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McCain's Malefactors
What happens when a presidential candidate just doesn't recognize any limits on federal intervention? Ideas and sentiments like this:
In times of hardship and distress, we should be more vigilant than ever in holding corporate abuses to account, as in the case of the housing market. Americans are right to be offended when the extravagant salaries and severance deals of CEO's -- in some cases, the very same CEO's who helped to bring on these market troubles -- bear no relation to the success of the company or the wishes of shareholders. Something is seriously wrong when the American people are left to bear the consequences of reckless corporate conduct, while the offenders themselves are packed off with another forty - or fifty million for the road.
If I am elected president, I intend to see that wrongdoing of this kind is called to account by federal prosecutors. And under my reforms, all aspects of a CEO's pay, including any severance arrangements, must be approved by shareholders.
|6.10.08 @ 12:12PM|#
Color me naive, but what's wrong-headed about making CEOs answerable to the shareholders?
|6.10.08 @ 12:15PM|#
Answerable to the shareholders yes....not some minion in a McCain "Justice Department"!
|6.10.08 @ 12:18PM|#
Something is seriously wrong when the American people are
left to bear the consequences of reckless corporate conduct, while
the offenders themselves are packed off with another forty - or
fifty million for the road.
Yes, it truly is a shame when executives entrusted with broad
powers abuse them in a blatant grab for even greater control, fail
spectacularly in the execution of their office, and get off
scott-free while the American people pay the consequences.
This infamy, exclusive to the private sector, must be stopped.
matt|6.10.08 @ 12:18PM|#
As long as there's free movement of capital, this is an
unnecessary regulation. So you don't like a corporation's lack of
transparency, or the way they handle executive pay? Don't buy the
stock. It's as simple as that.
As for the utilitarian argument, I'd guess that the red tape costs
involved in getting shareholders to approve every single executive
pay package decision would be prohibitive. This would likely wind
up costing shareholders more than the "wrongdoing" that McCain
seems to think is going on.
|6.10.08 @ 12:25PM|#
It's going to be a rough few months for economic
conservatives.
So. What's Phil Gramm up to these days?
Sulla|6.10.08 @ 12:27PM|#
And under my reforms, all aspects of a CEO's pay, including
any severance arrangements, must be approved by
shareholders.
Um, how? The scope of things that must be voted on by shareholders
is a matter for state corporate codes. Even recognizing the
expansion of federal intervention into corporate affairs of
Sarbanes-Oxley, the main focus of federal regulation of
corporations has almost exclusively fallen on public corporations
and their disclosure requirements. I would be surprised to see
Congress and the Supreme Court go along with an action that would
pave the way for a federal corporate code that preempted the
states' codes (as opposed to creating a new class of federal
corporations). It would be quite unprecedented.
Elemenope|6.10.08 @ 12:28PM|#
And under my reforms, all aspects of a CEO's pay, including
any severance arrangements, must be approved by
shareholders.
It makes sense to me. WTF is the problem?
TallDave|6.10.08 @ 12:28PM|#
And Obama has been calling for hearings for over a year
now:
http://blogs.wsj.com/washwire/2007/05/30/obama-asks-dodd-to-hold-hearing-on-ceo-pay/
Presumably he'll run to McCain's left, perhaps by having them drawn
and quartered.
Elemenope|6.10.08 @ 12:29PM|#
Ah. Sulla makes a good practical point. However, simply on the virtues of the idea (and not the necessarily messy details of its implementation), it does not seem objectionable.
|6.10.08 @ 12:31PM|#
I wouldn't necessarily have a problem with this, if a CEO pay ceiling were tied to federal bailouts. I believe George Will suggested this, although it was probably tongue-in-cheek.
|6.10.08 @ 12:31PM|#
Americans are right to be offended when the extravagant
salaries and severance deals of CEO's
I find this to be a significant abuse of the corporate model for
which there is no easy solution.
Mark Cuban had an excellent post
on this topic. I agree with his opinion that making CEO
compensation purely cash based could help mitigate some of the
abuses we regularly see. But I don't know how this will come about
beyond shareholder revolt, which simply isn't realistic, or
government mandate, which is distasteful and fraught with its own
problems.
From Cuban's post:
As long as CEOs live in the equity/lottery ticket zone and
employees in the cash zone, CEO pay is going to be outrageous
relative to everyone else.
|6.10.08 @ 12:33PM|#
This doesn't strike me as terrible...I was all ready to be
pissed by the idea that mccain was going to impose some federally
mandated Pay cap or something.
and sulla, there doesn't need to be a new federal corporate code to
get this done. They could probably get away with expressly defining
payment of corporate officers w/o shareholder approval as fraud
under the 33 or 34 act and be done with it.
Matt Welch|6.10.08 @ 12:33PM|#
What's Phil Gramm up to these days?
Senior economic adviser to McCain.
