udjibbom (udjibbom) wrote,
udjibbom
udjibbom

why don't more people get angry about this stuff?


I read this at work today and it made me feeling like getting on a plane, tracking this guy down and punching him in the face - what a bunch of self-serving bullshit! John Carney - you suck.

[The editorializing comments in brackets are mine; I'm kinda surprised I'm not just inarticulate with rage, given how I feel... I guess there really is something to the idea that laughter is the best medicine.]

Nope, Shareholders Shouldn't Be More Involved with Executive Pay
by John Carney

From The Business Insider, Aug. 11, 2009:

Getting shareholders more involved in compensation arrangements is a big goal of corporate governance reform types. ["The gub'mint is gonna get you - watch out!"] In fact, the failure of proposals now before Congress to get shareholders more involved forms the core of objections coming from people like New York Times columnist Gretchen Morgenson. ["I'm not the only person whining about this - look, over there! She's complaining, too!"] But whatever the problems might be with Congress assigning bureaucrats to evaluate pay, they pale in comparison with attempts to get shareholders more involved. ["Congress has more important things to worry about than how much a bunch of rich fuckers get paid, right?"]

Despite what many think, few shareholders have a subjective interest in executive compensation at the companies whose shares they own, except during extreme cases of corporate failure or truly shocking pay packages. ["It's none of  your business - shut up shut up shut up!"] One sign of this is that when given the opportunity, shareholders rarely act to reduce pay or enact rules that would give them a 'say on pay.' ["We've been getting away with this shit for so long, why should we stop now?"]

Why don't shareholders care more? Shareholder apathy is completely rational because diversified shareholders lack an incentive to become overly familiar with the operations of individual companies. ["It makes sense that you don't spend more time thinking about how bad we're raping you, since it would just piss you off and make you miserable."] They own a diversified portfolio of investments, so their interest lies in a prosperous economy and a rising stock market rather than the governance of individual corporations. They rationally care about the big picture rather than the compensation of individual executives. ["See? It's better for YOU if -I- make millions of dollars more than you! And you should also be upset about shit like the estate tax, which will never effect most of you - go worry about that, willya?"]

This means that shareholders would likely do a poor job of evaluating pay packages. ["They would howl bloody murder if they knew how much we got paid."] They lack the knowledge of the market for executives, and don't have a reliable metric for recognizing compensation practices that encourage overly risky actions. ["Nobody understands how hard it is, earning millions and millions of dollars a year! It is tough, man."] This ignorance applies to both individual shareholders and institutional shareholders. ["We don't want our employeers to know how much the boss makes, either - it tends to have a demoralizing effect on morale."] Individuals are too busy with the rest of their lives to become better informed, and instituions are specialists at portfolio management rather than corporate governance or executive pay. ["Nobody appreciates us - woe is me, the poor little rich man..."]

What's worse, ignorant and apathetic shareholders will not actually control the debate on executive pay. Instead, the debate will be dominated by committed special interests. ["And special interests are only good when they're OUR special interests, dammit!"] The rational ignorance and apathy of ordinary investors produces the entirely predictable effect of rendering them vulnerable to special interest exploitation. ["You guys are dumb and lazy and that's why we're better than you."] Agency costs of self-serving managers are a now familiar example of this. ["Even I don't understand what I'm trying to say here... Bwhu?"] And because of our long-standing familiarity with managerial agency costs, we’ve developed various corporate structures, reward incentives and legal frameworks aimed at better aligning investors and managers. ["We know how important our job is, so why don't you let us decide how much we should be paid for it, okay?"]

Less familiar—and therefore more dangerous—is exploitation by groups of shareholders who have interests that diverge from ordinary shareholders. ["There are people out there who -gasp!- don't want us to be rich; they'll screw everything up!"] Investors lack experience in fending off the self-serving activities of these groups, and there are few legal constraints on their activities. ["Democracy is dangerous."]

Labor unions are the primary example of these would-be exploitative special interest groups. Through their pension funds, labor unions are empowered with enormous financial leverage over companies even now. ["No stupid, grubby manual laborer is going to tell someone of my breeding how I should be compensated for spending their money... Why, the very idea is an outrage!"] Any proposal getting shareholders more involved in executive pay would have the unintended consequence of allowing unions to tie their labor negotiations to proposals for executive pay. ["Just because we make money doesn't mean our employees should make money - what're you, crazy?"] The predictable result of this would be a transfer of wealth away from ordinary investors, as union leaders and executives cut self-serving deals with each other. ["Uh, socialism or something-something... Haven't you gone away yet?"]

This isn't to say that nothing can or should be done about executive pay. ["Pay attention to what I just said - NOTHING CAN OR SHOULD BE DONE ABOUT EXECUTIVE PAY. Subtle, wasn't it? If you're as stupid as we think you are, you just got one hell of a subliminal message."] But it would be far better to take small steps, at the level of the states or individual corporations, than pass nationwide mandates that will be hard to reverse and whose costs will be hard to detect. ["I want it to sound like we're willing to do as little as possible to deal with this, but couch it in a way that makes us sound noble and reasonable - that kind of shit goes over big all the time. These fuckers are too stupid to know any better..."]
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