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Is it Effective to Limit CEO Compensation?

This article was written by in Career and Work. 45 comments.


Let’s say you are the chief executive officer of a formerly strong financial company. Either your company has faltered under your leadership or you’ve managed to steer clear of toxic assets but the slumping economy has affected you. Or perhaps you are newly hired, brought in to oversee a struggling shell of a company as it tries to regain its stature.

Either your company desperately needed the funds it has received from the Troubled Asset Relief Program (TARP) or the business was competitively forced to take the handout because you wanted your company to stay on par with your peers who were bailed out.

Now President Obama wants to limit your compensation to a measley $500,000. No fair, right?

It makes sense to limit executive pay when taxpayers have stepped in to propr up your balance sheet, whether the company needed the money or not. But it’s largely symbolic, like when CEOs declare they will reduce their salary to $1 per year. They can do that for two reasons: they’ve already made a fortune, and they’ll continue to make a fortune thanks to stock options, deferred compensation, and other perks worth millions of dollars.

Obama says the CEOs can continue to be compensated above and beyond $500,000 through company stock, restricted from sale until the TARP obligations are complete and the government has been paid. This is a great deal; financial stocks have been pummeled. They may go lower, but this built-in waiting period will almost ensure that CEOs stand to win in the long-run.

What do you think about this $500,000 “limit?”

Published or updated February 4, 2009. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 45 comments… read them below or add one }

avatar Smithee ♦1,358 (Quarter)

Oh, the things I could do with $500,000 a year. Seriously, that’s an astronomical amount of money, and very few people do work that actually deserves that kind of salary.

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avatar NCN

Personally, I think they should do just the opposite. Hire the SMARTEST people on the planet, pay them extremely high salaries, and allow them to turn these businesses around. Seriously, what motivation do bright and intelligent people have, if they go into a business, knowing that compensation levels are limited? I also think that this is true in politics. The president should make 100 million dollars a year. Imagine that. Who could bribe him? Salary caps scare off talented people!!!

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avatar tom

Hey… I agree with the $500,000 cap, and with the stock options plan. If those CEOs can turn around the company and payback the American people, then they deserve those options. Plus, it’s not completely win for all CEOs. Obama said that if you receive TARP funds, golden parachutes and such are also extremely limited. So if you cannot turn around the company and get fired, you leave without all that much because the stock is still in the toilet.

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avatar velvet jones

Supposedly, business has been justifying the sky-high salaries for what they believed were the best and brightest. The same geniuses who drove companies into the ground, and a good portion of the reason we’re all where we are today. So what’s really happened is that we have leaders that are VERY good at making money for themselves, not being…you know…leaders and problem solvers.

I would venture to guess that there are a good many extremely smart and able people out there who would take on the challenge of turning a company around for the sheer sense of accomplishment. As stated, that $500k is just salary, they can still make millions in stocks.

If the people making millions of dollars before all this were so smart, why are we facing the biggest economic crisis since…ever? Guess they weren’t so smart.

ETA: Just re-read NCN’s comment. My apologies if I missed your sarcasm (you were being sarcastic, right? Please?!?). If not, then I’m not sorry at all! :-D

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avatar Mr. GoTo

My belief is that if a CEO needs to be told or forced to do what is right, he shouldn’t be there at all. Substituting Obama’s judgment doesn’t suddenly elevate the status or wisdom of a CEO with bad judgment.

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avatar Customers Revenge

I am all for limiting CEO pay. It’s a sham. CEOs are hired by the shareholders, and there is no need to hire someone for millions and millions of dollars. The reason it happens is because shareholders don’t compensate the CEO, it’s the board of directors who are composed mostly of other millionnaires getting perks from the company. I think common shareholders of failing banks would be extremely interested in punishing the CEOs and other executives who led them to ruin.

It doesn’t take all that much thinking by your average CEO to run a company steady state. Some CEOs are exceptional, but many are not. They just “demand” improved performance from their people, and that’s how they get BS ideas like loading up on junk mortgages. The CEO doesn’t understand the risk his company is taking, so what value do they add? Now it’s just simple shoring up what you can with TARP money, again, doesn’t take a $50M/year brain for that. A $500K per year brain should suffice.

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avatar CWulf

Executive pay is obscene… to anyone who isn’t receiving it.

Unfortunately, as much as I like our new fearless leader, his good intention will only certainly doom the success of TARP participants. The best talent will go where the money is, leaving the average and well-intentioned to deal with a low ceiling salary environment. Once the best are sucked out, the taxpayer’s investments will wither until the more competitive banks devour them, arranged or unfriendly.

You can’t give workmen tools and then tell them how to use them; they’ll leave and find less conditional tools.

Barack wants a revolution: be careful what you wish for.

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avatar rrgg

The problem is no one will admit that the government owns those failed banks right now. Whoever owns the company can set whatever salary they want.

When the companies are truly private again, they can change the salary.

Besides, if they don’t like it they can quit. I’m not sure where they’d go anyway.

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avatar PT Money

Yeah, salary means nothing to these guys. It’s the options they want anyway. Bait and switch move here.

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avatar Customers Revenge

You can get just fine talent for 500K. CEOs are not CEOs just because of talent. Or rather, they are paid what they are paid because they get to decide what to pay themselves and precedent and friends. There are countless examples of failure CEOs getting huge amounts of money. The bank CEOs are targeted with caps, and they’re the ones who ran their companies into the ground so I don’t see any problem with capping those guys. They’re nothing hot anyway.

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avatar aa

How about options that can be exercised below the current price, ah haaa!! There should be loop holes here or there.

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avatar UH2L

Outrageously high salaries attract the greedy, not the talented. This whole financial crisis has proven my point. People who love what they do and are good at it, last a long time doing a good job at a reasonable salary that’s high enough to keep them happy. Until recently, investment banking \salaries were huge for people just starting out in the industry. The same thing applied to doctor jobs before. That attracted people who were into money. Now you’ll see people who like the industry go into it, not to take care of greed satisfaction, but for job satisfaction.

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avatar thomas

It is a horrible decision to limit executive pay. I have several points:
1. You won’t be able to attract the top talent. The ones who will most likely be able to right the ship will simply go to another company.
2. Gov’t direction over private institutions is socialism. Regardless of the bailout (leaving this out of the argument as it should have never happened).
3. Name one other program besides the Military that the government has been able to efficiency and effectively run? Education? healthcare? welfare? Stay out of the free market
4. More companies will decide to move business overseas to avoid gov’t intervention. one of the automaker’s is already looking to South America to avoid problems with running their business
5. Banks and the likes will be unable to keep the current talent as they will most likely bail given the opportunity.

I don’t make anything close to what these guys do, however you can’t have a la carte the free market. let it work itself out. Don’t fall for wealth envy folks.

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avatar Kp

If your receiving federal funds to prop your company up, why can’t the feds say to you that there should be a cap?

This is not like some rule that applies to everyone because not everyone is receiving a bail out. If so, then I can understand the cries of people whining about this deterring motivation/ talent. How about you still have a job as an executive because the American people are propping you up? Pay them back and then return to the gross ways of the past regarding compensation.

And these companies are not going overseas. Overseas aren’t doing any better than the U.S right now and I can’t ever see banking going overseas. It wouldn’t make sense. Just as people are not bailing because there is no where to bail to.

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avatar Kp

Oh, and another thing:

In 2007, Vikram Pandit of Citigroup, made $3.1 million; Kenneth D. Lewis of Bank of America, center, received over $20 million; and Rick Wagoner of General Motors made $14.4 million.

Cutting them to 500K equates to HUGE saving for a company. Maybe, just maybe some of these funds can go back into the company to make it more productive or to halt some of the massive layoffs these same companies are doing.

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avatar Jeff

At $500,000 cap, I have no motivation to become a titan of business. That is truly preposterous. Not to mention that many of the richest people in the world do so much good with it. Just look to Soros, Gates, and Buffet. Large concentrations of private capital can go a long way for humanitarian efforts.

