In the Delphi debate , folks keep assuming that unions and the labor force in America somehow needs to adapt- but really place no responsibility for America's lagging edge at competition on management- which has all control in this matter.

Some folks actually suppose that boardroom salaries in America actually has something to do with the market- when, comparing CEO and board room salaries to other countries companies of comparable size- there is no comparison- and it even becomes more and pronounced the farther up the chain you go- in other countries, the very honor of the CEO may be tied to company performance, and having to let go 10K jobs is seen as a personal failure by the CEO- as well it should, and they certainly don't give themselves a raise for bad performance- unlike American CEOs.

Delphi is a shining example of this- if market were truly a determiner of CEO salaries- then Delphi execs would have had some personal pain involved in thier own lives- at least equal to the employees they are screwing over- such as say, a pay CUT- for poor performance of the company- something that is not the Unons responsibility, but management- management, by it's very defination, is responsiible for company performance, at least in product determination, sales, marketing and such- but, when the company starts to fail, I have never heard managment make a very big deal of how badly their decisions were, or issue a public apology for company performance, as many countries do.

If the actual market were determining CEO and board room salaries- Toyota's CEO would be paid the highest in the world, and GM would rate near the bottom- which would reflect company performance.

So my questions-

1) How do we reform the boardroom in this country to reflect actual market forces?

2) Should CEO's and Boardrooms be held more accountable for thier fiduciary responsibilities- instead of the current system of no real responsibility of all, outside of outright fraud?

3) Should publically traded companies face the same risk for the managers as a privately owned corporations- i.e.- if the company goes bankrupt, thre is some of the same pain as an entrepenuer would have- some losses?

The best way to do away with the excessive CEO pay and other accounting scandals is to do away with the concept of a "limited liability" corporation and apply some simple rules that all small businesses have to live with.

That is, the owners themselves must be personally liable for any losses and debts the company incurs. For instance, if a small business owner runs up excessive debt that his store cannot pay off, that small business owner could have his car and house seized by the bank. To make sure that the above scenario doesn't happen, the smart business owner will do some research over the market, talk with suppliers, and try to get a good idea of who his customers are going to be.

Let's extend this over to the "investors" of today's corporations. Instead of simply worrying about their portfolios, investors should also be required to put up some collateral such as their cars and TVs that could be used to cover any losses if any company on the portfolio goes into bankruptcy. Given that they are the owners, they must also be subject to the same liability rules that small business owners face. Doing otherwise results in a double standard.

Think about the changes that would happen when you take out that "limited liability" crap. Instead of reading the Wall Street Journal and betting money on stock prices, investors would actually visit their companies, call the managers, and actually look at the widgets being produced. Given that oil prices have been going up for the past few years, GM and Ford should have stopped SUV production a long time ago. How many investors actually went down to the plants and asked to speak to the managers about that? Investors would actually run their companies for once, and that would set the CEO pay to the market rate.

3) Should publically traded companies face the same risk for the managers as a privately owned corporations- i.e.- if the company goes bankrupt, there is some of the same pain as an entrepenuer would have- some losses?
Definitely for manager-owners. And as skeet says that should extend to the stockholders who are part owners. Different rules on the same playing field aren't fair.

1) How do we reform the boardroom in this country to reflect actual market forces?

Market forces are supply-and-demand forces. CEO's (as only a select subset of "board room executives") are rare. They are in high demand. Low supply + high demand = high cost. That is the classic example of market forces.

If a company feels that it is being shortchanged by its CEO, then it is the board's job to replace him. The board itself does not run the company, it simply selects the management team. It then supervises reports to stockholders. Basically, it is the stockholders' representative in managing the company.

Now, there may be a difference of opinion about how good of a job a particular CEO does. That is the individual board's job to correct. Wall Street is the ultimate market force and if Wall Street perceives a company's management team as weak, the stock price suffers and the CEO suffers.

2) Should CEO's and Boardrooms be held more accountable for their fiduciary responsibilities- instead of the current system of no real responsibility of all, outside of outright fraud?

The board does not prepare financial reports. That is the management team's responsibility. Ultimately, it is the CEO's responsibility. To oversee the CEO and CFO, company's hire independent auditing firms. These firms are supposed to detect fraud, but of course they are also sometimes fooled.

CEO's and CFO's are liable for their company's financial statements. Not financially, but criminally. This was signed into law by George W. Bush, the Sarbanes-Oxley of 2002. Sarbanes-Oxley FAQ



3) Should publicly traded companies face the same risk for the managers as a privately owned corporations- i.e.- if the company goes bankrupt, there is some of the same pain as an entrepreneur would have- some losses?

