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Tilting at Windmills

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March 6, 2006
By: Kevin Drum

EXECUTIVE COMPENSATION....Is CEO compensation in America crazy? Mickey Kaus agrees that it is:

It seems obvious that top corporate pay is out of control. But there's Charles Murray's argument to contend with: "[W]hen a percentage point of market share is worth hundreds of millions of dollars, the people who can help you get that extra percentage point will command very large salaries."

That's true. In any system where there's a lot of money sloshing around think of Hollywood or professional sports the pay of the top performers is going to be astronomical if those top performers can increase profits by even a few percent. And in corporate America, there's a lot of money sloshing around.

But there's more to it than that. Consider this from Daniel Akst in the New York Times today:

As Rakesh Khurana showed in his insightful book, "Searching for a Corporate Savior: The Irrational Quest for Charismatic C.E.O.'s" (Princeton University Press, 2002), there is a much wider pool of potential chief executives than soaring pay levels would seem to imply. But companies insist on bidding for a savior, not a capable leader who knows the business at hand, which may be why typical C.E.O. tenures are now so short. Even in the boardroom, charisma carries you only so far.

This is the big difference between corporate pay and, say, pro sports pay: owners and general managers may make occasional mistakes when they bid for star quarterbacks or left-handed pitchers, but on the whole their bidding is pretty reasonable. They have good reason to think these guys are going to boost revenue by more than they're getting paid, and if the player's performance drops he eventually gets cut or traded. It's far from a perfect system, but at its core it's fundamentally rational.

Contrast that to executive pay, where truckloads of studies have shown that, in fact, it's practically impossible to predict which CEO will help you gain Murray's fabled couple of points of market share. What's more, star CEOs mostly don't do much better than merely excellent CEOs, so the money spent on them is pretty much wasted. As Akst points out a few paragraphs later, the compensation of the top five executives at public companies totaled roughly 10 percent of corporate profits, and it's almost a dead certainty that those companies would do better on average to hire competent executives at half the pay and then bank that additional 5%.

So why do they keep paying their executives so much? As Akst almost-but-not-quite says, it's because there's no one to stop them. Compensation committees are stocked with senior executives from other companies, and they all set each other's pay. Stephen Bainbridge half-jokes about this when he quotes Jack Welch's advice about who to put on your compensation committee ("Put someone in charge who is...immensely rich...and enjoys seeing other people get rich"), but it's no joke. That's a very big part of the story.

Despite what Akst says, there really are ways to pay for performance that are workable. Not perfect, but workable. But by their very nature, pay for performance incorporates the chance that pay will be low if performance is low, and CEOs, those supposed bastions of risk taking and private enterprise, are simply unwilling to accept that risk.

I don't have anywhere special to take this, except to insist that we give up on the fiction that CEOs are paid a lot these days because they're worth so much to their companies. There's just no evidence for it. It's not supply and demand that's responsible for astronomical CEO pay, it's cronyism and lack of accountability.

Kevin Drum 1:19 PM Permalink | Trackbacks | Comments (153)

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Kaus is and always has been a hack. Of course the millionaire fraternity will support itself. If the trust in markets is so great, perhaps executive compensation should be significantly attached according to stock performance. The fact is, the top 5 executives of most companies get paid oodles regardless of past or future perfomances. This fact alone destroys kausfiles little mind.

Posted by: raoul on March 6, 2006 at 1:26 PM | PERMALINK

The arguments to and fro on executive pay you lay out are excellent.

Two other ways to look at the question though: US executives are by far and away the highest paid top corporate executives in the world. But their overall performance relative to other nations executives is not so good.

So we know at a macro level that the US pay for top execs doesn't really do what it's supposed to.

Second, one can look at the whole issue as simply being an issue of power. Just like in Russia during the 90s when the oligarchs went crazy and stole everything not nailed down, here in the US the top executives take a lot of money because they can.

They have their cover story about hard jobs, shareholder values, market is always right, etc. And they just take the money and get rid of anyone on the board who gets in their way. And if you look at Eisner, Welch and some of the other examples, that just what a lot of them did.

Posted by: Samuel Knight on March 6, 2006 at 1:26 PM | PERMALINK

"The salary of the chief executive of the large corporation is not a market award for achievement," John Kenneth Galbraith noted back in 1980. "It is frequently in the nature of a warm personal gesture by the individual to himself."

The root strangness is that US companies are now being managed for the benefit of those wishing to sell their stock in said companies rather than to produce useful goods at competitive prices, manage the actual companies or serve any useful purpose beyond acting as accomplices to speculation.

Posted by: CFShep on March 6, 2006 at 1:27 PM | PERMALINK

You nailed it. What's even worse that the fantasy of the Executive Superstar is the fact that the ones who fail still walk away with boatloads of money in severance. It's a can't lose proposition for them, and a blackeye for capitalism.

Posted by: Jim on March 6, 2006 at 1:28 PM | PERMALINK

I don't have anywhere special to take this, except to insist that we give up on the fiction that CEOs are paid a lot these days because they're worth so much to their companies. There's just no evidence for it.

Actually there's a lot of evidence that they're worth so much to their companies. It's called the free market. In the free market, people get paid more if they can generate more revenues for the company. If certain executives are overpaid, their companies will fail. This results in other companies who survive paying the executives the fair market price for what they should earn. So in fact there is no evidence executives are overpaid at all.

Posted by: Al on March 6, 2006 at 1:29 PM | PERMALINK

I was at a pool party on Saturday, and one of the topics of conversation was the WinnDixie grocery chain Chapter 11 situation. Of particular attention was the compensation, in the form of a bonus, for the CEO to the tune of $1.5 million, or so, can't remember the exact amount.

Here the store is closing stores across the state and the chain, laying off folks in the area, and eliminating stock holders from settlement compensation in the bankruptcy proceedings, and the company is paying this guy a bonus of this size.

I understand, and tried to explain, the need to keep him there to assist in the reorganization, but even my arguments sounded hollow.

I've known the founding family for years, and the Chairman is a business associate of mine on other matters, but it doesn't seem right to me.

Posted by: Ed on March 6, 2006 at 1:29 PM | PERMALINK

I don't see why this matters -- CEOs obviously work much harder than everyone else, especially all those lazy inner-city folks, moochin' off us good Americans.

But we need to get back to the important threats to American: As long as Al and I can't get laid, everyone who does have sex must be punished! Women who dare to sleep with someone else? Must have more babies. Gays who can't get pregnant? Must be villified and threatened!

Once we get rid of RU-486, contraception, and sex-ed (didn't do Al or me any good!), and send Ellen Degenerous and clan to re-education camps, the U.S. will be perfect!

Posted by: Freedom Phukher on March 6, 2006 at 1:29 PM | PERMALINK

I suppose it will be better to let the Champion of the Free Loaders, Reverened Jesse Jackson, adjudicate on the level of salaries of the CEOs.

Posted by: tbrosz on March 6, 2006 at 1:32 PM | PERMALINK

BTW - sorry I mis-characterized Kevin's argument. It is cronyism.

And it's also something that Adam Smith identified as an inherent weakness in corporate capitalism way back in 1776. The weakness that the interests of the manager in a common stock corporation are not wholly lined up with the shareholder. And the bigger the corporation the greater the separation.

Unfortunately, there is no easy answer, but fixing corporate governor ship is a huge need in the US economy.

Posted by: Samuel Knight on March 6, 2006 at 1:33 PM | PERMALINK

Ya, those bourgeois capitalists.

Methinks any cure of yours is worse than the disease.

Posted by: conspiracy nut on March 6, 2006 at 1:33 PM | PERMALINK

Kevin,

If you want to structure comp packages to reward performance and punish non-performance, then you have to be prepared for truly astronomical awards for performance. It's all risk and reward - you want someone to take a risk, you have to compensate them when the gamble pays off.

Bottom line - Your suggestion, if adopted, would lead to even bigger pay packages. Maybe not for every CEO but for enough of them to give liberal editorialists a lot to vent about. Be careful what you wish for.

Posted by: DBL on March 6, 2006 at 1:34 PM | PERMALINK

Hey Al, you're missing something. It's not the free market at work. It's cronyism and mutual backscratching. No matter how wonderful the capitalist system might be, it's being gamed by a rather select group of arrogant self-important executives with their interlocking boards, and "I'll do you if you'll do me" attitudes. A true free market would never tolerate such an outcome.

Posted by: Jim on March 6, 2006 at 1:35 PM | PERMALINK

Getting irrationally rich in an irrational fashion at the expense of millions is the American Dream.

Posted by: Jeffrey Davis on March 6, 2006 at 1:35 PM | PERMALINK

I've known the founding family for years, and the Chairman is a business associate of mine on other matters, but it doesn't seem right to me.
Posted by: Ed

Really like that Memphis' museum is the Pink (as in Winn-Dixie) Palace.

A son of this family comes off very badly indeed in John Berendt's "The City of Falling Angels" - serves very nicely to bolster arguments for continuance of the estate tax.