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avatar Luke Landes ♦127,505 (Platinum)

Jeff: If you were to accept a $500,000 salary and spend two or three years turning a troubled bank around and succeed wildly at that task, there’s no doubt multi-mullion dollar offers from other banks would be right around the corner. In fact, once the govenment obligations are met, the same bank might keep you on and bump your salary beyond your wildest imagination. I’m not convinced that a smart CEO looks at a $500,000 salary cap and sees it as a demotivator. But then again, where are the smart CEOs?

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avatar Jim

If these companies need a federal bailout then the CEO’s failed and should be held accountable. A cut in pay is completely appropriate. Plus they can still cash in on stockoptions and other perks assuming they do well over time. If they don’t like it then they can go find a higher paying job elsewhere and good riddence frankly.

If CEO’s are compensated so highly for being so super excellent at their jobs then when they fail they should be held acccountable financially and compensation should be cut.

Heck, I think they’re still over paid. I know a LOT of people who could drive a bank to near bankruptcy for a lot less than $500,000 a year.

Honestly I think its riddiculous to complain about making a mere half million a year when its from a government handout.

Jim

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avatar the weakonomist

I’ll start by saying the $500,000 salary cap is symbolic at best. Executives will still be eligible for stock options and other compensation. The board will simply invent new ways to pay executives.

Second, much of the loss in funds is not from executive pay. It’s the bonuses they pay out to other managers and “top producers”. Capping executive pay might save a few million, but it is the payout to these other folks that will save hundreds of millions.

Third, most of the top executive pay is given in good times. Company makes a hundred billion, they pay out. All the companies now are reporting losses. Since much of executive pay is tied to profit and there is no profit to be had, there isn’t much to cap.

OK next topic. Flexo this will include two deep links to my blog so feel free to remove them. The first is a full write-up of how executives are currently paid:
http://weakonomics.com/2008/12/09/how-are-corporate-executives-paid/
It can be summarized in a sentence though: Why is my bonus a fraction of my pay and executive bonuses a multiple of theirs?

The second one is my suggestion on how executives should be paid.
http://weakonomics.com/2008/12/10/how-corporate-executives-should-be-paid/
Again a quick summary: Executive pay should be directly tied to the pay of all other employees. If the CEO wants a raise, every single person at the company would get one too.

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avatar mbhunter

The people who fall prey to the $500,000 limit will just find another way around it. They always do.

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avatar thomas

The government gives millions in welfare checks every month. I don’t seem them really limiting how those people spend their bailout money.

STOP THE WEALTH ENVY!

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avatar TJJ

The $500,000 limit is another big on words and image thing but poor on execution. There are so many holes in the bill until only a handful of exec will face a pay cut. Come on, “Did anyone ever read “Animal Farm” by George Orwell. I noticed that our ray of hope has taken down his agenda that was posted to his web site a couple of months ago. I guess Mr. Hope does not want anyone to use it as a report card against him. Then again, there are always excuses for lack of execution.

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avatar purpelnoon

Tie their compensation to performance. Its not fair when they get all thismoney regardless of result. I hate when I hear the word “talent”. It seems they drive more businesses into the ground than anything.

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avatar Chris

Flexo, while I admire your sentiment in #17, that of “opportunity”, folks are used to that word “guarantee.”

Take baseball players, for example. Should we cap their salaries, too, since now they’re making similar to CEO pay, $5, $10, $25 million dollars? Do you think they’d accept less if they knew the game would shut down if they didn’t? After all, MLB is a business, just like banking. There are teams that lose money every year, too.

I bring this up because the banks seem to be a victim of timing here; of yesterday’s headlines. Yeah, there would be bonuses this year – in stock options. These banks would be fools to give out cash, which they all apparently desperately need to stay liquid. See, I wonder if this is principle-based or reaction-based. Would exorbitant salaries in good times under an Obama administration be all right, or would he cap the pay in a better economy because he believes otherwise?

One more thing: say you take the $500,000 and a ton of options. Then you leave for another bank, and the next CEO runs the company into the ground and your options are worthless. Well, then we get to laugh at you for your worthless options and call you a sucker.

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avatar Shadox

My opinion is that salary caps are not only asinine they are downright counter-productive for tax payers. I actually wrote a detailed post about this unpopular position… by pandering to public outrage, the President is actually harming the tax payers.

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avatar Rick

I am an unabashed capitalist, no apologies Libertarian. But while I disagree with the TARP, I do agree with Obama that if the government is going to offer assistance, it should always come with strings. If you want welfare, you should go on Norplan, if you want medical assistance, you should have weight/smoking/drinking guidelines applied, etc. If you want TARP money, you should have limitations on earnings.

Tax money should NOT be offered for free, there needs to be guidelines because money is fungible. It’s possible to take TARP money, fill a hole in the balance sheet, and then use other funds that were going to be used to fill that hole to redecorate a bathroom. The point, to get money back into the system, is met with the redecorating. The PR, on the other hand, sends a horrible message – that you CAN be loose and easy with taxpayer money. This is no different than a welfare recipient taking his check and buying booze and cigarettes (which, I know, happens all the time, but let’s face it, bank managers are supposedly more intelligent).

Fact is, hiring the “best and smartest” is not always a function of high salaries. I’ve paid some of the dopiest people good salaries because they’ve padded resumes and given good interviews. It’s very hard to know what kind of “smart” you need, or how that person you’ve hired is really smart!

Example: I hired an admitted C student once, unread, very poorly informed on current events. Clearly not “smart” and I worried about the hire. What I liked was how he answered my questions – quickly, efficiently, not always what I wanted to hear, but always with a point that was clear that he could deal with things. My motto, “there’s always a way to make it work”, was clearly evident in his optimistic attitude. He proved to be one of my best hires ever. He was fast, he solved problems, never complained, rarely engaged in politics or gossip, and was generally just a terrific and motivated worker. I actually wound up working for him for a period of time, later in life. He still wasn’t “smart”. But he was what I described as someone who knows how to make things work and get people to do things.

In some ways, Obama is like this guy. I’m not a fan and didn’t vote for him, but I can appreciate his capabilities. Part of it emanates from the cult of personality that compels people to do things they ordinarily wouldn’t because they really believe in his “vision” (whatever it is, I still haven’t figured it out), but part of it is from their belief (and I agree) that he is very “smart”. His intelligence is clearly evident in his speaking, whereas Bush’s (yes, he was very smart) was not.
Obama is also smart enough to see that he can say one thing, then restate it in a different way, and completely reverse direction without his fans noticing. His Orwellian speech patterns are remarkable and provide a terrific context to “pull people together”. It’s this strength that is allowing him to get things done quickly and with the veneer of “bipartisanship” that is really non-existent.

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avatar Mike

“My opinion is that salary caps are not only asinine they are downright counter-productive for tax payers. I actually wrote a detailed post about this unpopular position… by pandering to public outrage, the President is actually harming the tax payers.”

_______________________

I agree. Bank of America should absolutely refuse to accept the $500k limit. They should pay their executives whatever they think best. And when Obama says “Oh, yeah, in that case we’re not giving you any TARP money,” BofA should tell the government where to stick its TARP money.

What? BofA isn’t willing to tell the government where to stick its TARP money?

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avatar Rick

Mike,
You’re correct. But you’ve also got to accept that if government funds are to be utilized, those funds should carry strings. And in the current environment, salary caps are totally acceptable. The caps themselves do not limit CEOs from potentially getting very rich from stock options. And if the CEOs are very good at what they do, then they will get very rich.

I hope more banks reject TARP money. Primarily because most banks don’t need it, but also because I think it will force them to engage in much smarter business practices. The TARP has made lazy companies even lazier about how they will fix things. For most, it’s remained business as usual except for increased layoffs. That’s what usually happens when the government provides assistance, though.