No. Anyone with a passing interest in business structures knows that there are basically three types of companies: entrepreneurships (or sole proprietorships), partnerships, and corporations.

In the first two, the business is an extension of the personal property of the owner(s). There are both benefits and negative consequences for this. Income is only taxed once (as personal income). However, the owner is personally liable for any losses incurred.

In a corporation, the business is a separate legal entity from the owner(s), even if it is wholly owned by one person. The corporation pays taxes as a distinct entity on its profits. The owner(s) pay separate income taxes on any dividend income and capital gains that result from ownership.

Losses occur in a corporation when the stock prices drop. A stock price drop IS a personal loss if part of the compensation package is company shares (which it often is). In addition, stock price dips make stock options non-profitable and useless. Stock options are often a big part of an executive's compensation package.

Thus, the CEO of Delphi (for example) will certainly lose a great deal of compensation that he might otherwise have gotten if the stock price had gone up instead of dropping like a stone.

Those are market forces. I assure you that no one is going to take a job where they may end up having to pay to be employed there. CEO's lose their job just as often as other employees--probably more often.

The fact that CEO's fail ironically makes the job of CEO even more in demand. Of course, I doubt Ken Lay will be offered a job as a CEO anytime soon.

1) How do we reform the boardroom in this country to reflect actual market forces?



All true. I can only really answer this question myself in the light of the British boardroom, which I've had a god deal of contact with (but not yet had the honour of serving on any).

The market forces argument is the root justification for board members earning more than the cleaners on the factory floor. It would be an odd world indeed if the cleaner earned more than the CEO.

But board income inflation tends to exceed general wage inflation, which is a reason why the much-talked-about "gap between rich and poor" has widened significantly.

Shareholders are asked to vote at company AGMs to appoint (or reappoint) board directors. But, significantly, they tend NOT to themselves set remuneration packages. Instead, a board subcommittee, the remuneration committee, determines the salary, bonus and share options for each board member, and agree the performance criteria required to receive them.

AGMs and therefore stockholders, if they are consulted at all, are presented with these proposals as faits accomplis and are not usually given alternative structures. More usually, remuneration packages are reported retrospectively in the annual report.

So, by the time anyone knows Fred Ceo got far more money his performance deserved, he's already tucked the cash into a tax haven and the share option certificates are maturing gently in his safety deposit box. And if we sack him, his one-year rolling contract means we have to pay him the same amount again - including another raft of stock options - to get rid of the guy.

And, in Britain at least, the problem with "the market will decide" argument is that "the market" can be very small indeed. What happens all too often is that board members take multiple directorships. The CEO of Company X might have non-executive directorships at Company Y and Company Z. Since executive directors sitting on their own remunerations committee would clearly constitute a conflict of interest, the members are usually drawn from non-executive directors.

The trouble is, Fred Ceo from Company X sits on the remuneration committees of Company Y and Company Z. And Fred's own remuneration committee consists of Gary Boss (CEO of Company Y) and Carl Chief (CEO of Company Z), who are both non-executive directors of Company X. It doesn't take a genius to work out that there is a temptation to put upward pressure on remuneration as a non-exec in the hope that you'll benefit from it as an exec director back your the home company, in a back-scratching exercise.

"The market will decide" would certainly argue for high salaries for executive board members (who are, by the way, and at least in Britain, always members of the most senior management team, though not usually the only ones), but unless there is a demonstrable shortage of directors - evidenced by lots of long-term boardroom vacancies? - there would be no reason for the inexorable above-inflation increases that we routinely see if rewards were purely a function of the market.

So, to answer the dbate question at hand, I think a big positive reform in board practices would be somehting that prevented mutual back-scratching of remuneration committees. Perhaps a simple ban on executive board members being a non-executive director at any company which provides non-exec directors to their own. Maybe even a ban on holding more than one directorship at a time, except perhaps within the same holding company, and perhaps only on executive directors, since once they retire their skills and experience are still very useful as non-execs.

2) Should CEO's and Boardrooms be held more accountable for their fiduciary responsibilities- instead of the current system of no real responsibility of all, outside of outright fraud?



Amlord is quite right on Sarbanes-Oxley. It is a huge step in the right direction in corporate financial accounting (if not in some other potentially troublesome areas), and the USA is WAAY ahead of other countries in this regard.

I think, in America at least, there is no current need to tighten this aspect of business regulation, since SOX has already done it. It's still a relatively new bill, so should be allowed to settle in until it becomes clear what, if any, loopholes are left.