Posted by: CFShep on March 6, 2006 at 1:38 PM | PERMALINK

Cheney: "As long as they are paying their taxes, and shareholders are happy, what the hell is the problem again?"

Ah, but most shareholders AREN'T happy about it. Their wealth would be increased if the CEO was paid less. But who listens to them!

Posted by: PTate in MN on March 6, 2006 at 1:38 PM | PERMALINK

Cue the loony libertarian brigade yammering about the magic of the free market.

Y'know, the thing that strikes me as the weakness in the libertarian position is that our system of repubican democracy is deliberately designed to prevent the aggregation of too much power in any one sector. But the libertarian position, while deeply distrustful of government, places abundant -- and in my opinion, unwarranted -- faith in corporations, which also hold much power over citizens, individually and collectively.

Just as an example, the transfer of intellectual property into the public domain is written into the Constitution, but Disney -- just to name one example -- stole our nation's collective property, albeit legally, by having its pet Congresscritters amending the laws under which that transfer occurs.

One of the many reasons I am a Democrat is that I believe government should act as a check against corporate power and its irresponsible exercise.

Posted by: Gregory on March 6, 2006 at 1:38 PM | PERMALINK

Hey, I've got an idea, why don't you propose nationalizing business? Then we could pass laws on CEO compensation.

Of course, all the CEOs would be political cronies then...

Posted by: conspiracy nut on March 6, 2006 at 1:39 PM | PERMALINK

conspiracy nut: Ya, those bourgeois capitalists.

CEO's are part of the hired help, not capitalists. Except to the extent that they're given shares and options. Hand me 10M shares of XYZ Corp. and I'll be a capitalist too.

Methinks any cure of yours is worse than the disease.

Still struggling with your reading comprehension? Neither Kevin Drum, nor anyone else on this thread so far, is suggesting a "cure".

Posted by: alex on March 6, 2006 at 1:39 PM | PERMALINK

Of course it's bad manners to ask for evidence that CEO compensation is governed by a "free market".

It's a free market because the True Believers say it is.

Faith trumps reason every time for these chumps.

Posted by: Dr. Morpheus on March 6, 2006 at 1:41 PM | PERMALINK

Neither Kevin Drum, nor anyone else on this thread so far, is suggesting a "cure".
You guys don't have to, Marx already proposed your cure.

Posted by: conspiracy nut on March 6, 2006 at 1:41 PM | PERMALINK

Samuel Knight: And it's also something that Adam Smith identified as an inherent weakness in corporate capitalism way back in 1776.

I know, but that Smith character also believed in progressive taxes and interest rate caps. Clearly a proto-Marxist.

Posted by: alex on March 6, 2006 at 1:44 PM | PERMALINK

Corporate and sports executives like this former President of the Texas Rangers getting outrageous compensation and perks not based on performance doen't seem like cricket but what does these days. What can we do?

Posted by: Steve Crickmore on March 6, 2006 at 1:45 PM | PERMALINK

And it's also something that Adam Smith identified as an inherent weakness in corporate capitalism way back in 1776. The weakness that the interests of the manager in a common stock corporation are not wholly lined up with the shareholder. And the bigger the corporation the greater the separation.

Unfortunately, there is no easy answer, but fixing corporate governor ship is a huge need in the US economy.

There's no easy answer, to be sure, but its often seemed to me this might be one of the benefits of cooperative ownership with democratic governance that is underexamined; you don't see democratic governments, at any level, with runaway executive pay very often.

But then, I've often thought that transitioning to a system where for-profit corporations were either fairly close to their owners (like, e.g., S-corps) or labor coops would have lots of beneficial effects in the long-term, though it would take a while to work out the practical kinks.

Posted by: cmdicely on March 6, 2006 at 1:45 PM | PERMALINK

Methinks any cure of yours is worse than the disease.

Yeah, but conspiracy nut also has said he/she/it thinks the Republican Party is too Marxist (for its tacit support of progressive taxation), and that every government of the G8 is also Marxist (for redistributing wealth via tax revenue to the poor), so judge what he/she/it thinks accordingly.

Posted by: Gregory on March 6, 2006 at 1:45 PM | PERMALINK

"...and the shareholders are happy..." Oh Cheney, oh Daddy, Daddy, Daddy, we're not happy! Almost all of us are just hanging on on the wage and salary side, and are inconsequential and impotently huddling in the shadow of the grand edifice that is American corporate law -- shareholder rights wing.

I know you like the setup, and why wouldn't you? Corporate structures with Presidents, voting, and all that in a representative democracy extolling free enterprise in a capitalist society kinda conflates political ideals and economic power in a u$eful way. But most of us (ask DeLong or Krugman or some lefty for their pet percentage, the closest you'll get to an honest response on the right is the crickets) are making less than we did a few years ago, see ominous signs of an economic tsunami (like inflation/devaluation, pension evisceration or some other 90+%-of-the-population-screwing maneuver), and unlike you few, don't a huge equity stake to use as a breakwater.

(Thought I'd meander toward a Katrina rather than a quail shootin theme to spare your heart.)

Your loving daughter,
MaryCh

(unedited for either clarity or length)

Posted by: MaryCh on March 6, 2006 at 1:47 PM | PERMALINK

Golly, here I was mocking c.n.'s ridiculous obsession with Marxism, and he/she/it goes ahead and confirms it for me. Thanks for the laughs, nut!

Of course, as they said in Clue, Communism is a red herring.

Posted by: Gregory on March 6, 2006 at 1:48 PM | PERMALINK

Oh, and the problem is that fantastic amounts of wealth are being concentrated in the hands of a very few individuals because they can get away with it, not because they have made such significant individual contributions.

This is a problem because these individuals are not working in a vacuum--their success results from the contributions of thousands of other people whose contributions are not being valued fairly.

A related problem is that inequities of wealth lead to social instability, injustice and corruption.


Cheney: "Are we talking about the raw number of shareholders (still, I'd like to see valid polling to support that), or those individuals / mutal funds with the most shares?"

Individual shareholders. Mutual funds tend not to express opinions, which is the problem.

Posted by: PTate in MN on March 6, 2006 at 1:48 PM | PERMALINK
Just as an example, the transfer of intellectual property into the public domain is written into the Constitution

The truth, I'd argue, is even stronger -- the idea that intellectually property is fundamentally, by right, in the public domain is written into the Constitution; the government is empowered to recognize private IP only as an instumentality to encourage the growth of that public store.

Posted by: cmdicely on March 6, 2006 at 1:48 PM | PERMALINK

The truth, I'd argue, is even stronger -- the idea that intellectually property is fundamentally, by right, in the public domain is written into the Constitution; the government is empowered to recognize private IP only as an instumentality to encourage the growth of that public store.

I stand corrected, cm.

Posted by: Gregory on March 6, 2006 at 1:49 PM | PERMALINK

Gregory
It's hard not to point out parallels with Marxism when the whole lefty mindset is a parallel with Marxism.

Income inequality, too much CEO pay, WalMart isn't unionized, gutting US power...

Posted by: conspiracy nut on March 6, 2006 at 1:51 PM | PERMALINK

What we need is an L-curve, hyper-progressive income tax rate that kicks in at say 500K. Tax those top incomes at 80% and they just won't seem to be that inviting.

Posted by: Kendall Miller on March 6, 2006 at 1:53 PM | PERMALINK

It's hard not to point out parallels with Marxism when the whole lefty mindset is a parallel with Marxism.

Funny, I noted your pointing out parallels with Marxism in the Republican Party and the G8. Are you saying they have a "lefty mindset" too? Priceless!

Posted by: Gregory on March 6, 2006 at 1:54 PM | PERMALINK

Most CEO's add nothing of value to any product or service their companies sell for revenue. Any compensation they receive comes from the surplus value added by others. When CEO's compensation increases, direct employees keep less of the value added they contribute.

Posted by: Hostile on March 6, 2006 at 1:54 PM | PERMALINK

As several commentors here have noted, opposing inflated CEO pay that results from executive cronyism is an inherently capitalist value. One wonders why c.n. is so insistent on raising the red herring of Marxism.

One also wonders where "gutting US power" comes into the CEO compensation picture, or where "gutting US power" is mentioned in the communist Manifesto. I suspect c.n. is also attempting a preemptive, if feeble, distraction from the fact that Bush has already gutted US power by his disastrous adventure in Iraq.

The Republican Party has a lefty mindset....I'm still chuckling over that one, nut. Thanks!

Posted by: Gregory on March 6, 2006 at 2:00 PM | PERMALINK
Sorry, but minority does NOT rule when it comes to capitalism.

Actually, as wealth is extremely unequally distributed, and wealth rules in laissez-faire capitalism, it is quite the case that the minority rules in laissez-faire

Laissez-faire capitalism produces oligarchy and is, fundamentally and invariably, opposed to substantive democracy.

This is, it should hardly need to be said, not an endorsement of Marxism or, a fortiori, its descendants via (and including) Leninism, in terms of what to do about that problem.

Rather, I think, the solutions lie largely in democratizing, rather than nationalizing, the institutions which in a capitalist system concentrate wealth and, therefore, power -- corporations.