TallDave|6.10.08 @ 12:34PM|#
Americans are right to be offended when the extravagant
salaries and severance deals of CEO's
Should we also be offended by the extravagant salaries of NBA
players, half of whom do not even play on winning teams?
Matt Welch|6.10.08 @ 12:36PM|#
However, simply on the virtues of the idea (and not the
necessarily messy details of its implementation), it does not seem
objectionable.
Someone could make a long list of terrible-upon-implementation
ideas that seemed unobjectionable before you imagined (or
witnessed) the federal government doing the implementing.
B|6.10.08 @ 12:36PM|#
So we have a candidate that wants sweeping regulatory power over
corporate governance, and a Democrat.
Glad I'm not trying to run a company right now.
|6.10.08 @ 12:37PM|#
I wouldn't necessarily have a problem with this, if a CEO
pay ceiling were tied to federal bailouts. I believe George Will
suggested this, although it was probably
tongue-in-cheek.
I've long suggested that Congressional pay and perks should be tied
inversely to federal debt levels. Nothing's gonna change until you
hit 'em where it hurts.
|6.10.08 @ 12:37PM|#
And under my reforms, all aspects of a CEO's pay, including
any severance arrangements, must be approved by
shareholders.
They already are. That is what compensation committees do on the
Board of Directors. Agency problems abound, but to have
shareholders set policy by referendum is a bad idea.
TallDave|6.10.08 @ 12:38PM|#
Someone could make a long list of
terrible-upon-implementation ideas that seemed unobjectionable
before you imagined (or witnessed) the federal government doing the
implementing.
Just ask Mark Steyn.
|6.10.08 @ 12:39PM|#
TallDave,
actually we are most offended by MLB salaries. These guys spend
almost all of there time either standing around or sitting in the
dugout and bullpen watching a friggin baseball game.
|6.10.08 @ 12:44PM|#
Should we also be offended by the extravagant salaries of
NBA players, half of whom do not even play on winning
teams?
Terrible analogy. Athletes' salaries correlate soundly with demand,
supply, and performance.
Except, of course, for the Knicks.
|6.10.08 @ 12:46PM|#
Miguel Cabrera's contract with the Detroit Tigers is for $153
million. So far, he's only hitting .270 with 8 HRs and 36 RBIs.
What's the government going to do about that outrage?
TallDave put it well.
Should we also be offended by the extravagant salaries of NBA
players, half of whom do not even play on winning teams?
Halle Barry did get payed for Catwoman, didn't she?
|6.10.08 @ 12:46PM|#
What business does the federal government have in the internal
operations of a corporation? What constitutional authority is there
for the proposition that the federal govt. has the power to force
companies to submit all questions of executive compensation to the
shareholders for their approval?
This is stil, in theory, a free society. Therefore. when the
corporation is formed, the stockholders have the right to insist
upon shareholder approval of executive compensation. Of course,
this does not address existing companies, but the short answer to
that is don't buy the stock.
I know that many of you will raise the issue of federal handouts
and with those handouts there should be some strings. The short
answer to that is NO FEDERAL BAILOUTS OF ANY BUSINESS.
|6.10.08 @ 12:48PM|#
It's going to be a rough few months for economic
conservatives.
Replace "going to be" with "been", and "few months" with "couple of
decades", and you might be on to something, joe.
Fluffy|6.10.08 @ 12:52PM|#
Gotta go with Pareto here.
Shareholders ALREADY approve executive compensation. Executive
compensation is awarded by Boards of Directors who can be voted on
at every shareholders' meeting.
Saying shareholders have no way to control executive compensation
is like saying that voters have no way to control the pay of
Congress.
|6.10.08 @ 12:53PM|#
Miguel Cabrera's contract with the Detroit Tigers is for
$153 million. So far, he's only hitting .270 with 8 HRs and 36
RBIs. What's the government going to do about that
outrage?
Not to mention, he's taking an American job!
Sulla|6.10.08 @ 12:57PM|#
and sulla, there doesn't need to be a new federal corporate
code to get this done. They could probably get away with expressly
defining payment of corporate officers w/o shareholder approval as
fraud under the 33 or 34 act and be done with it.
I am not a securities lawyer (i did some blue sky filings as a
junior associate, but my focus is M&A), but I'm not sure how
that would work. Does the 33 or 34 act have any similar provisions
that essentially require a procedure to be added to a corporation's
articles or bylaws before a stock issuance? It just seems that if
it were that simple, Congress could just define the lack of any
provisions it wanted in the corporate code as fraud.
What's more, if the requirements were really onerous enough to have
an effect on CEO compensation, you'd probably see a significant
number of companies go private or structure offerings to avoid
registration with the SEC. Sure, Congress could change the law to
expand the scope of the 33 and 34 Acts, but that would be a
suprising expansion of federal power. I'm not saying that it's
impossible - we've seen federal expansion into many areas that
would have once been considered unprecedented. My real point was
that McCain was blithely tossing that point around like it was no
big deal (I am fully aware that most (all?) politicians do it
constantly, but that doesn't mean we can't call them on it).
|6.10.08 @ 1:00PM|#
Let us not forget that John "the war hero" McNasty has been a pugnacious mediocrity his whole life. He has fed at the public trough just about his whole adult life. You want to take inspiration from this fraud?