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avatar David Dzidzikashvili

I think it’s a good call to limit CEO salaries at 500K for the companies that are getting taxpayer money. In general I strongly disagree with government intervention in private business matters, but since these companies are utilizing my money and your money and the money that belongs to all Americans, we have the right to demand to limit their payroll, especially after the embarrassing facts of CEOs using bailout money for lavish parties, private jets and unreasonable bonuses. Their acts has gone out of control and we need to force CEOs to get their acts together.

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avatar GB

Guess what people, scientists say that most people use 5-15% of their brain. Add some experience, and education expense you did to become a CEO.

So if I use just 5% of my brain in being a math teacher, who have 4.00 GPA in all the college math classes I took to be a teacher. And a CEO is on 15% with many years experience etc. etc. etc. …brightest, smartest…from mars…

how many times his salary should be than mine? for bringing this whole country down?

I make about $100 per day. I remember the story of this CEO who worked for 16-18 days (in WM or Wachovia?) and got 16-18 mil. before the company failed. That is about 1 mil per day.

now $1mil/$100 = 10,000
(yes my measlay compensation for building this countries future and educating is just $100 per day)

So, a CEO gets paid 10000 times more than me per day…how much more smarter and brighter he/she is???

So much for the brighter and smarter CEO’s who brought hundreds of billions worth companies down the the dust. And someone dares to call them brillient people on earth. Yes they are brillient to suck everything they can before the company files for BK.

I think the tax should be 100% for earnings over 1 mil per year for anyone. One doesn’t need more than that much to survive in golden coffers. More than that is what’s causing all this crisis. If that extra hoarded money is with the ordinary middle class less brillient people here, it will go back in the market and there will be billiions of $$$ worth extra liquidity in the market.

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avatar Rick

GB, your analysis is misguided on several counts:
1.Actually, the correct terminology is “We only use 10-15% of our cognitive ability”. We use 100% of our brain capacity because 85% of brain activity is geared toward unconscious activities like breathing. The question of how much cognitive ability we have is said to be 15% and is really just a guess. Peoples’ cognitive abilities vary dramatically. I have a very high IQ. But IQ does not directly correlate (nor is it causative of) with income.

2.IQ as a means of determining value is ridiculous. I work in sales. My boss is a moron. No, seriously. That’s not me being disgruntled, I happen to like him. But he’s stupid. So why is he my boss? Because he has qualities I don’t. His ability to motivate, strategize, and negotiate are in many ways superior to mine. But he couldn’t tell you who painted “Starry Nights”, what the Impressionist School of Art is, how to work the Quadratic Equation, or even give you a basic explanation of String Theory in physics. But he’s personable and an excellent guy in social situations.

3. Assuming the banks failed because they were overpaid and not as smart as people thought is incorrect. I won’t argue that some people were overpaid – that stands to reason. But how do YOU determine that? I am certain I have a very different idea of how that would work than you would. Nobody can define what a good level of pay is, that is pretty subjective thus highly variable. Similarly, I can tell you that even the smartest people in my industry would fail badly if they replaced the “Masters of the Universe” on Wall Street. These ARE very smart men. But sometimes too smart for their own good.

I have seen remarkably intelligent people undo themselves because they have overthought and overanalyzed things. The main reason for failure? Rationalization based on a preconceived notion. This effects all people, not just smart people. We all want to “BELIEVE” something, so we analyze the data, and toss aside the parts we don’t like. Global Warming (which is now called Global Climate Change because we’re not warming, we’re cooling) is a classic example. Under questioning, the IPCC members admitted that data contrary to their desired outcome was not included as it didn’t match the view they wished to push forward.

We frequently fall for information which seems to suit our needs and desires because of an emotional attachment to an idea. Just because smart men do it doesn’t mean they aren’t smart – it means they are human. The current financial mess, frequently referred to as the “Worst since the Depression” isn’t even as bad as the 1970′s. But we are emotionally attached to the overall situation, so the hyperbole strikes deep and we’re willing to accept this concept even though the concept bears no relation to the facts. The fact that so many people are swept up in the populist outrage is indicative that we are just as guilty of bad thought processes as some of the men who allowed this to happen.

Outrage tends to drive public opinion (read Freakonomics). Generating and managing outrage will control the agenda. We are in the midst of a massive and nefarious outrage generated by a group of politicians who have journalists held hostage. Be very careful of what you believe and hear – always look for alternative sources of information and facts. You’d be surprised what’s really going on. It bears little similarity to what you believe or what the press puts forth.

Fact is, whether or not anyone wants to admit it, the worst hit portion of our economy is finance. Who is doing the talking? Finance people. Seeing as their industry is shaken to the core, what kind of pronouncements are they likely to put forth? The worst. Who reacts with the most anger at this kind of thing? Politicians. What do politicians do? Generate outrage and force legislation.

After this, review the facts. We are not on the edge of insolvency (well, we weren’t a week ago…but who knows with the garbage DC just pushed through), and while economic times are difficult, the economy was likely bottoming out in the very near future. Savings have hit highs, debt has been destroyed, markets that were frozen have reopened, lending is occurring at a CORRECT pace (not the pace Obama wants, but that would be injudicious to be honest), and 93% of the working population is working.
Things could be better – true. But they aren’t terrible, either. They will get better. Anyone (like me) who has lived through REAL recessions (70′s and 80′s) realizes this is nothing. It’s a blip. We got too comfortable with what we had…we’ve had 28 years of good times. We were overdue for a reversal of this nature.

Get used to it, adjust to it, and accept it. Recessions are normal and the sign of a properly functioning economy, not a “broken” one that the politicians would have you believe.

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avatar Rick

Not that many utilized the money for lavish parties or private jets. Don’t forget, money is fungible, and many of these items were necessary.
A classic example is the AIG trip to the spa. What few people KNOW about this is that it wasn’t all AIG executives. It was an annual event for AIG contracted businesses. In other words, a “thank you” for those companies that AIG uses to SELL THEIR PRODUCTS. These thank you events are important because they create beneficial ties between the firms and act as incentives to PERFORM WELL.
In addition, the event was planned, booked, and paid for in advance of the bailouts. Cancelling them would have cost less money, but would have generated ill will with the businesses in question as well as still been using taxpayer money. This could’ve hurt AIG even more than the PR damage that was done by the trip itself, because it would have directly altered business relationships.

Remember, things that get reported in the press are always in the process of going through an agenda. The current agenda is “Bleed the Rich”. While some cases, such as John Thain’s, make perfect sense to show outrage over, many others do not. However, if something even remotely shows a scent of possible outrage, the press will blow it out of proportion.

Here’s some outrage for you:
Obama told us we could no longer keep our houses heated to 72 degrees during the campaign. The White House, today, was recently described as a “sauna” because he likes to keep it at 75 degrees. His excuse? He’s from Hawaii and likes it warm. Nice. I’m happy we taxpayers get to subsidize his sweat.

More private jets were used to get people to the Inauguration than any before. For the president who will reverse global warming and control corporate greed (private jets as proxy), it’s an interesting conundrum. Why did he not speak out about all his buddies flying in private jets?

The 2005 Inauguration was roundly lambasted as “pomp and circumstance in a time of war” and “overspending”. The 2009 inauguration was almost 3 times as expensive in both a time of war AND a period of economic crisis. Yet not a peep from the press, who are fawning over Obama.

The president of “HOPE” in his first speeches on the economy used terms like “catastrophe” and “be very afraid”. FDR NEVER used terms like this. He said “the only thing we have to fear is fear itself”. Why? Because raising the level of fear creates panic. Panic leads to herd behavior, which can create crisis. This president is happy to have crisis because it enables his agenda. The more crisis, the better. For a man who is raising the ghost of FDR, his language belies his desires.

There are many, many inconsistencies in coverage and each one is very alarming. We are being fed a pablum of populism and altered truths. But nobody is questioning the source or reason for this.

