CEO!?

Again, I'm willing to conceed that he performed well over the life of his tenure and just left when the company was on a downturn. But here again if he did everything he could to make his company profitable but in the end his best wasn't good enough, I still don't think such a CEO deserves to walk away with millions while also laying off thousands of employees. Something about that just seems wrong to me.
 
do you demand a link proving that the sun rises from the east as well? DO you play such evasive games because you don't like the facts? FOR YEARS the fans of the death tax justify it saying only 1% of estates pay that tax and there have been dozens of links to the income tax burdens. GIYLF

Now you're insulting my intelligence. Excuses are for losers. Are you going to post al link backing up your claims or not?
 
You seem to think that a company's health and profitability is measured by the number of people it employs. Sorry, but that isn't so. Jobs are incidental to business, not the point of it. Yet, you seem to think that a company exists to create them.

Did I say that? No, I did not. There's alot that go into a company's profitability. Part of that includes payroll. But to think of the employees as inconsequential...that's just wrong.

I'd like to think that employees are the last things companies large and small will cut when things go bad. If so, and the CEO has done everything he/she could to turn things around, then you gotta do whatcha gotta do. But I still don't think that CEO should be rewarded for mismanagement. So, the question is were companies like HP and J&J mismanaged under their former CEOs or did they really do everything they could to make their companies profitable? Based on the numbers alone, they did not. But as I said earlier, we/I don't know the details.
 
Did I say that? No, I did not. There's alot that go into a company's profitability. Part of that includes payroll. But to think of the employees as inconsequential...that's just wrong.

Labor is a cost. You increase profitability by cutting costs where it makes fiscal sense to do so. If that's in labor, then so be it. If there isn't enough work needing to be done to justify the existence of those jobs, then they're on the chopping block.
 
Since folks are arguing that business exist to make money, I went back and looked at the primary entity mentioned in the OP, Hewlett Packard (HPQ), and reviewed their stock over the last year. The company's stock has a 1-year change of -9.25% since Aug 2008. They reached a high in late-March of nearly 55 points (54.75) for the 52-week period, but since then have dropped to just over 40 points (40.34) when the markets closed on Friday (9/03/10).

Atleast where HP is concerned, the arguments for their CEO walking away with millions for underperforming does not hold water. He didn't make money for his company's shareholders. He lost them money, yet still managed to walk away with $24.2 million dollars!

And again, that's not the point.

Was the CEO given a discretionary bonus for causing the company's stock to drop? No, he was given a bonus per the contract that the company signed when it hired him. That's the downside of guaranteed contracts.

Again, Pavano turned out to be a disaster for the Yanks. That doesn't mean that the arguments for paying him $10m/year "don't hold water" after his first bad year - he's got a contract.

Another thing that people keep on glossing over is that if companies refused to provide CEO's with guaranteed contracts, they would have to pay substantially more money up front. This is just another reason why contract negotiations should be handled by businessmen and not Angry J. Public.

Other than you apparent contradiction, the fact that you're telling me the board has little if any bearing on the selection of CEO's is, shall I say -- in your own words -- ridiculous?

I don't think it's possible to come up with a more egregious misreading of what I said if you tried.
 
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Labor is a cost. You increase profitability by cutting costs where it makes fiscal sense to do so. If that's in labor, then so be it. If there isn't enough work needing to be done to justify the existence of those jobs, then they're on the chopping block.

Yes labour is a cost

A CEO provides his labour for in compensation for monetary gains.

Cutting the salaries of CEO's and other top executives makes sense in order to increase shareholder returns. Especially for those that are not the top performers in the industry. Very few CEO's have been vital to a companies sucess, Jobs, Welch, Gates are among a few that have been vital to the compamy they work for. Most do an average job for far above average wages, especially in the US. CEO's of foreign companies of the same size with similar performance do not in general receive anything near the compensation packages that US CEO's do
 
Yes labour is a cost

A CEO provides his labour for in compensation for monetary gains.

Cutting the salaries of CEO's and other top executives makes sense in order to increase shareholder returns. Especially for those that are not the top performers in the industry. Very few CEO's have been vital to a companies sucess, Jobs, Welch, Gates are among a few that have been vital to the compamy they work for. Most do an average job for far above average wages, especially in the US. CEO's of foreign companies of the same size with similar performance do not in general receive anything near the compensation packages that US CEO's do

That's a fine argument (maybe) for future CEO contracts, if it's economically feasible to do. But it means diddly for existing contracts.
 
That's a fine argument (maybe) for future CEO contracts, if it's economically feasible to do. But it means diddly for existing contracts.

What is wrong with that arguement?

A CEO provides his labour to lead the company in order to maximize shareholder returns, not to enrich himself/herself at the expense of the shareholders. I do think that CEO compensation packages in the US have been detremental to shareholder returns in the majority of cases
 
Harshaw and RNYC,

You both make very good points. It's why I said that if that CEO has done everything he/she could do to reduce overhead to increase profitability before laying off workers, I'm willing to cut him/her some slack depending on the details. Which lead me to RNYC's comments.

No, we don't know the particulars of any of the contracts where these CEOs in question are concerned. That was also part of my argument herein. However, the overall tenure from my perspective is if mismanagement did take place, why reward CEOs with multi-million dollar severage package particularly in a down economy when said mismanagement cost people their jobs while rewarding the CEO's mismanagement?