Bob|6.10.08 @ 1:01PM|#
Miguel Cabrera's contract with the Detroit Tigers is for
$153 million. So far, he's only hitting .270 with 8 HRs and 36
RBIs. What's the government going to do about that
outrage?
I know you're being facetious, but please don't say things like
that out loud in an election year!
|6.10.08 @ 1:02PM|#
I seems to me that the "rights of shareholders" should include
the right to delegate a few responsibilities to the board of
directors. If the shareholders wish to retain the right to
micromanage details like compensation rates, they can do so. McCain
doesn't seem to understand that his proposal would strip
shareholders of the option to decide how much responsibility to
retain and how much to transfer to the directors who,
presumptively, have a greater familiarity with the quotidian
affairs of the corporation and the market in which it works.
Either that, or McCain understands this perfectly well and he's
simply pandering to voters who have no clue.
|6.10.08 @ 1:05PM|#
And under my reforms, all aspects of a CEO's pay, including
any severance arrangements, must be approved by
shareholders.
Utterly meaningless eyewash.
CEO pay in publicly traded corporations is already disclosed to the
public.
"Shareholder approval" will be via the pro forma annual meeting of
proxies.
And, as Mr. Boston points out, this will immunize directors against
any responsibility for CEO pay.
|6.10.08 @ 1:07PM|#
Saying shareholders have no way to control executive
compensation is like saying that voters have no way to control the
pay of Congress.
Deadpan humor of the day award to the fluffster @12:52pm!
|6.10.08 @ 1:09PM|#
What exactly is the appeal of this fraud?
1. "war hero" what didd he do? He got in a plane and from
40-50,0000 feet he dropped bombs on little vietnamese boys and
girls. Then he gets shot down and provides the vietnamese with
information concerning bombing missions, targets, floght patterns,
etc and gets preferential treatment by the vietnamese.
2. "character" He dumps his first wife and weds an heiress to a
substantial fortune. This is the same first wife who waited 6 years
for her husband and our "war hero."
|6.10.08 @ 1:09PM|#
This is stil, in theory, a free society. Therefore. when the
corporation is formed, the stockholders have the right to insist
upon shareholder approval of executive compensation.
Corporations would not exist in an anarchy. The are a legal
construct sanctioned by the state (i.e. the people). The people
thus retain the right to regulate the corporate structure.
That's not justification for government micromanagement. But it's
not legitimate to through out this "free society" hogwash.
|6.10.08 @ 1:12PM|#
I am not a securities lawyer (i did some blue sky filings as a junior associate, but my focus is M&A), but I'm not sure how that would work. Does the 33 or 34 act have any similar provisions that essentially require a procedure to be added to a corporation's articles or bylaws before a stock issuance? It just seems that if it were that simple, Congress could just define the lack of any provisions it wanted in the corporate code as fraud.
What's more, if the requirements were really onerous enough to have an effect on CEO compensation, you'd probably see a significant number of companies go private or structure offerings to avoid registration with the SEC. Sure, Congress could change the law to expand the scope of the 33 and 34 Acts, but that would be a suprising expansion of federal power.
I am a securities lawyer... and you pretty much have it
right.
People have the ability to check on CEO pay by voting on the
members of the Board of Directors each year, particularly the
members of the Compensation Committee of the Board. A specific vote
on CEO pay really wouldn't do a single thing to reign in CEO pay
(if it needs to be reigned in)
|6.10.08 @ 1:17PM|#
MP-
Why is it not "legitimate to through out this free society
hogwash?"
Is it "hogwash" to assert that this, in theory, is supposed to be a
free society?
Hogwash is the notion that the government can solve problems or
that a civil society needs a meddlesome, instrusive government.
Sulla|6.10.08 @ 1:17PM|#
Corporations would not exist in an anarchy. The are a legal
construct sanctioned by the state (i.e. the people). The people
thus retain the right to regulate the corporate structure.
That's not justification for government micromanagement. But it's
not legitimate to through out this "free society"
hogwash.
I agree, but would expand this analysis. I'm always amused with
people complain about "corporations." A corporation is a time
saving device. Any society which recognized contract rights would
have some form of business entity similar to a corporation.
Certainly the rights and priviledges would be different, and the
outlines of the tort/obligation/contract law would have a large
effect on issues like "personhood" and limited liability. Still, as
long as two people want to cooperate in some way and there is a way
to agree and have that agreement enforced, you will find the same
issues that affect corporations.