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avatar GB

Just changing the terminology doesn’t change the truth. My point was simply that most people have intellect in a short range, it can’t justify 10000 times compensation.
About your boss, maybe he inherited some richness or created by his own…that’s not the point. The point is, should there be such vast gap between salaries of a teacher and a CEO? Hey, that’s what imperialist did. They told people we are made kings by the God’s will…so we are entitled for whatever we want. Isn’t that the current situation with the these executives too?

Apart from all this discussion, lets talk something very basic. How much one needs to survive decently or even lavishly? 1 mil per year? then why not make a law that everything over 1 mil is 100% taxed. No more greed.

Also, why someone has to get paid higher than the highest public representative aka president?

And about Obama’s keeping temperature 75 deg. I will call it bluntly a really ridiculous example. It doesn’t make sense that if someone is suffering then you should suffer too. By keeping the temp of white house to 72 he is not going to do any good for anyone, rather he will wake up cold and feel bad and will make bad decisions because he didn’t get good sleep.

About using words ‘catastrophe’…the first cure for any disease is to identify and acknowledge the disease. He is doing the the RIGHT thing. Just keeping a cloth on the wound won’t make the wound disappear, actually it will make it worse, and that’s what previous govt. did. You can verify it by the current situation of economy. Last year at this time it wasn’t this bad, but in last few months it has become a catastrophe in real. You don’t feel the pain probably because you are still in job. I have working half of what I was working last semester…

Anyway, all the talks are useless. The real question is, why someone should get paid 10000 times per day than a highly qualified teacher who has devoted most of his/her life to build/educate the society and this nation. Specially when the only thing they are building is national debt and hell for ordinary people like us.

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avatar GB

Forgot to say this….Make me CEO of any company and I will make it profitable with one year….regardless of the business they do.
Simplest fundamental of business is quite similar to this one. You don’t make 10 story building on 1 ft deep foundations…if you do, then this what happens what we are seeing all around. And you call these people bright? brilliant? nah….most of them are just greedy opportunists who don’t care about investors, who don’t care about country. They care about how much bonus and perks they can suck out before the company collapses to the ground. Otherwise, while a company is losing billions and billions, investors losing their life-savings, how would you justify a executive of that company taking bonuses in millions and getting away with it???
If I was a CEO, and I see that in my supervision my company has lost 90% of it’s market cap, I will NOT take any bonus and will not take salaries other than needed for survival til I get back the lost wealth in next few years.
But this sounds too stupid in our current wall street culture?

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avatar Rick

You answered only a portion of my entire post, and probably the least important portions – a classic tactic of debaters to limit the presumed argument of the opponent by pointing out seeming flaws which are non-essential.

So, to respond to your presumed MAIN point of what justifies income levels of vast differential:
1. Desire – desire to attain income levels and amass wealth on the part of the individual in question, and those they work for. Subplot to this is the desire to achieve very particular and isolated goals.
2. Intelligence – you may not think that the range of differential is large, but you are using the wrong statisical standards. If only 15% of cognitive capacity is used (which is really NOT true, but for the sake of your argument I’ll use it), and I use 15%, but you use 10%, your argument is we’re only 5% off. No, we’re 33% off. I use 100% of my 15%, while you use only 67% of yours. OK, so if you want to base salaries on % of brainpower, then I should only get 33% more than you. Again, wrong. Because maybe I have other intangible items at my disposal that you don’t – good looks, charm, social graces, the ability to communicate well, etc. These all play a role in determining my success level.
3. the Market – regardless of what your economic background or beliefs are, the market dictates everything. And the market will sometimes dictate that income levels for some things should be better paid (sometimes on a grand scale) than others. In our society, unfortunately, teachers are not considered as valuable as stock brokers because it is (wrongly) assumed that teaching doesn’t generate as much wealth as trading stocks. Still, that’s what the market says and since you seem to be a man of “the people’s desires” you should be able to understand why there is more value placed on stockbrokers – simply put, more people want them and are willing to pay for them.

I do not believe in limiting incomes in the open market. For taxpayer dollars, yes, it’s justified. But arguing about what a “right salary” constitutes is patently absurd due to the overall subjective nature of the discussion. What you value is NOT anywhere similar to what I value. And what my wife values is different from what both you and I value. Overall, the market makes the determination of where values lie, and what costs should be. Teachers salaries, unfortunately, are victims of the one thing you seem to be a proponent of – government control. Teachers salaries are low DUE TO the nationalized nature of the market. Governments ALWAYS undervalue the productivity of the worker.

I do agree with you that there was alot of greed and alot of overpaid people in this mess. But I disagree in your methods of determining what the level of overpayment is. The methodology is crude and frankly illogical. You say that my boss is imbued with some kind of richness which elevated him to some level and then argue that it’s not pertinent to your point. Sadly, it’s completely pertinent. My boss makes multiples more than me. But I don’t worry about it, complain about it, or argue about it. He deserves it. But he’s dumber, much dumber, than I am. So, using your logic, he should make less than me. But I realize that the realities of life dictate outcomes that sometimes seem illogical but are, in fact, quite logical when you look at the overall situation. Just because we aren’t able to see the nuances of the market doesn’t mean the don’t exist.

With regard to your comment on Obama and temperature – I’m sorry, but you’re sooo wrong. I disagree with you about “he shouldn’t have to suffer”. Why not? He’s our imperious leader, is he not? Hasn’t he said he would lead by example? He has!! Some example. Fact is, it’s my tax money paying for his sweat. You may not mind because you’re an Obamaniac. But I’m not. I want him to succeed, I want him to be a great president. But he is doing everything he said he wouldn’t do. And the temperature example just happens to be a good picture of where he is failing. Rather than set an example by lowering the temperature (which I may add Nixon and Ford did…as did Carter…during the 70′s oil crises), Obama sees fit to live imperially.

As for naming the disease – how is creating fear and panic naming the disease? How is telling the patient “things are very grim” going to help? My father is a doctor, and one complaint patients have about doctors is how they frame their explanations in either neutral or positive terminology – in other words “they didn’t tell me the truth”. This truth telling is part of the recovery process. If a doctor tells you that you have a negative prognosis and you should be afraid, this will NOT help you get better. More importantly, as we’ve seen frequently, if you do improve, then the doctor looks silly for saying it. On the other hand, by using neutral or positive language, he can craft a diagnosis which promises hope and recovery, encouraging you to follow instructions, and potentially nurse you back to health.

The first step in the start of an economic recovery (and I do have a masters in econometrics from the New School for Social Research) is to outline the positive parts of the economy and focus attention on those areas. Imbuing the people with hope that some things are functioning properly gets them comfortable with the fact that the economy CAN recover, and will recover.

On the other hand, by telling people things are bad (consider Carter’s comments about the “malaise” in the US), you exacerbate the problem and make things worse. In Carter’s case, the tough times extended another 4 years after his 1979 speech. He was the direct cause of tough times, but he certainly didn’t help things, and in fact the speech was part of his undoing. I have found, after 25 years in business, that people who lead by using terminology laced with negative overtones make for a very difficult environment. The terminology doesn’t provide hope, nor does it provide motivation. Most people tend to get paralyzed by the words and make panicky decisions which don’t benefit anyone.
As we can see, what Obama did had the exact result he wanted – a panicked package of garbage that benefits almost nobody, but sets the stage for future tax increases on the “rich”.

As a wise man once said, “you cannot raise up the poor by dragging down the wealthy.” This is certainly true, and if nobody learned this by studying the economic disasters of the Soviet Union and Eastern Europe, or China, or any Socialist country….then they are simply obtuse.