Posted by: cmdicely on March 6, 2006 at 2:00 PM | PERMALINK

actually, there was a study which found that if purchased stocks merely upon which companies had the highest-compensated CEO's...you would garner an above-average return...in other words, there is at least a correlation (causality, is, of course, a separate question) between CEO pay and a company's performance.

Posted by: Nathan on March 6, 2006 at 2:01 PM | PERMALINK

Kevin has "followers"?!

Posted by: Gregory on March 6, 2006 at 2:02 PM | PERMALINK

it's cronyism and lack of accountability

Core GOP values. No wonder the GOP works so hard for corporate america.

Posted by: craigie on March 6, 2006 at 2:02 PM | PERMALINK

Rather, I think, the solutions lie largely in democratizing, rather than nationalizing, the institutions which in a capitalist system concentrate wealth and, therefore, power -- corporations.

Obviously, based on my earlier comment, I agree.

Posted by: Gregory on March 6, 2006 at 2:04 PM | PERMALINK

conspiracy nut wrote: Methinks ...

That's a big fat lie right there.

Posted by: SecularAnimist on March 6, 2006 at 2:04 PM | PERMALINK

Gregory: One wonders why c.n. is so insistent on raising the red herring of Marxism.

Wingnuts, having no substantive or rational arguments to make, often fall back on the "red herring of Marxism" (love the pun!).

However, wingnuts do provide some entertainment value. Admittedly though, they need a new punchline.

Posted by: alex on March 6, 2006 at 2:04 PM | PERMALINK

Gregory wrote: One wonders why c.n. is so insistent on raising the red herring of Marxism.

Because conspiracy nut is a stupid, ignorant liar and regurgitating brain-dead, bullshit drivel is all that he's capable of.

Posted by: SecularAnimist on March 6, 2006 at 2:07 PM | PERMALINK

You know though, Kevin did bring up an interesting point. Why don't you moonbats ever complain about actors pay?

Posted by: conspiracy nut on March 6, 2006 at 2:08 PM | PERMALINK

http://www.westga.edu/~bquest/2000/ceo.html

http://www.mercerhr.com/pressrelease/details.jhtml/dynamic/idContent/1176860

http://www-rcf.usc.edu/~kjmurphy/ceopay.pdf

Posted by: Nathan on March 6, 2006 at 2:09 PM | PERMALINK

alex
I don't need to change my punchline as long as you keep providing the same routine.

Posted by: conspiracy nut on March 6, 2006 at 2:10 PM | PERMALINK

Wingnuts, having no substantive or rational arguments to make, often fall back on the "red herring of Marxism"

No kidding. c.n. seems to want to declare the subject off limits by his dishonest implication that even to raise the issue is Marxist, or leads to Marxism.

Of course, as I pointed out and c.n. confirms, his understanding of Marxism is pathetic to say the least.

Yet the only purpose c.n. serves by such a dishonest tactic is to defend the values of corruption from the values of captialism. (Well, and to provide no end of unintentional amusement by his clownishness.) Hmmmmmm.

(love the pun!)

Thanks, but I can't claim credit for it; as I said, it's from the movie Clue.

Posted by: Gregory on March 6, 2006 at 2:12 PM | PERMALINK

I stopped short of calling you "minions" at least

"Followers" ... "minions" ... Charlie/Cheney/Chuckles reveals, I suspect, more of his mindset than he intends here.

Posted by: Gregory on March 6, 2006 at 2:13 PM | PERMALINK

Gregory
What do you call it when you lefties start looking for a cure to the evil bourgeois capitalists?

And why aren't you complaining about actor's pay?

Posted by: conspiracy nut on March 6, 2006 at 2:15 PM | PERMALINK

Well regulated, financially transparent markets is one way for owners (stockholders) to prevent over-compensation for CEO's within our current political economy.

Changing some of the rules of our political economy, like giving stockholders more power over profits: rather than letting the majority of stockholders determine what other stockholders receive in the way of dividends, I think a certain amount of net profits, say 50%, should automatically be paid to stockholders. Take the money out of the board's hands and give it to all the owners. This will reduce some of that 'sloshing' money the board and CEO's think is available for their compensation.

Posted by: Hostile on March 6, 2006 at 2:15 PM | PERMALINK

I don't need to change my punchline as long as you keep providing the same routine.

The "routine" here, nut, is defending capitalism from crony corruption. The only one bringing up Marxism is you. One wonders why you're so intent on defending the values of corruption over capitalism with your feeble attempts at diversion.

I guess that since the GOP has too much "lefty mindset" for you, it's their corruption that really appeals to you. No surprise there, really.

Posted by: Gregory on March 6, 2006 at 2:16 PM | PERMALINK

What do you call it when you lefties start looking for a cure to the evil bourgeois capitalists?

Defending the values of capitalism from corruption. A process you appear to oppose. Interesting.

And why aren't you complaining about actor's pay?

Because I'm only playing along with your attempts to change the subject inasmuch as it's amusing to poke fun at your ignorance. Your pathetic attempt to change the subject with your fallacious argument is too obvious to be amusing -- or impressive, I might add.

Posted by: Gregory on March 6, 2006 at 2:20 PM | PERMALINK

defending capitalism from crony corruption
Bullshit. Want me to search for all the posts on high CEO pay here? Cronyism is just the newest thing to hang your hat on.

And you clowns don't even object to cronyism, you just object to all things non-leftist. Remember the lack of outcry when Hillary fired the Travel Office?

Posted by: conspiracy nut on March 6, 2006 at 2:20 PM | PERMALINK

When a sports pro contributes to winning a game, everybody can see it and the audience applauds.
When a company's market share goes up by two percent under the tenure of CEO X, no-one can tell if it's because of him or if it's just windfall (a competitor bungled) or if another CEO in his place would have won twice as much market share for half the pay. It's all smoke and mirrors anyway. On this level, capitalism is like a religion, it's all belief and looking for the saviour.

Posted by: Jrgen in Germany on March 6, 2006 at 2:22 PM | PERMALINK

My dictionary defines "minions" as "obsequious followers or dependents; sycophants" - you got something different?

As long as you're around, Charlie, we definitely have "obsequious followers or dependents; sycophants."

Posted by: Gregory on March 6, 2006 at 2:22 PM | PERMALINK

Cronyism is just the newest thing to hang your hat on.

Au contraire, nut, it's the GOP that's hung its hat on cronyism. But thanks for playing.

Posted by: Gregory on March 6, 2006 at 2:24 PM | PERMALINK

i think there's a third factor behind outrageous ceo pay and that is the "star factor". a fawning business press makes these guys out to be geniuses, a breed apart, and thereby worthy of their huge compensation packages. for years, lou dobbs's lips were all over "chainsaw al" dunlaps' behind, buying his line that thousands of workers needed to be put out of work in order to save the company and thousands of other jobs. meanwhile, selfless al lined his pocket with a compensation package well out of line for the size company he ran. that is until al's genius ran sunbeam into the ground and he got caught in an accounting scandal. even that didn't stop old lou. then there was cnbc's love affair with the likes of l. dennis koslowski, tyco's ceo. that went on until dennis was caught with hands literally in the corporate cookie jar. but hey, these corporate bureaucrats are really smart, unlike you and me.

Posted by: mudwall jackson on March 6, 2006 at 2:25 PM | PERMALINK

So, it's O.K. to call me that

Nice of you to admit it, Chuckles.

but not you followers

That Kevin has "followers" and/or "minions" is an assertion not in evidence, Charlie, so no, you're just being your usual dishonest self. Got any more dead kid jokes for us?

Posted by: Gregory on March 6, 2006 at 2:30 PM | PERMALINK

The problem with CEO's today (most of them) is all that they care about is the bottom line and not the company or the product.

Look at the guy from Harley Davidson. He took over the company because he loved the motorcycles and turned it around for that reason. Not to please Wall Street.

Posted by: la on March 6, 2006 at 2:32 PM | PERMALINK

Your pathetic attempt to change the subject with your fallacious argument is too obvious to be amusing
I was just giving you the chance to show that it wasn't just capitalism you were opposing. The chance to show that there might be some principle behind your stand.

I knew there wasn't going to be, but being the fair guy that I am I wanted to present the opportunity.

Posted by: conspiracy nut on March 6, 2006 at 2:37 PM | PERMALINK

The mere act of recruiting a CEO with zillions of dollars becomes an event that can generate a few points in the stock market, if only temporary. Just like outsourcing, or massive layoffs. Such events generate a hype in the market, among the uneducated, or merely lazy. Even if the act of paying a CEO too much, or if the act of a mass layoff cripples a company's ability to innovate by chucking out the baby with the bathwater, the company can often make up for it with those investment dollars.

Posted by: Osama_Been_Forgotten on March 6, 2006 at 2:38 PM | PERMALINK

On this level, capitalism is like a religion, it's all belief and looking for the saviour.
Posted by: Jrgen in Germany on March 6, 2006 at 2:22 PM | PERMALINK

It *IS* a religion.
My religion.