What most of these people are complaining about are large entities
that have large amounts of power. That is a completely different
issue.
lunchstealer|6.10.08 @ 1:18PM|#
Nothing good will come of the Executive branch getting involved in CEO compensation.
|6.10.08 @ 1:23PM|#
Sulla-
People will form business associations irrespective of the
exixtence of some political sub-division. To suggest that business
associations somehow need a nation state in order to operate is
absurd.
|6.10.08 @ 1:23PM|#
Americans are right to be offended when the extravagant
salaries and severance deals of CEO's
Does this imply that we're wrong not to be offended by it? Because
people making a lot of money doesn't bother me a bit, even if it
means that have more than I do.
|6.10.08 @ 1:29PM|#
Andrew-
Rule 10 (b)(5)- What a bunch of bolshevik baloney. Just ask Mr.
Chiarella.
jkp|6.10.08 @ 1:30PM|#
Glad you're back on this point, Matt.
Hey -- how's Obama on gun control?
Just asking.
Fluffy|6.10.08 @ 1:31PM|#
Since I bash McCain a lot, I have to stop and point out that
Obama favors a windfall profits tax for energy.
So the elderly guy with the premature death rictus smile is not the
man with the dumbest economic idea in the race.
J|6.10.08 @ 1:33PM|#
serious question: Is liberty mike a subtle troll or not?
To me he seems erratic (sometimes making sense, sometimes not), and
I know this site has a lot of recognized trolls, so I was just
wondering.
libblah|6.10.08 @ 1:34PM|#
Fuck free society! All injustices need to be corrected by a CARING government that looks after the well-being of ALL it's citizens. Freedom = slavery.
J sub D|6.10.08 @ 1:34PM|#
Re: liberty mike | June 10, 2008, 1:09pm
I don't appreciated slander against McCain any more than I
appreciate it against Obama. Or even Hillary for that matterm and I
despise her. You're full of shit, liberty mike. FOAD, thank
you.
Those with the Obama slander, I've got more where that came from.
This ain't Worker's World or RedState.com. Act like adults.
|6.10.08 @ 1:36PM|#
all aspects of a CEO's pay, including any severance
arrangements, must be approved by shareholders.
It already *is* approved by shareholders. The shareholders are free
to sell their shares in a company whose CEO is "overpaid," or walk
away for any reason they don't like the business they're invested
in.
You don't need the fucking federal government to govern that.
Disgusted Beyond Belief|6.10.08 @ 1:40PM|#
Passing for a moment about the federal mandate aspect of this, I
think it is a good idea to make executive compensation up for
direct shareholder vote. To argue that the shareholders already get
a say by picking board members is pure spin - realistically, most
shareholders don't really have much of a choice there and the way
the rules are often set up it can be really hard to even get one
board member ousted.
I think putting up compensation for a straight up or down vote to
shareholders is a good idea - and make voting easy - heck, it
should really be online, with a bulletin board in the same place
for shareholders worldwide to log on and discuss the vote (and view
the full pay package). It is too easy for executives to have boards
in their back pocket. Making them directly accountable to the
shareholders avoids that problem. Hell, shareholders are the
freaking OWNERS - they are the CEOs BOSSES - they should have a
direct say. (Not in the day-to day operations, but in big
decisions, like compensation contracts, where there is a huge
amount of corruption and collusion).
I think a lot of corporate excesses (which are really wastes of
shareholders money in that they loot the company for the benefit of
the executives at the top) could be stopped if certain things were
put to a shareholder vote and required at the very least a majority
(and perhaps some things should require a supermajority). CEOs have
no cause to complain if the owners tell them "no."
|6.10.08 @ 1:41PM|#
Is it "hogwash" to assert that this, in theory, is supposed
to be a free society?
It's hogwash because you're using empty "free society" rhetoric to
legitimize your position that there is zero justification for state
regulation of corporations.
People will form business associations irrespective of the
exixtence of some political sub-division.
They will not form Corporations. They couldn't. In an anarchy, you
can't create a contract that forces other entities in the society
to treat your business as an entity independent of the ownership.
In an anarchy, the only legitimate contractual forms of business
are partnerships and sole proprietorships. It is because of the
inability to easily scale these type of businesses that corporate
law exists. But simply because society has determined that
corporations should exist in order to enable an efficient
deployment of capital does not mean that society is obligated to be
completely hands-off once it authorizes corporate law.
Disgusted Beyond Belief|6.10.08 @ 1:44PM|#
Jamie Kelly - the shareholders are the OWNERS - the option should not be either 1) shut up and accept the ridiculous pay or 2) sell your ownership interest. If you owned a business and the manager (who works for YOU) got ridiculous compensation, would you be thrilled if you were not given the option to approve that pay (as the owner) and could only sell the business and walk away if you did not like it? These are the frickin' OWNERS we are talking about. While much is governed by boards, I'd like to think that the owners should get at least SOME direct say, particularly in areas that have been ripe for abuse, such as golden parachutes and looting-the-corporate-treasury-level compensation for executives (set by boards that are themselves CEOs for the other companies that, by strange coincidence, is where this CEO sits as a board member).
|6.10.08 @ 1:45PM|#
"They already are. That is what compensation committees do on
the Board of Directors. Agency problems abound, but to have
shareholders set policy by referendum is a bad idea."