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avatar Rick

By the way, I may add, that while my father is a doctor, my mother’s side of the family is all teachers. I have a great level of respect for teachers and what they do. However, I have also had my fair share of run ins with them because of the way they teach my kids. I don’t believe that they have the right to do certain things, such as:
1. teach political views (had one tell my boys that they should tell parents to vote Obama)
2. be lacking in discipline (it’s a classroom, and it requires discipline or nobody except the very brightest and ambitious will learn)
3. be lax in their grading standards (giving a grade to a student because a parent complains and they hope to avoid confrontation is weak and benefits nobody. By the same token, grading on a curve is absurd. Failure is failure, just as success is success, by any standard.)
4. Teach facts, not opinions. (this has many examples, too numerous to count)

It is for these reasons that I am comfortable with the current pay scale of teachers. Most that I’ve had the luck to know and meet are good, but as the current situation on Wall Street shows – we are all dragged down by the worst among us. The bad teachers are VERY VERY BAD. And their unions are comfortable with that and promote that. Tenure is a disaster…and I know teachers who even say this – teachers with tenure.

It’s unfortunate that a CEO makes so much more than a teacher (it isn’t 10,000 times more, you skewed the statistics to make an absurd point). They make about 1,000 times more, on the high end, and most make 100 times more (assuming a $50,000 teacher salary). Point is, I’d like to see a teacher run a company. Few could, or have the capacity to.
The old saw “those who can do, those who can’t teach” isn’t always true. It’s a stereotype. But stereotypes have a grain of truth in them….that’s how they start and are maintained.

I know very few teachers who could do my job and I don’t make much more than them. But teaching? I intend to do that upon retirement. After all, I’m a great teacher. I’ve taught multiple employees how to do their jobs, and I’ve taught 2 young boys how to be good people. Teaching is a noble profession. But there’s hardly a limited supply of teachers. There’s just a limited supply of very good ones.

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avatar Rick

GB, I get the feeling that you’d be a very bad CEO. Not because what you wrote is bad, but because of the inflammatory nature and illogic of your arguments.

I would never state I would be a good CEO. I think I do a good job in middle management and I believe that if I continue to strive I could, someday, be a good CEO. But I know I have alot to learn before I could be a good one.

Just because I can cite an analogy that has no bearing on business in general does not make me good at being a CEO.
Here are some things that I’ve learned which would help:
1. can you analyze your business and determine which business divisions show the most profitable futures?
2. can you analyze your business divisions and determine which have the most potential for success in the fields within which they operate?
3. can you effectively review your personnel and staff and determine who will provide the proper support for you AND the correct leadership and vision for their departments?
4. can you make difficult decisions about production and manage expectations for deadlines in a manner that keep people happy AND provide a profitable outcome?
5. can you outline a vision, and in simple and understandable language outline the goals that need to be achieved to reach and define that vision?

Patton was a wonderful general, and often thought HE should have lead the Allieds, not Eisenhower. However, his personality was suited to warfare, not management. Eisenhower was a wonderful manager, but a lousy fighter. His role in managing personalities during WWII are a classic example of good CEO behavior – making tough decisions, managing egos, handling primadonnas (Patton and Montgomery), all while keeping focus on the immediate goal of winning the war at the lowest cost of overall life to the Allied Cause.

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avatar GB

You answered only a portion of my entire post, and probably the least important portions – a classic tactic of debaters to limit the presumed argument of the opponent by pointing out seeming flaws which are non-essential.
*Because, I don’t have time. My time is well spent in trying to find a full time position rather wasting in some debate which will not bring any joy to my family. I have to provide for them regardless the reason who is the reason that I can’t even get a full time job easily.

So, to respond to your presumed MAIN point of what justifies income levels of vast differential:
1. Desire – desire to attain income levels and amass wealth on the part of the individual in question, and those they work for. Subplot to this is the desire to achieve very particular and isolated goals.
*I desire to have 1 billion $s. Should I go and kill someone to do that? That’s what these CEO’s and wall street is doing. Why Madoff is just in house arrest? Living in luxury still? Drive a little fast and you will be eating in the jail and cursing the system about injustice.
2. Intelligence – you may not think that the range of differential is large, but you are using the wrong statisical standards. If only 15% of cognitive capacity is used (which is really NOT true, but for the sake of your argument I’ll use it), and I use 15%, but you use 10%, your argument is we’re only 5% off. No, we’re 33% off. I use 100% of my 15%, while you use only 67% of yours. OK, so if you want to base salaries on % of brainpower, then I should only get 33% more than you. Again, wrong. Because maybe I have other intangible items at my disposal that you don’t – good looks, charm, social graces, the ability to communicate well, etc. These all play a role in determining my success level.
* who said that those CEO’s use it? They certainly don’t have it. They are just some bunch of opportunists who got opportunity by our crooked system in which they can exploit everyone else freely.

3. the Market – regardless of what your economic background or beliefs are, the market dictates everything. And the market will sometimes dictate that income levels for some things should be better paid (sometimes on a grand scale) than others. In our society, unfortunately, teachers are not considered as valuable as stock brokers because it is (wrongly) assumed that teaching doesn’t generate as much wealth as trading stocks. Still, that’s what the market says and since you seem to be a man of “the people’s desires” you should be able to understand why there is more value placed on stockbrokers – simply put, more people want them and are willing to pay for them.
*market dictates…true. Is it right? No….absolutely not…people of this country should dictate not a few crooks on the wall street.

I do not believe in limiting incomes in the open market. For taxpayer dollars, yes, it’s justified. But arguing about what a “right salary” constitutes is patently absurd due to the overall subjective nature of the discussion. What you value is NOT anywhere similar to what I value. And what my wife values is different from what both you and I value. Overall, the market makes the determination of where values lie, and what costs should be. Teachers salaries, unfortunately, are victims of the one thing you seem to be a proponent of – government control. Teachers salaries are low DUE TO the nationalized nature of the market. Governments ALWAYS undervalue the productivity of the worker.

*Doesn’t make difference what you believe or what I believe. Ask any sane person who is not so blind by the shinning lights of wall street that how much one should make to live lavishly? Why should someone get paid so exorbitantly that when they get fired, they will go for vacation. And hardworking people like me, will not be able to afford even a doctor’s trip.

I do agree with you that there was alot of greed and alot of overpaid people in this mess. But I disagree in your methods of determining what the level of overpayment is. The methodology is crude and frankly illogical. You say that my boss is imbued with some kind of richness which elevated him to some level and then argue that it’s not pertinent to your point. Sadly, it’s completely pertinent. My boss makes multiples more than me. But I don’t worry about it, complain about it, or argue about it. He deserves it. But he’s dumber, much dumber, than I am. So, using your logic, he should make less than me. But I realize that the realities of life dictate outcomes that sometimes seem illogical but are, in fact, quite logical when you look at the overall situation. Just because we aren’t able to see the nuances of the market doesn’t mean the don’t exist.
*I don’t worry about people making more, I worry about people taking taking bread from the hand of my child and throwing it to their dogs. Someone who works hard, has capabilities should make more than others. That’s not what I am arguing about. My argument is …how much more. To end the greed, only alternative for this countries representatives is to cap the high side of income. If we set the minimum wages so that no one is poorer than a certain level then we need to set a higher cap too so that someone is not so rich that they forget that others are human too….society should enrich in a balance. Widening gap between rich and poor is not the best sign in any society, it simply means that some people are leaching out of others, leaching til the extent that they die.

With regard to your comment on Obama and temperature – I’m sorry, but you’re sooo wrong. I disagree with you about “he shouldn’t have to suffer”. Why not? He’s our imperious leader, is he not? Hasn’t he said he would lead by example? He has!! Some example. Fact is, it’s my tax money paying for his sweat. You may not mind because you’re an Obamaniac. But I’m not. I want him to succeed, I want him to be a great president. But he is doing everything he said he wouldn’t do. And the temperature example just happens to be a good picture of where he is failing. Rather than set an example by lowering the temperature (which I may add Nixon and Ford did…as did Carter…during the 70′s oil crises), Obama sees fit to live imperially.
*Obamaniac…nah…I am not any ****iac…. I don’t relate myself with anything…no religion no politics…nothing…. I relate myself with truth. And I say what I see, as it is… But I still disagree that one should suffer to comfort other’s suffering. That’s not the right way, right way is when you cure other’s suffering.