Posted by: Mammon on March 6, 2006 at 2:46 PM | PERMALINK

So Gregory
With your lack of reply, I can only assume that it is capitalism that you are complaining about. Now, what, in general, is your answer to capitalism? You keep claiming it isn't socialism so I'm kind of interested.

Posted by: conspiracy nut on March 6, 2006 at 2:54 PM | PERMALINK

i read a story recently about armstrong trying to come out of bankruptcy...

top management got at least 30-percent raises over compensation from the previous 1-year....

ceo got even more...

fyi

Posted by: thispsaceavailable on March 6, 2006 at 2:59 PM | PERMALINK

I was just giving you the chance to show that it wasn't just capitalism you were opposing. The chance to show that there might be some principle behind your stand.

Since opposing excessive CEO pay is not "opposing capitalism," but to the contrary, defending it, the "chance" you offer is, as usual, a false one. But false equivalences are one of your specialties, aren't they, nut?

So Gregory
With your lack of reply

That was, according to the timestamps, a seventeen minute interval between your posts. A bit hasty to declare victory, aren't you? Once again you emulate the GOP in unflattering ways.

I can only assume that it is capitalism that you are complaining about

Well, of course you can only assume that, because your perception of Marxism, captialism and corruption are, as I've demonstrated and you keep proving, sadly skewed. Again, your assertion that this discussion is "opposing capitalism" is simply false, period, full stop.

Indeed, as I've pointed out, it seems more that your efforts to distract more aptly serve thecause of cronyism and corruption against capitalism. Now, Marx maintained that capitalism's corruption would be its downfall. Could it be that by defending its corruption, it's you who's the Commie? Perish forbid!

Posted by: Gregory on March 6, 2006 at 3:03 PM | PERMALINK

Gregory
You have no opposition to cronyism. Remember the Travel Office? Your lame whining about something you do not oppose isn't convincing.

And your claim that interfering with the way businesses are run is not opposing capitalism tickles me. Your only answer is regulation, and you want to claim that increasing government regulation of business is a capitalist thing?

And you think my equivalences are false?

Democrats: We want to save capitalism by regulating the hell out of it!
Right.

Posted by: conspiracy nut on March 6, 2006 at 3:10 PM | PERMALINK

I'm not admitting anything

Truly, never admitting he's wrong, even when it'd been proven time and again, is one of Charlie's trademarks.

I also have never joked about dead kids.

Case in point.

Remember, Charlie, lying is a sin.

Posted by: Gregory on March 6, 2006 at 3:11 PM | PERMALINK

hmmm...I post links to three academic studies (or reviews of the literature) indicating that there is a positive correlation between CEO compensation and corporate performance.

anyone want to articulate a substantive response?

Posted by: Nathan on March 6, 2006 at 3:15 PM | PERMALINK

conspiracy nut wrote: Remember the lack of outcry when Hillary fired the Travel Office?

conspiracy nut's answer to everything: brain-dead regurgitation of right-wing drivel.

Posted by: SecularAnimist on March 6, 2006 at 3:17 PM | PERMALINK

anyone want to articulate a substantive response?
Be happy to.

It seems that businesses do know what's good for business. Imagine that.

Posted by: conspiracy nut on March 6, 2006 at 3:17 PM | PERMALINK

Here we go folks, this should be exciting, we've got Charlie (posting as "Cheney" today) and conspiracy nut, each of them outdoing himself in a tough battle to win the tile of Stupidest Most Ignorant Most Dishonest Idiotic Dumbass Ever To Post Comments at Political Animal!

My the stupidest, most ignorant, most dishonest Bush-bootlicking Rush-regurgitating neo-brownshirt goon win!


Posted by: SecularAnimist on March 6, 2006 at 3:21 PM | PERMALINK

You have no opposition to cronyism.

News to me. But you'll have to excuse me if your assertion alone is somewhat less than persuasive.

And your claim that interfering with the way businesses are run is not opposing capitalism tickles me.

That comment reflects much more poorly on you than it does on me, nut. :) As to your assertion that opposing excessive CEO pay is "interfering with the way businesses are run," well, let's just say that your assertions and definitions are faring rather poorly in this thread, and leave it at that.

Your only answer is regulation, and you want to claim that increasing government regulation of business is a capitalist thing?

Golly, nut, you're the one bringing up regulation. But now that you mention it, yes, regulation isn't at all at odds with capitalism -- only corruption. It ensures that corrupt entrepreneurs can't take advantage of the businesses that want to play by the rules. Why do you keep defending corruption at the expense of capitalism?

And you think my equivalences are false?

I know it, nut. Hell, it's one of your specialties! I just pointed one out in the previous paragraph, of course. Remember your amusing attempt to justify your giving Bush a free pass for failing to meet his service obligations by maligning Kerry's medals? Not one of your finer moments.

Democrats: We want to save capitalism by regulating the hell out of it!

Ah, I almost forgot your penchant for the dishonest paraphrase! Let's see, we have the full conspiracy nut hit parade here: False equivalences, non sequitirs, straw men, dishonest paraphrasing and the ever-amusing obsession with Marxism. I don't think there's really anything to add, except to point out once again that the one making these threads a cesspool of bullshit is you and only you, nut. Congratulations.

Posted by: Gregory on March 6, 2006 at 3:23 PM | PERMALINK

How many times do I have to tell you I am not "Charlie"?

As many times as you like, Charlie, but it's a lie each time.

Remember, lying is a sin.

Posted by: Gregory on March 6, 2006 at 3:24 PM | PERMALINK

anyone want to articulate a substantive response?

Sure, Nathan. You yourself noted that correlation =/= causation. So my substantive response to your post, weighed against the information Kevin and others have provided, is: So what?

Posted by: Gregory on March 6, 2006 at 3:27 PM | PERMALINK

Gregory
Maybe if you could clearly articulate ... anything, it would help.

You're opposed to cronyism, except when you're not.

You don't want to regulate, except there's no other answer.

You're opposed to high pay when there is no discernable benefit, but there is and you're still opposed.

You're opposed to high pay in some things, but not others.

Have you considered that there is not a bit a consistency in your position? You are evidently just whining to hear yourself whine.

Posted by: conspiracy nut on March 6, 2006 at 3:28 PM | PERMALINK

If paying executives massive amounts of money is important to corporate success, why don't the foreign companies do it? Japanese and European companies pay their CEOs 10-20 times what they pay their lowest paid employees. In America it's more like a hundred times (or more). Yet it's the foreign (especially Japanese) companies that are gaining market share.

Posted by: Jose Padilla on March 6, 2006 at 3:31 PM | PERMALINK

Have you considered that there is not a bit a consistency in your position? You are evidently just whining to hear yourself whine.

c.n., your description of my position is not accurate, as you well know, there's no inconsistency. Indeed, as I've demonstrated, it's you who are inconsistent by claiming to support capitalism when in fact you're defending its nemesis, corruption.

In fact, I've clearly articulated a number of arguments to which you have no response other than your false straw men. Since you have no refutation, only bullshit, I'll leave you to play with your straw men, and leave it to the judgement of honest readers (sorry, Charlie, that leaves you out) who has clearly articulated and who is inconsistent.

Don't worry, though -- I'll remember your "the GOP has a lefty mindset" remark. It's a keeper!

Posted by: Gregory on March 6, 2006 at 3:34 PM | PERMALINK

A hint, Charlie? You should refrain from the little winkies. It's a dead giveaway.

Posted by: Gregory on March 6, 2006 at 3:35 PM | PERMALINK

your description of my position is not accurate
The fact that you cannot defend your position does not make my description inaccurate.


You said The "routine" here, nut, is defending capitalism from crony corruption.
But the lack of opposition to the Travel Office firings so that Clinton cronies could be installed was not a problem. So it sure looks like an accurate assessment when I said "You're opposed to cronyism, except when you're not."

You say that you're not proposing regulation Golly, nut, you're the one bringing up regulation. And there is clearly no other answer, and you surely haven't made any attempt. So it looks like another accurate assessement when I said "You don't want to regulate, except there's no other answer."

Want me to keep going?

But I really like this:
in fact you're defending its nemesis, corruption.
Please, defend high CEO pay as being corruption.

Posted by: conspiracy nut on March 6, 2006 at 3:45 PM | PERMALINK

Gregory:

that's why it might behoove you to actually read the studies...rather than argue simply from ignorance. much has been done to demonstrate that there appears to be a causal element.

Posted by: Nathan on March 6, 2006 at 3:48 PM | PERMALINK

The fact that you cannot defend your position does not make my description inaccurate.

The fact that your description is inaccurate means I don't need to defend my position, nut, but thanks for playing.

Anyway, given your serial dishonesty in this post alone -- for just one example among many, in your insistence that the near-universal recognition that what you call "TravelGate" is irrelevant means that those who quite correctly don't debate you on the issue don't oppose it -- debating you is a mug's game.

I gave you a chance to debate honestly, c.n., and all you have is your usual bullshit. Once again, the available evidence suggests that the one making these threads a cesspool is you.