No, I agree with the commenter who noted that "Agency problems
abound." They do. The system is broken. Look at who sits on the
Boards of Directors, it is generally other CEO's, or former
CEO's... what you see is a country club, not a free market. A well
functioning free market would reward performance, not abject
failure, as we have seen recently, in the wake of the subprime
mess.
Are you telling me that Citigroup could not have found someone else
to run Citigroup into the red, other than Charles Prince, for the
kingly sum of 26 million, or 17.5 million?
Not to mention the fact that there are perks and intangibles. Who
does NOT want to be a CEO, and be the most powerful man at a
company?
One commenter noted that people have the ability to control
salaries just as they do Congressional salaries--while technically
valid, when was the last time that you saw a contested Board of
Directors race? Do you think that the Board of Yahoo has performed
well as of late? The link between voter-participants in the
corporate system has been made even more remote than it is in our
democracy, and you all now how well that works.
The bottom line is, while free enterprise and competition work,
these things simply are not at work in the boardrooms of many of
America's top companies.
|6.10.08 @ 1:49PM|#
The bottom line is, while free enterprise and competition
work, these things simply are not at work in the boardrooms of many
of America's top companies.
QFT
fyodor|6.10.08 @ 1:55PM|#
They will not form Corporations. They couldn't. In an
anarchy, you can't create a contract that forces other entities in
the society to treat your business as an entity independent of the
ownership. In an anarchy, the only legitimate contractual forms of
business are partnerships and sole proprietorships.
Well that's purely speculation. If you agree that commerce can
happen in an anarchy, then you probably agree that some mechanisms
will come about to enforce contracts, and if that's the case, then
there's no reason to assume that there couldn't be contracts that
recognize one or more of the business entities have the poperties
of a corporation.
I'm not saying that WOULD happen, only that's it's presumptuous to
say it couldn't.
J|6.10.08 @ 1:58PM|#
The bottom line is, while free enterprise and competition
work, these things simply are not at work in the boardrooms of many
of America's top companies.
I agree. In many cases board members are high level executives at
other businesses as well, giving them a personal stake in high pay
regardless of performance - not that this has a good solution I
know of. I would love to see bidding for CEOs. I imagine you could
get a pretty good CEO for a lot less if they had to bid on the job.
But it would be against most of the interests on many boards to do
so.
LarryA|6.10.08 @ 2:07PM|#
And under my reforms, all aspects of a CEO's pay, including
any severance arrangements, must be approved by shareholders.
They already are. That is what compensation committees do on the
Board of Directors.
Define "shareholders."
Most here are using it as synonymous with stockholders. Is it under
McCain's plan? Or is he defining it as "stakeholders," including
customers, employees, neighbors, and other interested parties?
|6.10.08 @ 2:11PM|#
Not to mention the fact that there are perks and
intangibles. Who does NOT want to be a CEO, and be the most
powerful man at a company?
I'll assume this is as rhetorical as it sounds, but I should point
out that power and wealth are not universal motivators.
|6.10.08 @ 2:17PM|#
The bottom line is, while free enterprise and competition
work, these things simply are not at work in the boardrooms of many
of America's top companies.
There is one more elephant in the room. Most individual
shareholders of a coportation, (i.e. the ones writing the absurd
Shareholder Proposals each year on the Proxy statement)own such a
negligible percentage of the outstanding shares that their vote
would make no difference on a general referendum. The institutional
owners, mutual funds and retirement funds, for example, are the
ones who exercise all the leverage. Most of them are just fine with
the status quo.
Most here are using it as synonymous with stockholders. Is it
under McCain's plan? Or is he defining it as "stakeholders,"
including customers, employees, neighbors, and other interested
parties?
Customers, neighbors, employees who do not own stock and other
"interested parties" are free to vote with their checkbooks.
Otherwise it is none of their business.
Sulla|6.10.08 @ 2:23PM|#
Jamie Kelly - the shareholders are the OWNERS - the option
should not be either 1) shut up and accept the ridiculous pay or 2)
sell your ownership interest. If you owned a business and the
manager (who works for YOU) got ridiculous compensation, would you
be thrilled if you were not given the option to approve that pay
(as the owner) and could only sell the business and walk away if
you did not like it? These are the frickin' OWNERS we are talking
about. While much is governed by boards, I'd like to think that the
owners should get at least SOME direct say, particularly in areas
that have been ripe for abuse, such as golden parachutes and
looting-the-corporate-treasury-level compensation for executives
(set by boards that are themselves CEOs for the other companies
that, by strange coincidence, is where this CEO sits as a board
member).