As for naming the disease – how is creating fear and panic naming the disease? How is telling the patient “things are very grim” going to help? My father is a doctor, and one complaint patients have about doctors is how they frame their explanations in either neutral or positive terminology – in other words “they didn’t tell me the truth”. This truth telling is part of the recovery process. If a doctor tells you that you have a negative prognosis and you should be afraid, this will NOT help you get better. More importantly, as we’ve seen frequently, if you do improve, then the doctor looks silly for saying it. On the other hand, by using neutral or positive language, he can craft a diagnosis which promises hope and recovery, encouraging you to follow instructions, and potentially nurse you back to health.
*I didn’t mean to say that one should scare the patient, but one shouldn’t hide the truth either. No matter how dire the situation is, one can still be truthful and positive. One doesn’t need to lie to show false positivity.

The first step in the start of an economic recovery (and I do have a masters in econometrics from the New School for Social Research) is to outline the positive parts of the economy and focus attention on those areas. Imbuing the people with hope that some things are functioning properly gets them comfortable with the fact that the economy CAN recover, and will recover.

On the other hand, by telling people things are bad (consider Carter’s comments about the “malaise” in the US), you exacerbate the problem and make things worse. In Carter’s case, the tough times extended another 4 years after his 1979 speech. He was the direct cause of tough times, but he certainly didn’t help things, and in fact the speech was part of his undoing. I have found, after 25 years in business, that people who lead by using terminology laced with negative overtones make for a very difficult environment. The terminology doesn’t provide hope, nor does it provide motivation. Most people tend to get paralyzed by the words and make panicky decisions which don’t benefit anyone.
As we can see, what Obama did had the exact result he wanted – a panicked package of garbage that benefits almost nobody, but sets the stage for future tax increases on the “rich”.

As a wise man once said, “you cannot raise up the poor by dragging down the wealthy.” This is certainly true, and if nobody learned this by studying the economic disasters of the Soviet Union and Eastern Europe, or China, or any Socialist country….then they are simply obtuse.

*that wise man certainly will be a CEO of his time. Making wealthier more wealthy is not going to work either. It’s more like, they will create slaves out of us regardless of race. And practically that’s what I see these days. I am not a negative person, but I can’t stand with lies. I like truth no matter how harsh it is. Ultimately truth prevails.

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avatar GB

By the way, I may add, that while my father is a doctor, my mother’s side of the family is all teachers. I have a great level of respect for teachers and what they do. However, I have also had my fair share of run ins with them because of the way they teach my kids. I don’t believe that they have the right to do certain things, such as:
1. teach political views (had one tell my boys that they should tell parents to vote Obama)
2. be lacking in discipline (it’s a classroom, and it requires discipline or nobody except the very brightest and ambitious will learn)
3. be lax in their grading standards (giving a grade to a student because a parent complains and they hope to avoid confrontation is weak and benefits nobody. By the same token, grading on a curve is absurd. Failure is failure, just as success is success, by any standard.)
4. Teach facts, not opinions. (this has many examples, too numerous to count)

*Why not give a point wise advice to those executives who are damaging this whole country? Wouldn’t it be more worthwhile? Specially since you are business grad? Why waste your precious time pointing out mistakes of couple teacher which has no significance on the most?

It is for these reasons that I am comfortable with the current pay scale of teachers. Most that I’ve had the luck to know and meet are good, but as the current situation on Wall Street shows – we are all dragged down by the worst among us. The bad teachers are VERY VERY BAD. And their unions are comfortable with that and promote that. Tenure is a disaster…and I know teachers who even say this – teachers with tenure.

*this is why the education level of this country is going down so badly. Some of my college prep math students can’t do even 4*6, which in most countries is a first grade’s question. Teachers need to be paid better so that more brighter people chose this profession. Otherwise, you get what you pay for. I will certainly not be a teacher for ever. I will refuse to be dominated by this system as soon as I get into a new field.

It’s unfortunate that a CEO makes so much more than a teacher (it isn’t 10,000 times more, you skewed the statistics to make an absurd point). They make about 1,000 times more, on the high end, and most make 100 times more (assuming a $50,000 teacher salary). Point is, I’d like to see a teacher run a company. Few could, or have the capacity to.
The old saw “those who can do, those who can’t teach” isn’t always true. It’s a stereotype. But stereotypes have a grain of truth in them….that’s how they start and are maintained.
*so 5 million per year is accepted? Why even that much? What good they have done to deserve it? A teacher doesn’t see 5 mil in all of his/her life rather creating tremendous hero’s in a society. But still…they get the blame “those who can do, those who can’t teach”… education is one of the most crucial foundation stone in any society. If it’s compromised, it will bring demise to the whole society. We don’t see it now very clearly, but one can see the glimpses if one is in the profession.

I know very few teachers who could do my job and I don’t make much more than them. But teaching? I intend to do that upon retirement. After all, I’m a great teacher. I’ve taught multiple employees how to do their jobs, and I’ve taught 2 young boys how to be good people. Teaching is a noble profession. But there’s hardly a limited supply of teachers. There’s just a limited supply of very good ones.

*About the jobs. Don’t put yourself on pedestal. I have done digital media editing, freelance writing (in fact I still write for some extra money)without having any mentor or any formal education.

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avatar GB

GB, I get the feeling that you’d be a very bad CEO. Not because what you wrote is bad, but because of the inflammatory nature and illogic of your arguments.

*I am not sure about being good or bad, but I will make a dying corporation alive again. I have it and I know it. I don’t look for approval of my potentials from others.

I would never state I would be a good CEO. I think I do a good job in middle management and I believe that if I continue to strive I could, someday, be a good CEO. But I know I have alot to learn before I could be a good one.
*Not knowing yourself is sign of weakness not strength. If you think that by not stating you can back off…that’s your fear to take challenges in life. I don’t feel scared saying that I can do it. I am always ready to take challenges and accept my failures.

Just because I can cite an analogy that has no bearing on business in general does not make me good at being a CEO.
Here are some things that I’ve learned which would help:
1. can you analyze your business and determine which business divisions show the most profitable futures?
2. can you analyze your business divisions and determine which have the most potential for success in the fields within which they operate?
3. can you effectively review your personnel and staff and determine who will provide the proper support for you AND the correct leadership and vision for their departments?
4. can you make difficult decisions about production and manage expectations for deadlines in a manner that keep people happy AND provide a profitable outcome?
5. can you outline a vision, and in simple and understandable language outline the goals that need to be achieved to reach and define that vision?

*words are beautiful when written in a specific order, poems are good for entertainment. But ask your father if he did everything by the book in his career? Ask any doctor. Success doesn’t come by book, success comes by an individual. One has to be ready always to learn and apply new things always. I can write a gazillion things about successful business but that won’t bring any success in any business. In fact if that’s the case than why so many businesses are failing today?

Patton was a wonderful general, and often thought HE should have lead the Allieds, not Eisenhower. However, his personality was suited to warfare, not management. Eisenhower was a wonderful manager, but a lousy fighter. His role in managing personalities during WWII are a classic example of good CEO behavior – making tough decisions, managing egos, handling primadonnas (Patton and Montgomery), all while keeping focus on the immediate goal of winning the war at the lowest cost of overall life to the Allied Cause.

*Just don’t get so easily impressed by a few historical names. They don’t prove anything. Time is now, and I am talking about what we are going through now. Using any name for a good CEO’s example doesn’t justify still the enormous paychecks they take to bring this country to ashes.

and yes, I have to get back to filling online applications again. Thanks to such bright CEO’s of this burned down country.

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avatar Rick

I’m sorry you’re looking for work. That’s unfortunate. I was unemployed 3 times in the last 10 years, once for about a year. It’s never easy.
My point in mentioning this is that unemployment happens even in good times, and not everyone is immune to it.

