Monday, August 30, 2010

We Need Bigger Claws

Clawbacks, that is.

Everyone is unduly focusing on the financial sectors as 'the place' where executive clawbacks are needed. A 'clawback' is a return of prior years' pay when later losses occur which are connected to the decisions and situations the person created and was paid for. For example, Chuckie Prince of Citibank got paid hundreds of millions of dollars, yet the assets on the books of Citibank were massively overvalued leading to billions of losses. Ditto Stan O'Neal at Merrill Lynch. Ditto hundreds of traders, bankers and investment bankers.

But for a couple decades we've seen in all industries endless examples of the recurring non-recurring losses, where the executive suite books a few years of great profits, collects big bonuses and stock option gains, then takes a big 'nonrecurring loss'. Of course in the long run (for which the executive suite SHOULD be paid), all gains and loses are both recurring and operating gains and losses. These executive hogs are not even fired for those losses. And the prior CEO, etc., keeps his huge retirement package while the common man employee gets laid off in a restructuring.

This is no long tolerable ! It never should have been tolerated, but was created due to the incestuous, clubby nature of the compensation committees and compensation consultants. CEO pay and that of the entire executive suite is way out of line and needs a massive dose of clawbacks reaching into retirement pay, too.

You can also see one other logical result: stock options are not - never - a proper means of executive pay. They reward short term performance, no matter what the vesting period.

CEO and executive suite pay should be based on earnings (in $, not per share) smoothed by ALL nonrecurring losses (and gains) over at least three years - five is better. And any retirement package should be restricted stock that cannot be sold for at least five years and is subject to clawbacks, too. At least then the CEO will bear the cost for his mistakes as well as the employees. All retirement packages should include only restricted stock issues based on earnings, subject to the clawback.

Limit all cash payments to $1 million per year. That's enough. CEOs are not Dukes or Princes. No special deals for ANYTHING. They have plenty of money - let them pay like the common man for vacation air fares. The US needs a massive dose of populism to improve the moral of the common man. Reform this ruling class in the executive suite, too, along with their DC cousins.

All this follows from the concepts of fraternal libertarianism: regulations and restrictions and controls on the rich and powerful ruling classes, freedom and a strong safety net for the poor and working poor. This is the political barbell strategy that the US needs to adopt.

Fraternal libertarianism is the correct political strategy for the Tea Parties. This strategy and philosophy can let the Tea Parties attract a broad base of support and win general elections.


Krypto await lower prices to buy stocks, and will sell more TIPs on a further rally.

Word of the Day

"Connivance" - noun [$10] and "Connive" - verb, intransitive [$10]
Connive means 1. scheme or plot; 2. to cooperate secretly in an illegal act or wrongful action, collude; 3. to feign ignorance of or fail to take measures against a wrong.
Connivance means 1. the act of conniving; 2. (Law) knowledge of and tacit consent to the commission of an illegal act by another.
Sentence: For decades the connivance of the hogs in the ruling classes, compensation committees and consultants have looted corporations via gluttonous CEO and executive pay packages. Let's get their snouts out of the trough ! Bring out clawbacks for ALL in the ruling class !


Frosty said...

certain "the girls" must be lookin for some claw back....pole union....USA USA USA.

Spin-em said...

dont take any crap paul...I guess its fine to buy 30k shares a buck lower and post..Im in XYZ..and feed it to the tank...slimey??...look in the mirror boyz

mfl59 said...

"there are hardly any of us left"

and why do you think that is, douche?

Bunkerman said...

lolol is that not standard operating procedure there by some ?

Bunkerman said...

well, what would I know about it "now" - left almost four years ago.

Spin-em said...

and why do you think that is, douche?


Spin-em said...

cmon guys

we all know its slimey to post a trade thats up big hours s late

i didnt say you were slimey



Spin-em said... know how you think perhaps 2011 should be a good you go back to your 09 Bunky list..or will there be new leadership?

Bunkerman said...

The 2009 list will NOT be the leaders, imho. Those were a "survival winners" play, much dependent on improving debt markets.

I'm thinking about leaders (other than the big blue chips who are borrowing at such low cost now).