The problem with this analogy is that you own 10% of the business,
and all the other stockholders own 90% and they're fine with how
much the manager is paid and how the compensation decisions are
made.
Kolohe|6.10.08 @ 2:27PM|#
Saying shareholders have no way to control executive
compensation is like saying that voters have no way to control the
pay of Congress.
Well, otoh, the most recent constitutional ammedment is to
ostensibly address the fact that this control is somewhat tenous
and subject to plenty of countervailing forces.
Zeb|6.10.08 @ 2:27PM|#
Honestly, I don't think that the fact that I own 1/1000000 part of a few companies gives me much say in how they are run. Sure, I am technically an owner, but so what. My proxy votes are very irrelevant. Owners who are big companies holding stock or big time private investors do have a say in how the company is run. It's not as if the boards of directors come from nowhere, they are selected by the owners who own significant numbers of shares. Even if everything were voted on, it is not as if all of the people who have 100 shares in their IRA are going to be calling the shots.
Kolohe|6.10.08 @ 2:29PM|#
Either that, or McCain understands this perfectly well and
he's simply pandering to voters who have no clue.
Exactamundo
jp|6.10.08 @ 2:34PM|#
I haven't read the whole thread, but CEOs are just the scapegoat du jour. How and how much the CEO is paid is up to the stockholders, not McCain's (or any other third party's) sense of fairness. If you don't like how a corp is run, you can (1) not invest in it in the first place, (2) sell your stock, or (3) work with other stockholders to change it. If the capital market isn't putting pressure on corporations to change their governance in a particular way, then that means the changes have been deemed to be economically inefficient by the folks who actually have skin in the game. Government need not butt in.
Egosumabbas|6.10.08 @ 2:36PM|#
Corporations are a state-determined organism, since you're giving legal personhood to a non-person. In short, they get a subsidy by default from the state compared to a private business in the court system. No government intervention would be preferable, but I can't really complain about the state dictating the structure of corporations since their mere existence is protected by the state anyway. Let me be more specific: the legal structure of a public corporation, that is, requiring executive pay to be tied to a vote. Capping executive pay goes beyond setting up a legal framework and shouldn't be allowed. On the other hand, the government has no right top interfere in the business structure of a private company.
Disgusted Beyond Belief|6.10.08 @ 2:39PM|#
Those 1/1000000th shares add up - it has been in the news
recently about shareholders who got so fed up with some of the
antics (and looting) done by boards that they'd vote non-binding
resolutions against them (and try to enforce them unsuccessfully in
court). Even when they get over 50% the boards still ignore them.
So this isn't a case of 10% of the shareholders wanting
something.
But really, if it was just 10%, if it would be so easy to get over
50%, why balk at allowing it then? Why not put it up for that
shareholder vote if you are so confident it will be supported? Hey,
if 90% of the shareholders vote to support looting the company for
bs golden parachutes for failure, then that's their business - and
at that point, the 10% can sell their shares and say to hell with
it. I think many people are worried they'd have trouble justifying
the pay packages in such a vote - and with good reason - they are
utterly ridiculous and just indicators of people playing with other
people's money - I really think management at large corporations
are no better than the government when it comes to wasting other
people's money as if it were their own private stash.
jp|6.10.08 @ 2:40PM|#
Egosumabbas -- Sounds like you're tangled up in your knickers. Anyone (you, me, the widow next door) can form a corporation for less than $100. That corporation has no more and no less government "protection" than a huge multinational. They both benefit from / are bound by the same set of laws.
Egosumabbas|6.10.08 @ 2:44PM|#
JP, I think you're confusing the word company with corporation--a public corporation with shareholders. This is different than an LLC (which has SOME corporate personshood but not as much as a full-blown corporation) and a partnership. The things you get for 100 bucks are not full-blown corporations; there is great risk for personal liability.
jp|6.10.08 @ 2:49PM|#
Ego -- I'm a corporate lawyer and form corporations and LLCs all the time. Trust me, the things you get for $100 have just as much corporate personhood as any other corporation. That's the case in Delaware, anyway. Maybe you live somewhere with atypical laws.
Sulla|6.10.08 @ 2:52PM|#
Those 1/1000000th shares add up - it has been in the news
recently about shareholders who got so fed up with some of the
antics (and looting) done by boards that they'd vote non-binding
resolutions against them (and try to enforce them unsuccessfully in
court). Even when they get over 50% the boards still ignore them.
So this isn't a case of 10% of the shareholders wanting
something.
Do you have any examples where shareholders owning more than 50% of
the voting power of a corporation were unable to run the
corporation? At that point A) you have the votes to appoint a new
board of directors or B) you bought shares in a company that
required more than a 50% vote for board members (or some other
board protection device like staggered terms) and you get what you
paid for.
Yes, there are collective action and agency problems, but they will
not be solved by giving shareholders a vote on executive
compensation.