If that was not the case where these companies in the OP are concerned, i.e., they out performed the market, they reduced the company's deficit by 2/3 (using McVicchio's example, reducing a -$60M deficit to -$40M) then I'm willing to conceed that said CEO did a pretty good job under the circumstances. And if his contract stated that his tenure was for X-amount of years and he'd retain such and such severance package provided the company reached X-profit margin, then I'd have to say he deserved that money. But it's the details we don't know; just the raw data that's being presented. Therefore, based on that raw data, I'd say HP and J&J's former CEO didn't earn their severance/bonus money.

It's all in the details...what really took place versus what's being reported. We really don't know...

But in this economy, it certainly doesn't look good for these CEOs to be letting people go while also walking away with that kind of money.

What is wrong with that arguement?

A CEO provides his labour to lead the company in order to maximize shareholder returns, not to enrich himself/herself at the expense of the shareholders. I do think that CEO compensation packages in the US have been detremental to shareholder returns in the majority of cases

Agreed. That essentially is the argument here.
 
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What is wrong with that arguement?

A CEO provides his labour to lead the company in order to maximize shareholder returns, not to enrich himself/herself at the expense of the shareholders. I do think that CEO compensation packages in the US have been detremental to shareholder returns in the majority of cases

I'm . . . pretty sure I said that it might be fine argument for later contracts.

But existing contracts are what they are. :shrug:
 
Harshaw and RNYC,

You both make very good points. It's why I said that if that CEO has done everything he/she could do to reduce overhead to increase profitability before laying off workers, I'm willing to cut him/her some slack depending on the details. Which lead me to RNYC's comments.

No, we don't know the particulars of any of the contracts where these CEOs in question are concerned. That was also part of my argument herein. However, the overall tenure from my perspective is if mismanagement did take place, why reward CEOs with multi-million dollar severage package particularly in a down economy when said mismanagement cost people their jobs while rewarding the CEO's mismanagement?

Probably because that's what their contracts included. Again, I very much doubt that boards are running to laving huge discretionary bonuses on CEO's who are getting fired. Instead, I think that these large awards are part of the guaranteed contracts that CEO's sign.
 
Probably because that's what their contracts included. Again, I very much doubt that boards are running to laving huge discretionary bonuses on CEO's who are getting fired. Instead, I think that these large awards are part of the guaranteed contracts that CEO's sign.

And that takes us right back to the same argument the President made concerning the bonuses AIG's CEOs received after they got their government bailout money. It's F'd up for sure, but that just means board members and shareholders need to place more stringent stipulations in CEO contracts where bonuses and severance pay are concerned.
 
And that takes us right back to the same argument the President made concerning the bonuses AIG's CEOs received after they got their government bailout money. It's F'd up for sure, but that just means board members and shareholders need to place more stringent stipulations in CEO contracts where bonuses and severance pay are concerned.

And if board members and shareholders want to do that, they're free to do so. They always have been. The point is that they have occasionally chosen not to do that and that's a business judgment that they're qualified to make.
 
And that takes us right back to the same argument the President made concerning the bonuses AIG's CEOs received after they got their government bailout money. It's F'd up for sure, but that just means board members and shareholders need to place more stringent stipulations in CEO contracts where bonuses and severance pay are concerned.

do you want to attract the best and the brightest to your firm? then you had better be prepared to compensate them
that's why goldman sachs gets the cream of the crop
and it's also why it consistently out-performs the competition


now i will agree that the government should have attached strings to its bailout money, prohibiting substantial bonuses/compensation while those government loans were outstanding
but the government can often be a very stupid lender
and because we are the shareholders that elect its board, that doesn't say much about us
 
Thanks for providing this insight. My argument, of course, is based on the information provided. Your insight kinda changes my perspective alittle...if true....not alot, but some.



Again, I'm willing to conceed that he performed well over the life of his tenure and just left when the company was on a downturn. But here again if he did everything he could to make his company profitable but in the end his best wasn't good enough, I still don't think such a CEO deserves to walk away with millions while also laying off thousands of employees. Something about that just seems wrong to me.

Let me take the other side. For a CEO the job is to grow your company profitably. What has come to be accepted as a way to do that is to ship jobs overseas and to make acquisitions. When you take over a company people talk about synergies. That is a nice way of saying where there was a person doing something at your company and the acquired company you get to lay off one of them.

People talk about all of the cash that is in the coffers of corporations today. They say that this will lead to increased hiring. Perhaps, but you may have noticed that in August there has been a surge of deals. I am sure that you will find that more money will be spent of acqusitions, which lead to layoffs than you will see some surge in hiring as there is not a big uptick in demand.

Please also know that laying people off, understanding how you are adversely impacting them and their families is no fun. It is horrible (yes it is worse for the people getting laid off). But that is the way American business is set up today for large companies.

If the administration and congress really wanted to change this it would not be hard. They could change the tax rules to make these strategies less profitable. But since both parties are in the pockets of big business nothing changes.
 
What is wrong with that arguement?

A CEO provides his labour to lead the company in order to maximize shareholder returns, not to enrich himself/herself at the expense of the shareholders. I do think that CEO compensation packages in the US have been detremental to shareholder returns in the majority of cases
you might be right

become a shareholder of some company where that is happening and voice your concerns. Some CEO compensation appears to be ego driven rather than rational but that isn't something that the government has any business in trying to alter.
 
you might be right

become a shareholder of some company where that is happening and voice your concerns. Some CEO compensation appears to be ego driven rather than rational but that isn't something that the government has any business in trying to alter.

Never said it does.

Other then to ensure shareholders can get a stronger voice in approving executive compensation packages, I would suggest the government stay out of it
 
This thread isn't about corporations making money, it's about greedy CEO's laying off workers and getting compenated for it.


As defined by whom? Liberals, and MSNBC? Oh wait, same thing.


j-mac
 
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