Your lashing out is indicative of frustration and anger, which is justified. But never, during any one of my 3 previous bouts of unemployment, did I blame anyone. I simply accepted it as a fact of life, kept my positive mindset, and moved on. That is always the best solution.

You do spend alot of time lambasting CEOs and their pay packets. Yet the pay themselves isn’t what did anything to the economy. In fact, relatively few CEOs are what I would term as “overpaid”. Even then, as I pointed out, this is a subjective term which is never really well defined.

The fact that you responded to all my posts at a point in time when you seemingly are seeking work indicates to me that you’re easily provoked and distracted. I would control this if you wish to find and keep a future position. Your responses are always overwhelmingly negative in tone. This, too, is important to keep under wraps. My first two job losses were the result of having a very negative attitude about management. Was I correct? Yes, as “luck” would have it, in both cases my views turned out to be absolutely correct. But for me, that didn’t matter a bit – I was still out of work.

Therefore, I resolved to become positive (not pollyannaish) and put my skills to work in a meaningful way – Optimism is a force multiplier (Colin Powell) – and I have become very positive about things, even this current situation. I believe that this will carry me through EVEN IF I get laid off (though I hope that is unlikely).

To that end, the issue of CEO compensation remains of great interest to me. I feel some are overpaid, but I also believe that many earn what they make. You claim they don’t use their intelligence, or are lacking in it. Indeed, I have known some who I would think that the case. But by and large it is not.
Some CEOs are victims of circumstance. You may wonder how that could be. But the fact is, some are simply caught in situations which they have no control over and therefore have made decisions which should benefit the company and simply haven’t. In the last 2 years, these CEOs are legion. Their predecessors, in many cases, were the short term thinkers who created a bad situation and walked away.

Problematically, it’s hard to say their predecessors didn’t deserve their money. The companies were profitable during their tenure. Did some create toxic long term situations? Possibly, and in some cases definitely. But let me ask you something – if you did a job, and everything was fine, but after you left the position it was determined that you screwed something up, would you give the money you earned during your tenure back? I doubt it.

Most of what you have written is emotionally driven and lacking in substance, so I won’t respond to it. You can believe what you want. But it’s very hard to make good decisions when you let your emotions guide you.

We have elected a president primarily on the basis of an emotional feeling of goodwill. This is a dangerous thing. We have invested ourselves in him and are heaping massive praise on him without his having accomplished ANYTHING of note, yet. Should he fail to live up to the standards he set during the campaign (which is already NOT living up to), it is hard to step back from that emotional attachment and accept that we failed to make a good choice. We will seek anything and everything possible to “prove” it was a good choice, even when we know, rationally, it is not sensible.

I’m not saying I don’t like Obama. I believe many good things can result from his presidency. Unfortunately, I am fairly certain one of those things will be a realization that government is the cause of problems, not the fixer of problems.

Good luck with your search.

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avatar GB

I’m sorry you’re looking for work. That’s unfortunate. I was unemployed 3 times in the last 10 years, once for about a year. It’s never easy.
My point in mentioning this is that unemployment happens even in good times, and not everyone is immune to it.
*just came back from work. Thanks for your response. I like discussions when they are not biased. You do have certain impressions about my attitude which I find are not true about me at all.

Your lashing out is indicative of frustration and anger, which is justified. But never, during any one of my 3 previous bouts of unemployment, did I blame anyone. I simply accepted it as a fact of life, kept my positive mindset, and moved on. That is always the best solution.

*Frustration and anger are correct. I don’t hide them or try to do so. When it’s there I just show it…that’s the right way I think. Blaming something or someone is not always symbol of negativity, in fact you will rarely find more positive person than me if you know me closely. But not seeing the truth is not going to make you positive.
You do spend alot of time lambasting CEOs and their pay packets. Yet the pay themselves isn’t what did anything to the economy. In fact, relatively few CEOs are what I would term as “overpaid”. Even then, as I pointed out, this is a subjective term which is never really well defined.

*it’s not just the ceo’s …it’s about all the highly paid jobs which are very unfair regarding democratic values. They put a few people on the top of others having unfair advantage in the society, which force it to become more like imperialism than democracy. Surely apples and oranges are not same but they are not like dark and light either.

The fact that you responded to all my posts at a point in time when you seemingly are seeking work indicates to me that you’re easily provoked and distracted. I would control this if you wish to find and keep a future position. Your responses are always overwhelmingly negative in tone. This, too, is important to keep under wraps. My first two job losses were the result of having a very negative attitude about management. Was I correct? Yes, as “luck” would have it, in both cases my views turned out to be absolutely correct. But for me, that didn’t matter a bit – I was still out of work.

*easily provoked. Maybe…but I didn’t respond just because I got easily provoked. I responded because I felt you are a kind of person who thinks or tries to understands the complexities of our society. I don’t write in many blogs around…very rarely I do…

Therefore, I resolved to become positive (not pollyannaish) and put my skills to work in a meaningful way – Optimism is a force multiplier (Colin Powell) – and I have become very positive about things, even this current situation. I believe that this will carry me through EVEN IF I get laid off (though I hope that is unlikely).

*about job…I have done many different things in my life. In some I was successful, in some I wasn’t. But saying the correct reason of my losing half earning is not negativity. It’s the truth. And saying it doesn’t mean that I m negative. Infact it made me feel that rather having a part time position I should try to get a full time one so in future I don’t have to go through the hardship of part time employees.

To that end, the issue of CEO compensation remains of great interest to me. I feel some are overpaid, but I also believe that many earn what they make. You claim they don’t use their intelligence, or are lacking in it. Indeed, I have known some who I would think that the case. But by and large it is not.
Some CEOs are victims of circumstance. You may wonder how that could be. But the fact is, some are simply caught in situations which they have no control over and therefore have made decisions which should benefit the company and simply haven’t. In the last 2 years, these CEOs are legion. Their predecessors, in many cases, were the short term thinkers who created a bad situation and walked away.

Problematically, it’s hard to say their predecessors didn’t deserve their money. The companies were profitable during their tenure. Did some create toxic long term situations? Possibly, and in some cases definitely. But let me ask you something – if you did a job, and everything was fine, but after you left the position it was determined that you screwed something up, would you give the money you earned during your tenure back? I doubt it.

*I will drop the issue of ceo’s salaries as I know that nothing will change by this discussion of ours. We will see in future, probably in next 10-12 years that history will repeat itself. Bad things of now will become okay in a few years and then the same cycle will go on …. The issue will be there always that if a few people can just live on others or not. The lavish lifestyle of our current corporate people is based on others work mostly, it has lasted for many centuries in different forms but for how long it can go this way? If communism is bad as it doesn’t differenciate in apples are oranges than capitalism is bad because it puts someone as bright as a star and others as black hole. Both systems are unsuccessful in this manner, a correct system will be a good mix of both. People have different capabilities, intelligence level , there they should be paid according to that….but there should be some law against a few people having all the power/ money etc. Decentralization of power and resources is the correct way, unlike when top executives in a company take 50% of the bonuses and rest more than 90% get remaining 50%. If not, then the imbalance in the society grows larger day by day and it comes to what we are going through right now.

Most of what you have written is emotionally driven and lacking in substance, so I won’t respond to it. You can believe what you want. But it’s very hard to make good decisions when you let your emotions guide you.
* About emotions. I don’t think that decisions taken by emotions are always wrong. In fact mostly they are right. I m not talking here about decisions taken in anger are always correct. Emotions mean surge of energy in you which overpowers your normal thinking procedure….it can by sorrow, pain, anger and many other things. If I have to chose from heart and mind, I will chose heart. It’s usually more pure. Mind is mostly corrupted by the society, knowledge and the biases we carry throughout normal aging.

We have elected a president primarily on the basis of an emotional feeling of goodwill. This is a dangerous thing. We have invested ourselves in him and are heaping massive praise on him without his having accomplished ANYTHING of note, yet. Should he fail to live up to the standards he set during the campaign (which is already NOT living up to), it is hard to step back from that emotional attachment and accept that we failed to make a good choice. We will seek anything and everything possible to “prove” it was a good choice, even when we know, rationally, it is not sensible.