Egosumabbas|6.10.08 @ 2:54PM|#
"That's the case in Delaware, anyway."
Well that explains everything, JP. Ever notice how everybody is
incorporated in either Delaware or Nevada?
jp|6.10.08 @ 3:00PM|#
Ever notice how everybody is incorporated in either Delaware
or Nevada?
Yes, Delaware has the best corporate law and business courts in the
country. (Can't speak for Nevada.)
Egosumabbas|6.10.08 @ 3:03PM|#
Anyway, even if every kid on the corner can open a corporation in Delaware for a Benjamin, it still doesn't make it right that they have limited liability. One psychological explanation for why CEO pay is so sky-high yet divorced from performance is due to all the legal protections. Imagine if a CEO was personally responsible for the actions of a corporation? Or if all the board members were personally responsible?
|6.10.08 @ 3:06PM|#
Egosumabbas -- Sounds like you're tangled up in your
knickers. Anyone (you, me, the widow next door) can form a
corporation for less than $100. That corporation has no more and no
less government "protection" than a huge multinational. They both
benefit from / are bound by the same set of laws.
I don't follow your point. I don't see Egosumabbas arguing that
there is a difference between Jimbo's Trash, Inc. and Citigroup
from a basic corporate law perspective. The point is that the state
has a legitimate authority in regulating the construct of a
Corporation since it created this construct in the first place.
jp|6.10.08 @ 3:12PM|#
Limited liability has nothing to do with protecting CEOs or
directors. If a CEO or director does something actionable, he can
be sued and, if it's a crime, punished. That's what happened to
Kenneth Lay, Andrew Fastow, et al. The fact that they were working
for a corporation at the time had no impact on their liability
(other than to create additional causes of action).
What limited liability does is protect shareholders from
having their assets taken by creditors of the company, and protect
the company from having its assets taken by creditors of the
shareholders. This is what enables corporations to raise so much
money and thereby undertake large-scale projects that have
increased our standard of living by many multiples of what it was
in 1800, say. Without limited liability, you wouldn't be able to
attract millions of investors to an enterprise. You'd have what was
the case in the 18th century and earlier -- lots of small shops
operating at low levels of productivity.
Egosumabbas|6.10.08 @ 3:17PM|#
Without the legal fiction of a corporation, you'd still have wealthy people engaging in large-scale projects. Your argument is analogous to the idea that only governments can engage in large scale projects (voters are to shareholders as an executive is to the CEO).
Egosumabbas|6.10.08 @ 3:18PM|#
Also, you know how corporations have multiple departments with relative autonomy? Society could work just as efficiently (I'd argue even more so) if these departments were private organizations.
jp|6.10.08 @ 3:22PM|#
Without the legal fiction of a corporation, you'd still have
wealthy people engaging in large-scale projects.
No. You would not have as much wealth and wealthy people to begin
with, and you would not have anywhere near the amount of investment
and productive activity that the corporate form has made
possible.
There is a key difference between corporations and governments:
Corporations do not have a monopoly on force. They can't make
people buy their products and services. If they perform poorly,
their owners suffer accordingly. Governments are subject to no such
discipline.
I need to get back to work now.
Egosumabbas|6.10.08 @ 3:39PM|#
"There is a key difference between corporations and governments:
Corporations do not have a monopoly on force. They can't make
people buy their products and services. If they perform poorly,
their owners suffer accordingly. Governments are subject to no such
discipline."
Well there's something we can agree on.
x,y|6.10.08 @ 3:42PM|#
LarryA -
Shareholder and stockholder are typically synonymous. Corporate law
is set at the state level. Some states call the owners
stockholders. Others call them shareholders.
Stakeholders, on the other hand, generally means
stockholders/shareholders, officers, boards, employees,
contractors, the community, and the kitchen sink.
|6.10.08 @ 4:20PM|#
I have a theory that McCain really does not want to be
president. He's doing a damn good job of pissing off every single
part of his potential coalition.
Is there a non-Godwin way to describe someone who leans left on
economic issues and right on social issues? 'Cause that appears to
be what the GOP has done to itself.
Matt Welch|6.10.08 @ 4:34PM|#
Is there a non-Godwin way to describe someone who leans left
on economic issues and right on social issues?
I think the term is "Huckabee."
|6.10.08 @ 4:42PM|#
http://finance.yahoo.com/tech-ticker/article/25925/Millions-Paid-to-Dead-CEOs-Outrage-Over-'Golden-Coffins'?tickers=CMCSA,NBR,SGR,OXY
|6.10.08 @ 4:49PM|#
I think putting up compensation for a straight up or down
vote to shareholders is a good idea
I think its utterly pointless.
make voting easy
It could hardly be easier now. They mail you a form that you can
mark your votes on and mail back for the annual meeting. If that's
too much trouble, then you shouldn't be voting at all.
with a bulletin board in the same place for shareholders
worldwide to log on and discuss the vote (and view the full pay
package).