Have fun playing with your straw men, c.n. Oh, wait -- you already are.

Posted by: Gregory on March 6, 2006 at 3:53 PM | PERMALINK

Nathan
Don't worry about Gregory. The voices in his head are louder than facts. And the voices in his head tell him that capitalism is EVIL.

Posted by: conspiracy nut on March 6, 2006 at 3:53 PM | PERMALINK

the near-universal recognition that what you call "TravelGate" is irrelevant
I can see why you want to dismiss it out of hand, because it does make you look pretty stupid to be whining about cronyism after that. But here's your clue: it was cronyism so it is relevant to cronyism.

Posted by: conspiracy nut on March 6, 2006 at 3:55 PM | PERMALINK

Agency with minimal and compromised oversight. Plus, the fact that executive compensation is within the scope of corporate executive agency. Equals, inflated execuitve salaries. What am I missing? Is it more complicated than that?

Posted by: SS on March 6, 2006 at 3:56 PM | PERMALINK

I gave you a chance to debate honestly, c.n
BTW, I missed this one. It must have been buried deeply amid your shifting position. Where did this happen at?

Posted by: conspiracy nut on March 6, 2006 at 3:58 PM | PERMALINK

Nathan,

You said:

actually, there was a study which found that if purchased stocks merely upon which companies had the highest-compensated CEO's...you would garner an above-average return...in other words, there is at least a correlation (causality, is, of course, a separate question) between CEO pay and a company's performance.

You didn't provide a link to the studies, which I notice have morphed into the plural since your first post. You yourself noted that "causality, is, of course, a separate question," and now claim that "much has been done to demonstrate that there appears to be a causal element."

All with no cites. Funny, that.

Given all that, Nathan, I'd say your mention of vague and uncited studies hardly gives you latitude to say that anyone else is arguing from ignorance. I said, "So what?" and I say it again. Do you have anything substantive to bring to the discussion -- vague, unsourced reference to surveys hardly count -- or are you just trying to impress us all with your mighty intellect?

c.n.: the voices in his head tell him that capitalism is EVIL

Yep, you already are. The funny thing is that it's your statements on this thread, rather than mine, that oppose capitalism.

Posted by: Gregory on March 6, 2006 at 4:01 PM | PERMALINK

Gregory:

I posted the study links up the thread.

Are you illiterate?

Posted by: Nathan on March 6, 2006 at 4:03 PM | PERMALINK
actually, there was a study which found that if purchased stocks merely upon which companies had the highest-compensated CEO's...you would garner an above-average return...in other words, there is at least a correlation (causality, is, of course, a separate question) between CEO pay and a company's performance.

That's exactly what you would expect if, say, CEO compensation, all other things being equal, was higher in industries with higher overall growth; that CEO compensation is, indeed, fueled by an industry being "hot" is hardly a new observation. So, while I don't doubt the result, I don't see it as particularly likely to indicate a causal relationship, especially not in the direction "CEO quality" --> "CEO compensation".

Posted by: cmdicely on March 6, 2006 at 4:05 PM | PERMALINK

It must have been buried deeply amid your shifting position

c.n., here's a clue for you. Dishonest paraphrasing does not a shifting position make. It does mean that you aren't debating honestly, and renders your assertions of no value, but that's your choice, not mine.

Charlie, I might also add that your insistence on identifying Halliburton's best CEO, not to mention crowning Rumsfeld the best defense secretary of all time, are also dead giveaways.

Posted by: Gregory on March 6, 2006 at 4:06 PM | PERMALINK

Gregory, I'm sure you already realize that conspiracy nut is a stupid, ignorant liar, and that the only thing he has to offer is wasting your time with his bullshit.

Posted by: SecularAnimist on March 6, 2006 at 4:10 PM | PERMALINK

I posted the study links up the thread.

My bad, I missed them.

Are you illiterate?

No. Considering that your "links" were posted in plain text, and not in the HTML format I was looking for when you said links, I'd say the oversight was understandable, and your sneering totally unwarranted.

But's clear now that you're just interested in having all bow down to your superior intellect.

I'm tremendously impressed, Nathan.

Just not by your intellect.

Posted by: Gregory on March 6, 2006 at 4:11 PM | PERMALINK

CFShep-

"Really like that Memphis' museum is the Pink (as in Winn-Dixie) Palace."

Actually, the Pink Palace was built by the founder of Piggly Wiggly, which was the first modern, self-service grocery store. The founder was a bit of a brilliant eccentric, but I don't think he died wealthy.

Posted by: MJ Memphis on March 6, 2006 at 4:12 PM | PERMALINK

Well Gregory, I'm proud to see that you have failed miserably to answer a single thing I have brought up. What remains is your contention that we should regulate capitalism to save it from ... capitalism. Because you believe that
regulation isn't at all at odds with capitalism

Democrats: Saving capitalism by making it socialism!

Posted by: conspiracy nut on March 6, 2006 at 4:13 PM | PERMALINK

Yes, Secular, I do realize that.

He was amusing when he was attributing a "lefty mindset" to the GOP, and when he was aiding the Marxist agenda by opposing reforms to capitalism but instead hastening its corruption. But I hazard that the only one getting amusement from c.n.'s straw men is c.n. him/her/itself.

Posted by: Gregory on March 6, 2006 at 4:15 PM | PERMALINK

Ya Secular, as opposed to your well reasoned comments like:
conspiracy nut is a stupid, ignorant liar, and that the only thing he has to offer is wasting your time with his bullshit.

Of course, I realize that you're still pissed over the brocolli thing.

Posted by: conspiracy nut on March 6, 2006 at 4:15 PM | PERMALINK

I'm proud to see that you have failed miserably to answer a single thing I have brought up,/i>

Au contraire, nut, I called it for the bullshit it is.

Of course, you're also proud to post bullshit and spew dishonesty in the various forms I identified. You're welcome to it.

Posted by: Gregory on March 6, 2006 at 4:17 PM | PERMALINK

Nut, one final thing:

regulation =/= socialism

The return of your ridiculous obsession with Marxism does afford some slight amusement, but coupled as it is with yet another dishonest and false representation of the Democratic position, it's of little value.

If you have to lie to make your arguments, you're admitting defeat off the bat. All that's left is, as Secular said, wasting time with bullshit, so I will, at last, leave you to your straw men.

Posted by: Gregory on March 6, 2006 at 4:20 PM | PERMALINK

Hell, Gregory, you couldn't even address the Travel Office cronyism. I know, I know, in your mind it's not cronyism when the kindly and good Democrats do it, only when the evil Republicans and capitalists do it. But that's not much of an address to impress anyone but a moonbat.

You know, with that kind of cronyism in government, maybe instead of government oversight of business we need business oversight of government.

Posted by: conspiracy nut on March 6, 2006 at 4:22 PM | PERMALINK

conspiracy nut wrote: Of course, I realize that you're still pissed over the brocolli thing.

You are a stupid, ignorant liar.

Posted by: SecularAnimist on March 6, 2006 at 4:22 PM | PERMALINK

Secular
Do you mean that you're not still pissed over the brocolli thing? Then your behavior is normal and not driven by anger?

Who'd have thunk it...

Posted by: conspiracy nut on March 6, 2006 at 4:24 PM | PERMALINK
I post links to three academic studies (or reviews of the literature) indicating that there is a positive correlation between CEO compensation and corporate performance.

Text URLs are not "links".

The first of your misnamed links is a paper which has no indication of being peer-reviewed, and thus I'd be hesitant to call it an academic study; the second appeared to be a dead URL (but transitorily unreachable sites happen); the third is rather lengthy (91 pages) doesn't seem to provide clear support for your thesis on a brief skim, and, of course, you certainly haven't cited anything particular from it that supports your thesis (though I have no doubt that the author would agree with your thesis ideologically, even if he didn't find clear research support for it, given that the link one on of his own webpages to the AFL-CIO executive pay website as "Propaganda from the Dark Side".


Posted by: cmdicely on March 6, 2006 at 4:28 PM | PERMALINK
Democrats: Saving capitalism by making it socialism!

c.n., if you gave any sign of understanding either capitalism or socialism, you might be able to make some relevant and insightful comment about either.

Posted by: cmdicely on March 6, 2006 at 4:30 PM | PERMALINK
cmdicely:

Compare and contrast [blah blah blah]

When I sign up for a course where you are an instructor, or get a job where you are my supervisor, feel free to hand me assignments.

Until then, if you have a point to make, make your own argument.

Posted by: cmdicely on March 6, 2006 at 4:31 PM | PERMALINK

John Bogle, an exCEO has written a good book exactly about this: The Battle for the Soul of Capitalism.
An abstract at:
http://tinyurl.com/dfbu

Posted by: ExBrit on March 6, 2006 at 4:32 PM | PERMALINK

if you gave any sign of understanding either capitalism or socialism, you might be able to make some relevant and insightful comment about either
Well, let's just check the old Merriam Webster then.

capitalism -
an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market
Hmmm, what was that line: "determined by private decision". Well said, no? Now, let's continue our stroll through the dictionary
socialism -
any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods
Hmmm, "government...administration", sounds much like regulation.