I’m not saying I don’t like Obama. I believe many good things can result from his presidency. Unfortunately, I am fairly certain one of those things will be a realization that government is the cause of problems, not the fixer of problems.
*I don’t agree that people chose obama just coz of emotional feeling of goodwill. I think he was the best candidate in all of them. My personal second best was Clinton and then mccain. Anyway, if he can really deliver the change he talked about, he will be considered in one of the most successful president in the history of this country. But only time will tell.

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avatar Rick

You speak of salaries and compensation in tandem with democratic values.
This is a purely Marxist viewpoint. Dialectical Materialism traditionally mixes the political, social and economic realms to create a view of life that is designed to result in a Utopian outcome by positing certain values within each realm that are not common to humanity.

Democratic values imply equal opportunity – not full equality. This is a common misperception. Even in a society that is designed to maximize opportunity (and you will NOT find a better society at doing this than the US), there is always going to be inequality.
In addition, Democratic values imply the right to engage the opportunities you are presented with in such a way as to maximize your happiness. This happiness comes in many forms. I know people who are happy just doing whatever they do and earning whatever they earn. I know others who are happy serving others all the time. Still others are happy only by engaging their rapacious selfishness. Yet in the end ALL are victims of one thing – what they value most highly. There is no true ALTRUISM in the world. All people do things because it makes them feel good in some way…or at least better than the alternatives offered. That is the essence of Democratic values.

As such, this has no bearing on compensation in any form, except a few Utopian brands of ideology.
You’re correct, you won’t change my view. But if you were to take a step back, and stop applying a purely subjective view to the situation we face, you’d see (objectively and rationally) that what is going on is a natural state of affairs which we’d have faced even if the CEO’s earned $1 and were focussing on simply maximizing corporate value. They engaged in highly risky behaviors not just because it maxed out their pay packets, but because many people were misinformed on what was going on.

I personally know people who make very little money, but bought expensive houses. They are blaming predatory lenders for their problems. They have nobody to blame but themselves. At a point in time when anyone could see we had a housing bubble (and many people including myself would point it out), these people purchased and leveraged themselves to the hilt in order to “have the dream”. But the problem is having the dream requires using your head, which many of these people did not. On my advice, I told each this was a mistake. Yet they did it anyway. Are we to feel sorry for these people? I don’t, they received good advice and ignored it – and many like them did the same.

This is not the fault of rapacious CEOs. This is the fault of an individual, or series of individuals. Caveat Emptor is not the rule of law, but it is the rule of the consumer….all transactions must be entered into with some level of thought.

I lost over $45,000 in the market in 2001/2002. I blame nobody but myself for this loss. It was a loss that came at the same time as unemployment. I took a job at 1/2 what I was earning just to have an income. Hard work saw me through, as did a good attitude.

CEOs will do what they do. That’s a given. You infer that I will see this cycle happen again. Of course I will….I never said I wouldn’t. But you say this as if it’s a bad thing. The cycles are what they are and accepting them and learning from them are what separate those who earn from those that do not.

Those who seek to place blame and avoid personal responsibility will not be effective. Which is why it is astounding to me that men like Obama turn to the very people who have avoided personal responsibility to “fix” the problem.

Politically, I can see we are divergent. But I have yet to see what made Obama a “better” candidate aside from the fact that he sounds very nice and lovey-dovey to everyone and spouts populist rhetoric that was assigned to history’s dustbin ages ago. He may not have been an emotional choice for you – but he was an emotional choice for fully 2/3 of the people who voted for him.

As a Libertarian, I can’t say I favored either party or candidate. But Obama, from what I could see, was the worst of the worst. Marketing is amazing thing – HE DID put lipstick on a pig!! And he’s the pig!

For what it’s worth, fully 65% of economists interviewed have disliked this stimulus package for either being “too weak” (few of them said this) or “poorly designed). Now businessmen, many of whom stand to benefit from it, have lined up against it.
And Obama outright LIED at the Caterpillar plant the other day when he said the CEO told him the package would allow Caterpillar to REHIRE employees. The CEO afterward said that was incorrect and it was likely that even with the package, more layoffs could occur.

Obama lies and people clamor for more. Good luck with that. We’re all going to need it.

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avatar Rick

For what it’s worth:
http://www.numberwatch.co.uk/2009%20February.htm

We can choose to learn wisely AND learn to choose wisely. These are not mutually exclusive things. Sadly, politicians are incapable of either.

The crunch – two analogies from physics

The ultimate result of shielding men from the effects of folly is to fill the world with fools. – Herbert Spencer (1891)

Take a sample of gas between two electrodes and apply a voltage known to be high enough to cause electric breakdown. This was a system first described by Nobel Laureate, Max von Laue, in 1925. The breakdown discharge does not take place immediately: although the system is unstable, it awaits a triggering event, such as a cosmic particle. The observed time lags to breakdown are highly scattered (exponential distribution).

Imagine instead of suddenly applying a constant voltage we apply a ramp function rising linearly from zero. The voltages at breakdown are again random, depending on a triggering event (among other factors). The damage done by the discharge depends on the energy in it, which varies with the square of the voltage, so a long time lag means much more damage.

The tragedy of the Reckless Decade was the long time lag before an initiating event (the Lehmann collapse). If it had happened earlier, the damage would have been far less. The system was unstable for years before the dénouement. It was not a matter of risk. Breakdown was inevitable. The question was “when?” and the longer the delay, the greater the damage.

While emptying the bath, try steering a particle of detritus towards the plughole with a waft of the hand. Unless you have been practising, the offending matter will probably end up travelling in a direction opposite to that intended. The bath water (described mathematically by a vector field) is subject to laws of continuity. Every part of the system is linked to every other part.

So it is in human affairs. Politicians (almost all innumerate) pass acts based on possibly noble but ultimately simplistic principles and are shocked (if they actually notice) when the results are the opposite of those intended. All of human society is linked in all sorts of complicated and ill-understood ways. Much of the damage in the Reckless Decade was adumbrated by previous political actions. Congress decreed that mortgages should be more egalitarian, Britain was made vulnerable by being too dependent on one industry (finance) etc. Both relaxed monitoring of financial institutions. Britain had a tripartite system that was so complicated (typical Brown) that everybody’s business became nobody’s business.

Recessions are generational phenomena. The new boys replace those who have experience of it going wrong. They know the history, but the inevitable and doomed cry is “This time it is different”. It is never different. Though the details vary, a collective euphoria builds up and all rationality is cast aside. Folly is a contagion. A long time ago we were taught as schoolboys the first rule of banking – Don’t borrow short and lend long. We did not really know what it meant. We do now.

Like the bath water, all the elements of society are interconnected. We do not even begin to understand how. This provides the reasoning behind the Conservative Principle – If it ain’t broke, don’t fix it. It also explains the failure of the Socialist Illusion – Everything can be planned. That is why whenever we visited the Soviet Empire we had to take items like bath plugs with us. Nobody understands how society works, though many academics claim to do so, despite the fact that they clearly cancel each other out.

A British central banker admitted that they were caught out by the crisis. Caught out? Did none of them turn on their televisions and see advertisements offering loans to people with poor credit records? Even those of us who were warning of the inevitable catastrophe had no idea that the insanity extended to foreign loans on dubious surety. The new generation of bankers were nothing more than professional gamblers. In a rising market they were rewarded for risk taking beyond reason. Many of them have retired from the scene, rich for life. Those that remain are rewarded for their folly by being loaded with unprecedented grants underwritten by the suffering taxpayer.

It’s a mad world, my masters!

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avatar k ellis

Assuming Congess believes that a pay cut for certain CEO’s and other highly paid executives is called for bases on their poor fiscal performance; I suggest that ALL members of Congress deserve to have their pay reduced to minimum wage based on that same assumption.

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