The pay package is already public information in SEC filings. Every
publicly traded company has multiple bulletin boards devoted to
it.
Everything people say would make such a difference in CEO pay
already exists. Corporations are large economic organizations with
lots of resources. The people in charge will be compensated
accordingly. Short of truly idiotic government intervention, there
is nothing that can be done to change this.
|6.10.08 @ 4:51PM|#
I think the term is "Huckabee."
True, but I'm trying to think of a term that can be used in polite
company.
|6.10.08 @ 5:14PM|#
Anyway, even if every kid on the corner can open a
corporation in Delaware for a Benjamin, it still doesn't make it
right that they have limited liability. One psychological
explanation for why CEO pay is so sky-high yet divorced from
performance is due to all the legal protections. Imagine if a CEO
was personally responsible for the actions of a corporation? Or if
all the board members were personally responsible?
Exactly.
If a I, as a private citizen, took a cup of water from a disgusting
stagnant pond, make it look fresh, and then gave it to someone to
drink, leading to their illness, I would be at least liable for
civil damages if not criminally liable for some form of "assault".
A corporation can do this and .... nothing. Maybe a lawsuit but
often not even that.
"There is a key difference between corporations and
governments: Corporations do not have a monopoly on force. They
can't make people buy their products and services. If they perform
poorly, their owners suffer accordingly. Governments are subject to
no such discipline."
BULLSHIT!! When corporations get government patronage, as they
often do, they stop being purely private entities and often stop
paying for their performance.
There is a market for beef 100% tested for MadCow, so why can't I
buy it? Because the Bush administration won't let me.
The Department of Agriculture refused yesterday to allow a Kansas
beef producer to test all of its cattle for mad cow disease, saying
such sweeping tests were not scientifically warranted....Gary Weber
of the cattlemen's association called 100 percent testing
misleading to consumers because it would create a false impression
that untested beef was not safe.
Its not just bailouts. This kind of shit happens everyday.
|6.10.08 @ 5:15PM|#
J- 1:33PM
The answer is no. I am a liberty lovin' libertarian. If you think
that I am "a subtle troll"-why?
You make the claimn that sometimes I make sense and that sometimes
I don't-yet you fail to support your statement.
I do not support communists and both Obama and McCain are
communists. Why do I assert that they are both communists? Both
support the income tax. The income tax is one of the planks of the
communist manifesto. Both support massive redistribution of wealth.
Both support the notion that sacrifice to the state is the highest
of virtues.
|6.10.08 @ 5:24PM|#
J sub D- 1:34 P.M.
What's the problem? It can't be that you think that I am some kind
of troll for the communist freshman senator from Illinois.
What about my post touched your irrational angry rant? Do you like
to defend enemies of liberty like the fraud McCain? Ever hear of
the Keating 5? Campaign Finance Reform? He did divorce his first
wife to marry an heiress whose father was very tight with MR.
Keating. McCain and his wife took numerous trips aboard Mr.
Keating's private jet, including vacations to exotic locales. All
facts.
|6.10.08 @ 5:24PM|#
You make the claimn that sometimes I make sense and that
sometimes I don't-yet you fail to support your
statement.
J doesn't need to support an observation.
And yes, "subtle troll" is a valid observation, given your tendency
to keep the rhetoric at a high volume.
|6.10.08 @ 5:32PM|#
MP-
Assuming that I have a tendency to keep the rhetoric at a high
volume, how does that make me a subtle troll?
If you think that, then, for whom or for what cause? Do you have a
notion that I am really a supporter of big government? Of state
intervention in the boardroom? The bedroom?
|6.10.08 @ 5:49PM|#
The SEC is given virtually limitless discretion in determining
what constitutes fraud with regards to publicly traded
companies.
I have no doubt they could issue a regulation stating that
excessive severance packages given to CEOs constitutes a fraud on
the shareholders, and have the courts uphold it.
Even if the courts said this was outside the SEC's discretion
(which I don't believe it to be), all it would take is a nudge and
a wink between the SEC and the Self-regulating organizations (such
as the NYSE) to get this regulation in through the back door
|6.10.08 @ 6:16PM|#
Assuming that I have a tendency to keep the rhetoric at a
high volume, how does that make me a subtle troll?
It doesn't make you one. But I can easily imagine why someone might
perceive you as one.
|6.11.08 @ 9:33AM|#
war hero" what didd[sic] he do? He got in a plane and from 40-50,0000 feet he dropped bombs on little vietnamese boys and girls
both Obama and McCain are communists
libertymike, these sort of things are why some people think you're a "subtle troll". Not that your opinions are invalid, but, yes your "rhetoric" is very high-amplitude. Hope this helps.
|6.11.08 @ 1:39PM|#
So the elderly guy with the premature death rictus smile is
not the man with the dumbest economic idea in the race.
Like pulling teeth.
Jesus.
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