So, my contention is that government has no business in business. You lefties like nice amounts of government regulation in business. Tell me again who's confused over the difference between capitalism and socialism?

Posted by: conspiracy nut on March 6, 2006 at 4:37 PM | PERMALINK
Hmmm, "government...administration", sounds much like regulation.

Perhaps if it said "government administration" or "government ownership or administration" rather than "government ownership and administration", that would be a fair characterization.

However, since it didn't, I have to conclude that your ignorance extends beyond not understanding capitalism and socialism to not understanding the difference between "and" and "or".

No one here has advocated government ownership. No one is arguing for socialism.

Posted by: cmdicely on March 6, 2006 at 4:53 PM | PERMALINK

CEO compensation in the American economy presents a classic principal/agent problem, and a damnably difficult one to solve. I think it may be the case that the best way to align compensation with shareholder interests is via staggered outright grants of stock to top management, with the provision that the stock cannot be sold for many years. How to make that happen is kind of difficult.

Posted by: Will Allen on March 6, 2006 at 4:54 PM | PERMALINK

I wouldn't care how much money top executives make
if our blue collar workforce was being treated fairly. In most families both spouses have to work to make ends meet, and a lot of people don't have decent healthcare.

The problem isn't that the lucky few make a ton of money-- the problem is that we are squeezing the bottom half of the society viciously, to the benefit of nobody. If I was a fat cat, I would want the economic underclass to be happy, well educated, and healthy; this is what makes for a stable society.

Posted by: cosmo on March 6, 2006 at 4:57 PM | PERMALINK

I've been convinced for many years that excessive CEO pay is the result of just plain greed and envy. I worked for a couple of Fortune 500 companies some back ago and saw what went on from the inside. I'm convinced that when CEO's saw the astronomical sums that entertainers and sports figures were making, they simply salivated. They just had to get their mitts on that kind of money, no matter what. When you can 'nudge' your Board of Directors into giving you whatever you want, why not do it? Job and company performance has absolutely nothing to do with what they get in salary and stock options. They just name their price and get it!

Posted by: bigapplegeorgiapeach on March 6, 2006 at 4:57 PM | PERMALINK

For an example of totally unregulated free market luxury! Let's go to Somalia. No central government no enviromental noise to slow down one's production. A libertaran pardise. A fountain head. Atlas shrugged here..

Posted by: Neo on March 6, 2006 at 5:00 PM | PERMALINK

The weird irony is that these CEOs etc fighting for *market share* do not increase the GNP near as much as they are valued - they cancel out each others' efforts to a large extent. Sure, they try to increase efficiency and quality etc. as *part* of their tools in increasing market share. But, their efforts fighting against their competitors per advertising campaigns, etc., are worthless to the rest of us over and above any direct product improvement. Yet they are paid mostly for the relative advantage they get over competitors, which is worthless as an actual product to the rest of us.

Posted by: Neil' on March 6, 2006 at 5:05 PM | PERMALINK

cmdicely:

the first study is by 3 academics...I will attempt to ascertain where it may have been published. the money quote (from the summary) "When we analyzed CEO total pay it does have a positive impact on economic performance"...

the second link works just fine and speaks for itself (albeit it is simply one of correlations)...

the third link is to a review of the literature.
the money quote (p.44) "Overall, the evidence is consistent with the hypothesis that stock-based incentives are
important drivers of managerial actions and corporate performance."

Posted by: Nathan on March 6, 2006 at 5:06 PM | PERMALINK

No one here has advocated government ownership. No one is arguing for socialism.
Here's the deal though. Government regulation moves toward government management and away from private decisions.

I realize that we don't have socialism, but what you don't realize is that we don't have capitalism either. As soon as you start with government regulation you remove the "private decision". The decisions are now part private, and part government regulation. So if I claim we have socialism that is just as wrong as you claiming we have capitalism. We have a hybrid.

And my claim that you want to move us toward socialism is dead on accurate. If you say that I want to move us toward capitalism, I'll wear that with pride. What's your problem accepting the truth?

Posted by: conspiracy nut on March 6, 2006 at 5:08 PM | PERMALINK

Dear Cheney:

No, I was thinking that the lowest paid would make $30-40,000/a year ($15-20/hour) and the highest paid would get $300,000-800,000. Being a practicing attorney, I can tell you that $800,000/year is more than 99% of all lawyers make. Also, why should a business executive necessarily make more than a lawyer or a doctor? Finally, if an executive is paying his employees a little more than minimum wage, then why should be be making more than $300,000 a year?

Posted by: Jose Padilla on March 6, 2006 at 5:12 PM | PERMALINK

conspiracy nut: What's your problem accepting the truth?

The truth is that you are a stupid, ignorant liar.

Posted by: SecularAnimist on March 6, 2006 at 5:13 PM | PERMALINK

I realize that we don't have socialism, but what you don't realize is that we don't have capitalism either. As soon as you start with government regulation you remove the "private decision".

Well, no. The U.S. economy seems to have plenty of "private decision" as well as plenty of government regulation. One does not cancel out the other.

The decisions are now part private, and part government regulation. So if I claim we have socialism that is just as wrong as you claiming we have capitalism. We have a hybrid.

By that argument, though, capitalism never has and never will have existed throughout human history, as every single society ever has regulated business to one degree or other.

When you look further at this argument, though, it seems to be saying at that the Republican Party is engaged in a socialist campaign against capitalism. After all, the Republicans control the White House and the Congress, so if they wanted to they could pass a bill tomorrow wiping out the SEC, FDC, FDIC, etc. etc. and removing all controls from business whatsoever. And yet they don't, which must mean that Republicans are really socialists.

Posted by: Stefan on March 6, 2006 at 5:18 PM | PERMALINK

capitalism never has and never will have existed throughout human history
I know you'd like to think that, but you might recall the late 1800's expansion in the United States (not the established parts, the expansion parts). And during Cowperthwaite in Hong Kong, the government provided infrastructure, property rights, and courts. Cowperthwaite worked to avoid regulation, that's why they erected a statue to him.

When you look further at this argument, though, it seems to be saying at that the Republican Party is engaged in a socialist campaign against capitalism.
Well, throw in free market education (vouchers) and we find a differentiator. But it is true that when we talk about Democrats and Republicans in this regard, we're talking about how far from capitalism each wants to take us.

But since you've chosen to jump in, I have a question: Why are you afraid to admit that you would like to move the United States toward socialism? It's the plain truth.

Posted by: conspiracy nut on March 6, 2006 at 5:33 PM | PERMALINK

This is policy. Check out "The Battle for the Soul of Capitalism" by John C. Bogle which, to put it in a sentence, says that people don't own stocks today so much as they "rent" them because the largest "owners" of stocks are mutual funds, which are in some ways incentivized to think short term. That includes CEO pay.

Ask yourself this - what's a better way to raise a stocks price *tomorrow*: hire a "sexy" celebrity CEO or save some money, hire someone no one has heard of and plan for him to grow in the job?

So, policy wise, we're talking about higher sort-term capital gains taxes and more required disclosure of mutual fund fees and expenses. Perhaps even require mutual funds to report their returns as net return instead of before fees, etc.

Posted by: Chuck on March 6, 2006 at 5:38 PM | PERMALINK

The real question is, I think, why salaries are so much higher than was historically the case. One answer, I think, is the decline of unions. When companies really had to bargain with unions, and might face the prospect of a strike springing from such factors as the disparity between workers' and managers' pay, they were more careful where the money went. Now there's no brake on the give-aways.

Posted by: David in NY on March 6, 2006 at 5:44 PM | PERMALINK

conspiracy nut wrote: Why are you afraid to admit that you would like to move the United States toward socialism??

Why are you afraid to admit that you are an asshole who posts deliberately obnoxious bullshit just to get attention?

Oh, I forgot, you have admitted that.

Posted by: SecularAnimist on March 6, 2006 at 5:44 PM | PERMALINK
the first study is by 3 academics...I will attempt to ascertain where it may have been published. the money quote (from the summary) "When we analyzed CEO total pay it does have a positive impact on economic performance"...

Sure, I never said that article didn't support your thesis, I said it didn't appear to have been peer reviewed. There are a number of quality problems I have with it, notably the small number of control variables (there are only two) which make it harder to rule out covariance rather than causation; a lot of the things I'd like to see -- broad performance in similar industries, etc. -- are hard to control for, to be sure, but what is important and what is easy are not always the same.


And, to help you out, it appears (both from the URL and the link on the bottom of the page) to have been published in B>Quest, an online "journal" which has this note on its webpage: "B>Quest publishes articles authored by academicians and practitioners. Academicians can request that their manuscripts be blind, peer reviewed. "B>Quest publishes articles authored by academicians and practitioners. Academicians can request that their manuscripts be blind, peer reviewed." (Note the "can request".)
the third link is to a review of the literature. the money quote (p.44) "Overall, the evidence is consistent with the hypothesis that stock-based incentives are important drivers of managerial actions and corporate performance."

Which regards the kind of compensation, not its overall level and thus, doesn't support your point even remotely.

Posted by: cmdicely on March 6, 2006 at 5:45 PM | PERMALINK

In addition to ranting about a socialist takeover like some deranged lunatic on a street corner, I also enjoy smelling my own farts.

Posted by: conspiracy nut on March 6, 2006 at 5:46 PM | PERMALINK

I doubt that you lefties have studied much about Cowperthwaite. So I'll help you out:

Asked what is the key thing poor countries should do, Cowperthwaite once remarked: "They should abolish the Office of National Statistics". In Hong Kong, he refused to collect all but the most superficial statistics, believing that statistics were dangerous: they would led the state to to fiddle about remedying perceived ills, simultaneously hindering the ability of the market economy to work. This caused consternation in Whitehall: a delegation of civil servants were sent to Hong Kong to find out why employment statistics were not being collected; Cowperthwaite literally sent them home on the next plane back.
That's right, he didn't even want the government to know what business was doing.
He was an opponent of giving special benefits to business: when a group of businessmen asked him to provide funds for tunnel across Hong Kong harbour, he argued that if it made economic sense, the private sector would come in and pay for it. It was built privately. His economic instincts were revealed in his first speech as Financial Secretary: "In the long run, the aggregate of decisions of individual businessmen, exercising individual judgment in a free economy, even if often mistaken, is less likely to do harm than the centralised decisions of a government, and certainly the harm is likely to be counteracted faster."
And that last quote sums it up. But I know your question: What kind of hell will policies like this create?
When he became Financial Secretary [1961], the average Hong Kong resident earned about a quarter of someone living in Britain. By the early 90s, average incomes were higher than Britain's.
And keep in mind that Hong Kong did this while adsorbing millions of refugees from China, and with a land area of about 1000 sq kilometers.

source

Posted by: conspiracy nut on March 6, 2006 at 5:48 PM | PERMALINK

Yes and no, Kevin. While I agree that executive compensation, along with the cult of the CEO, has reached absurd levels, there are significant other factors in play.

Sure, plenty of academic studies might indicate that CEO candidate X is statistically just as likely as candidates P, Q, R and S to perform well. But if I'm on the hiring committee, I'm not interested in abstract academic studies. Rather, I'm interested in finding who seems to be the best person for this particular job: skill set, personality--the complete package.

And, when we find that person, we have to offer that person a compensation package sweet enough to lure him or her from his or her current position. If I believe that person is the "best" for the position, I'm likely to need to pay him or her accordingly. Right or wrong, money is how corporate America measures success--on the annual report and the stock ticker just as in the paycheck.

It is believed that to be successful, you have to have the best, and the best costs money. That's why executive pay is so high.

Foolish that may be, but it is not some banal conspiracy of rich white men (and a few women) to propagate their species.

Posted by: JRP on March 6, 2006 at 5:52 PM | PERMALINK

the average Hong Kong resident earned about a quarter of someone living in Britain. By the early 90s, average incomes were higher than Britain's.

And between me and Bill Gates, we have an average income of a billion dollars!

Why aren't any of you evil Maoist impressed with my superior intellect?

Posted by: conspiracy nut on March 6, 2006 at 5:55 PM | PERMALINK

cmdicely:

that stock-based compensation is a driver of corporate performance would appear to back my point that Kevin is wrong when he says there aren't studies indicating that corporate performance is related to CEO compensation....

Posted by: Nathan on March 6, 2006 at 5:57 PM | PERMALINK
Here's the deal though. Government regulation moves toward government management and away from private decisions.

I would disagree that that is universally true; government regulation that serves to locate the decision-making power with the persons most affected by decisions does not move away from "private decisions" in any important way.

Nor do, necessarily, government decisions which alter the conditions under which a special government-issued privileges are granted. Those privileges, such as the privilege of incorporation, already constitute, generally, a weak form of government management. But changing the way in which that management is applied may increase, decrease, or have no effect on the degree to which "private decisions" rather than "government management" substantively drives the outcomes, even while changing whose decisions are involved.

I realize that we don't have socialism, but what you don't realize is that we don't have capitalism either.

I have no idea why you think I don't realize that, since I've fairly consistently characterized the modern US as a mixed rather than capitalist economy, and pointed to people like you that argue for laissez-faire capitalism as extremist nutballs.

If I thought your arguments in that direction were merely a defense of the status quo, I probably wouldn't do that.

Of course, what we have is not the issue, what is being advocated is. You have falsely claimed people are advocating socialism, and no retreated to "I know we don't have socialism" when the error of your claim is pointed out.

decisions are now part private, and part government regulation. So if I claim we have socialism that is just as wrong as you claiming we have capitalism. We have a hybrid.

Yeah, except while you've claimed that the US is socialist, that the G8 is socialist, that the Republican party is socialist -- and all this, as you note, is wrong -- I haven't claimed that the US is laissez-faire capitalist, though I've argued against those who argue as if it should be.

And my claim that you want to move us toward socialism is dead on accurate.

Er, no, its not. What I want to do is move us toward an effective market economy, by addressing some of the challenges noted in capitalist systems from their earliest proponents, such as Smith., as well as later critics, such as Marx.

In doing so I support some things that might be considered "socialism" with some justice, such as single-payer healthcare. I support some things that are orthogonal to the socialism/capitalism discussion, such as changing the conditions on corporate protection -- of course, since such a protection always involves public action, in the granting of special priveleges, it is not increasing socialism for their to be conditions attached by the public agency for that protection. Further its an abdication for government to give away special privileges at public expense without assuring that there are commensurate expected benefits.

And I support some things which move away from socialism, including devolving some public roles onto private agencies -- though in many cases that support is contingent on the kinds of reforms of corporate privilege that I've described elsewhere.

If you say that I want to move us toward capitalism, I'll wear that with pride.

Well, yeah, I think we've already established your laissez-faire nutball credentials.

What's your problem accepting the truth?

I have less problem accepting the truth than you seem to have understanding it, or honestly describing it.

If you say that I want to move us toward capitalism, I'll wear that with pride. What's your problem accepting the truth?


Posted by: cmdicely on March 6, 2006 at 6:05 PM | PERMALINK

See, I told you back when people were saying Luxembourg was too different from the US to be a healthcare model; the right wingnuts won't stop bringing up Hong Kong as an economic model.

Despite the fact that all the things that make Luxembourg a bad model for healthcare are present in the Hong Kong-US economic analogy.

Posted by: cmdicely on March 6, 2006 at 6:08 PM | PERMALINK

I haven't claimed that the US is laissez-faire capitalist, though I've argued against those who argue as if it should be.
Well in that case I have indeed mischaracterized you, I apologize.

But your initial argument that regulating business doesn't take away private decisions was certainly riddled with qualifiers, as it would have to be for an argument like that. I'll let that pass since it's clearly grasping at straws.

You have falsely claimed people are advocating socialism
True, I have engaged in hyperbole. The truth is that the left wants to move us toward socialism.

And about my laissez-faire nutball credentials
I've posted a little on Hong Kong, more is available. Contrast that with the Soviet Union. Now try to tell me that laissez-faire capitalism is nutball.

And I'm sorry you're unwilling to admit that you want us to move toward socialism.

Posted by: conspiracy nut on March 6, 2006 at 6:13 PM | PERMALINK
I've posted a little on Hong Kong, more is available. Contrast that with the Soviet Union. Now try to tell me that laissez-faire capitalism is nutball.

Laissez-faire capitalism is nutball, though it may be successful in small, pockets surrounded by more regulated areas, particularly if you just want to look at aggregate performance without examining distributional effects.

Communism largely likewise, but replacing "more regulated" with "less regulated".

But you, in any case, are a nutball who supports laissez-faire.

Posted by: cmdicely on March 6, 2006 at 6:19 PM | PERMALINK

Heh, Luxembourg's working class don't live in Luxembourg. When you send the peasants home to their own country every night I think there is an identifiable difference.

Posted by: conspiracy nut on March 6, 2006 at 6:21 PM | PERMALINK

it may be successful in small, pockets surrounded by more regulated areas
OK, pick Hong Kong and Cuba then.

Posted by: conspiracy nut on March 6, 2006 at 6:22 PM | PERMALINK

"It's not supply and demand that's responsible for astronomical CEO pay, it's cronyism and lack of accountability."

That's it in a nutshell. Nice to know there are still some things that I can agree with Kevin about.

Posted by: JJF on March 6, 2006 at 6:56 PM | PERMALINK

On Saturday March 4th the annual report and letter to the shareholders from Warren Buffet of the holding Co Berkshire Hathaway addresses this very issue. Go to http://www.berkshirehathaway.com/
and find the section of the 2005 annual report on exec compensation to get some real insight to overpaid incompetence.

Posted by: Bills on March 6, 2006 at 6:58 PM | PERMALINK

conspiracy nut,

I'm a little confused by your references to "Hong Kong". Are you referring to the Hong Kong with the massive public housing projects, or the one where the government owns all the land outright?

Posted by: alex on March 6, 2006 at 7:53 PM | PERMALINK

pay for performance, yeah right. two words: carly fiorina. I rest my case.

Posted by: supersaurus on March 6, 2006 at 8:10 PM | PERMALINK

I wish those supporting a more market economy would distinguish between regulatory laws about germs in meat etc., and true economic meddling such as price supports, subsidies, etc.

Posted by: Neil' on March 6, 2006 at 8:37 PM | PERMALINK

Neil',

Communism is communism. In a true free market like Hong Kong, the gov't only owns all the land and builds about half the housing. Libertopia!

Posted by: alex on March 6, 2006 at 8:47 PM | PERMALINK

This is easy to fix . We only need the political will to reimpose a steeply progressive income tax.

Posted by: alan aronson on March 6, 2006 at 9:39 PM | PERMALINK

Conspiracy Nut, you might learn a thing or two if you put down your arrogance for a minute. Among the things you might learn are that regulation is an essential factor to the successful continuance of any form of market.

The most obvious example of this is anarchy: I will not trade with you when I can beat your brains in with a rock and take all of your stuff. The first form of regulation, ever, was a monopoly on the use of force to settle disputes. Without it, there is no market. Without an independent legal system, operating on nothing whatsoever like market economics, to determine who really owns property and what contracts really say, there would be no market for long. You think you're a radical free-marketer, but you can't even imagine a world where, say, court decisions were made by auction. That would be a real market system. It would also kill markets very quickly as the richest companies squashed everyone else and became, essentially, fascist enclaves.

If you had some trouble swallowing that one, let's try this one: if regulation is the evil of the known world, buddy, why exactly are there so few modern economies out there that don't have any regulation? How come no one out there has an unregulated banking sector, where you can hold as few reserves as you want? How come when Enron went bust, the response of Republicans was to pass legislation? How come, in to get to the point, markets are thriving and expanding to an extent unimaginable 100 years ago, despite the fact that 100 years ago, there wasn't one-tenth of the regulation there is today?

The truth is that when you leave the solution to 'the market', the 'market' inevitably plays into the hands of a few dishonest, unfairly advantaged individuals who milk everyone else for everything they're worth and then flee the country, impoverishing the whole system. That, my friend, is not a healthy market correction. It's the lurch of the system towards breaking down. Only regulation, combined with law enforcement, keeps it from collapse.

Workers owning the means of production doesn't have to have any contrast with a market system either, while we're at it.

You're quite ready to spout dogma against socialists who want to destroy your precious capitalism, but the truth is you have no idea what really goes into a functional vs. a dysfunctional market. You're like every other one-trick pony hysteric. You take the first casual mechanism you see that you think you understand, and you milk it until it croaks.

Posted by: glasnost on March 6, 2006 at 10:42 PM | PERMALINK

glasnost,

Your comments are wise.

The only glitch is that you seem to be mistaking conspiracy nut for a person with a functioning faculty of reason.

Believe me, we've tried that.

Posted by: obscure on March 6, 2006 at 11:08 PM | PERMALINK

Everyone keeps blasting boards for CEO pay.

However, if you look at Unions, non-profits even political advisers/campaign managers, non-government organizations, etc.
The same 'star' mentality has huge salaries for the man at the top.....

You can't keep blasting capitalism if everything else does the samething.

Posted by: McA on March 7, 2006 at 12:10 AM | PERMALINK

Am I the only one who senses some sort of link (or more accurately, common causality) between star CEO pay and escalating NBA star player salaries? The governing Republican philosophy is you deserve anything you can get, because if you can get it you must be pretty sharp, and besides, God must love you. After all, if God loved poor people he would have made them rich. Only Democrats and other suckers feel success is dependent not only on talent, but on luck and support of others.

Posted by: fafner1 on March 7, 2006 at 12:36 AM | PERMALINK
However, if you look at Unions, non-profits even political advisers/campaign managers, non-government organizations, etc. The same 'star' mentality has huge salaries for the man at the top.....

You can't keep blasting capitalism if everything else does the samething.

All those other things are also products of the same system, working in the same environment (and, often, competing for the same pool of executives, meaning a big enough imbalance in pay between one of those groups and the others will cause a drain -- natural inclination only goes so far, when there is a big enough premium in a different field for much the same set of qualifications.)

Posted by: cmdicely on March 7, 2006 at 12:39 AM | PERMALINK

You're like every other one-trick pony hysteric. You take the first casual mechanism you see that you think you understand, and you milk it until it croaks.
Heh, at least I'm honest. I'm not trying to push capitalism while calling it something else, like the moonbats around here are trying to push socialism while calling it something else.

Socialized medicine, socialized education, progressive taxation, wealth transfer, centralized government; the only thing the left isn't calling for is government ownership of business (yet). But they sure want to regulate the hell out of it. All the while claiming capitalism. Tell me something, are they just stupid or are they afraid? Do they not know what what they're doing, or do they know and are afraid to tell the public the truth? Which is worse?

Anyway, your description of anarcho-capitalism is untrue in some cases, and unfortunately an accurate description of others. But socialism is a universal failure. And I'd rather work towards something that has a chance of success than work towards something guaranteed to fail.

Posted by: conspiracy nut on March 7, 2006 at 8:52 AM | PERMALINK

All those other things are also products of the same system
Capitalism is the root of all evil, huh? But governments are beneficent.

Business or government, which do you suppose has enslaved more people?

Posted by: conspiracy nut on March 7, 2006 at 9:47 AM | PERMALINK

Ours is a system of corporate socialism, where companies capitalize their profits and socialize their losses...in effect, they tax you for their accidents, bungling, boondoggles, and mismanagement, just like a government. We should be able to dis-elect them.

- Ralph Nader

I'm looking for Gore Vidal's contention that our 'hybrid economy' amounts to "socialism for the rich - free markets for the poor".

Posted by: CFShep on March 7, 2006 at 10:04 AM | PERMALINK

Hey, Cheney, if you're still out there. We're not talking owners here (owners can pay themselves anything they want). We're talking executives; that is, employees. The question: Is it a good idea to have executives, who effectively set there own pay, to overpay themselves? My vote is no, yours is yes. Also, how come U.S. companies were much competitive in the Sixties when excutive pay was much less? Berle and Means forsaw a separation of ownership and management, but they never thought management would use their power to loot the companies.

Posted by: Jose Padilla on March 7, 2006 at 10:26 AM | PERMALINK

Jose
From the garment industry. Labor is typically 28% of product cost. Overhead is typically 18% of product cost. Only a fraction of the overhead cost is salaries of any type. The other 54% is material. Garments are labor intensive, something like metal machining usually runs labor in the 10% range, materials in the 75% range, and the rest overhead.

You'll notice that labor intensive industries are the primary ones done overseas. And much of the price competition used to come from products with inferior materials.

Look at what makes up the costs and it all kind of makes sense, doesn't it? Pretty disingenious to tag it to a small part of costs instead of the cost drivers.

Posted by: conspiracy nut on March 7, 2006 at 10:50 AM | PERMALINK

Or how about the auto industry? Highly paid workers producing a high-priced product. Why have our over-paid CEOs lost massive market share to the foreign companies and their poorly paid CEOs?

Posted by: Jose Padilla on March 7, 2006 at 11:26 AM | PERMALINK

This thread has been very revealing with regard to the one-dimensional, cartoon comic book "Ayn Rand for Dummies" stereotype mental world that conspiracy nut inhabits, and goes a long way to explaining why he is such a stupid, ignorant, lying dumbass.

Posted by: SecularAnimist on March 7, 2006 at 11:48 AM | PERMALINK

Why have our over-paid CEOs lost massive market share to the foreign companies and their poorly paid CEOs?
There have been reams of studies written on that. You wouldn't like the answer. It seems that inflexible labor union workplace requirements aren't real beneficial to productivity.

And no whining about pay and benefits, the foreign companies building cars here have competitive pay and benefits. See, auto manufacturing is low labor content; that's why they can afford to pay so much. Labor cost is not a driver. It's the rest of the goofy union rules that cause the problems. "Grade X operators may only operate machines of Type A or C, Grade Y operators may only operate machines of Type B. Laborers must be available to load and unload machines because Grade X and Y operators are overqualified for the task of loading and unloading..."

Mind, management inflexibility also figures in here. But that is usually a mid-level issue, not CEO related.

Posted by: conspiracy nut on March 7, 2006 at 12:18 PM | PERMALINK

Hey Secular
If you're really not still pissed over the brocolli thing, and this is just the real you shining through, I suggest some anger management classes. Maybe some nice walks in the park on sunny days.

Posted by: conspiracy nut on March 7, 2006 at 12:20 PM | PERMALINK

conspiracy nut wrote: If you're really not still pissed over the brocolli thing, and this is just the real you shining through, I suggest some anger management classes. Maybe some nice walks in the park on sunny days.

You are a stupid, ignorant liar.

Posted by: SecularAnimist on March 7, 2006 at 12:31 PM | PERMALINK




 

 

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