Here in Britain, while companies that trade in the USA have to comply with SOX, most businesses fobbed off the UK government with bland assurances that "we've never had any instances of corruption on the scale of Enron, so there's no need for additional regulation". Displaying astonishing credulity and the memory-span of Alzheimic goldfish - BCCI? Barings Bank? - the British government accepted this blatant nonsense and allowed UK accountancy businesses to continue in their cosy self-regulation.

So the answer here is the opposite - yes, we should make boardrooms more accountable for fiduciary matters, because current UK law lets them get away with plenty short of outright fraud.

3) Should publicly traded companies face the same risk for the managers as a privately owned corporations- i.e.- if the company goes bankrupt, there is some of the same pain as an entrepreneur would have- some losses?



I assume that you are employing a specific meaning of "losses" here, since the usual business usage of "loss" - a negative profit - bears only coincidental relation to the stock price of the business. If the market has been pre-briefed to expect a loss, and the actual loss matches the predicted sum, the stock price can often go up depending on whether the business and the markets expect the trading position to improve.

And the converse also implies - a company might make a record profit, and still see their stock price drop (for example, because of some kind of takeover implications, or perceived future weakness, or just because the market is jittery that day).


Well, I assume here you're talking about the value of stock options - where an executive or other manager is given the option to purchase stock at a specified price at in predetermined future period.
Given that stock options are usually awarded at a healthy discount to the market price on the day they are awarded, it's certainly possible that a big fall might go below the discounted price and make the Delphi CEO less money than he would have had to pay to exercise the options.

But then, he has the option not to exercise the Option, doesn't he? He doesn't HAVE to buy the stock at all.

He'll only LOSE money if he spends money on options he already knows are worth less than he's paying for them and then sells them before the price rises to put him back in the black, in which case it's not so much market forces as rank stupidity that are going to cost him money.

He might well lose the opportunity to MAKE money, but, unless he's an idiot, he need not LOSE a single cent.


This I agree with - CEO turnover can be quite high compared to other levels, especially in market sectors that are generally struggling (for example high street retailing in the UK, steel manufacturing outside China & India, and so on).

While it is a fact, one thing I don't quite understand is how a CEO can be sacked for poor performance at one company, then reappear a few years later (often on more money) somewhere else. There are a few CEOs who have done this multiple times, and the market STILL thinks that they are worth the money. The logic of this eldues me - after all, a mistake may only be a mistake if you make it twice or even three times, but if you mess the same thing up five or six times, surely is speaks more about your own incompetence? So why are such people even given house room at this level.

(I can dig up examples if required, though they'll all be British, I'm afraid; I can't honestly say that I know this happens in the USA, though I'd be surprised if it did not. Even SOX is still quite new.)


Of course, because even failing CEOs make pots and pots of money. Who wouldn't take a job they can't possibly lose out in, no matter how bad they are at it? Especially if they think that they can get away with it more than once.

CEOs are way, way, way removed from responsibility, and stockholders rarely have any say whatsoever in the election of corporate officers- it is the way CEOs have set up the system so they have no accountability except to themselves- they, with thier uneven access to lawmakers, have tailored a system that they are outside market forces-

for instance, only in America, as a matter of regular business (comparing first world nations) not only pays several times higher than any other nation's CEOS in the world, IT IS THE ONLY PLACE WHERE OUTRIGHT FAILURE IS REWARDED- i.e.- the company is declaring bankruptcy and may very well close it's doors permanently, so the day before, the CEOs give themselves a big raise. Failure is rewarded regularly in the US system- instead of them losing as much as the employee in the company-

This is exactly the opposite of market forces, for an entrepenuer, the owner is the last one paid, the most risk is the person on the top- whereas, with say Delphi, the person taking the most risk is the person that accepts the job from Delphi, not the person at the top-

This unbalance is really showcased in things like GM vs Toyota, GM, losing for decades, keeps paying it's failing management more and more, where, Toyota, possibly the most succesful auto company today, thier CEO makes a small fractiobn of what the GM CEO and board makes-

True market forces would say that the highest paid exec in the world it the Toyota exec, and the board of directors for GM would have been fired along time ago if folks that hold the most stock, guys like me, had any real say-so.

But the CEO has managed to insulate himself from all responsibility whatsoever- if GM CEO Wagoner runs GM right into the ground, he still keeps his 4 million per year, and perhaps gives himself a raise right before the doors close, making sure his payroll is paid with the sale of the assets.

In a real market, success is rewarded, failure is punished, and American publically traded companies have been out of the real market for some time.


Julian- "And, in Britain at least, the problem with "the market will decide" argument is that "the market" can be very small indeed. What happens all too often is that board members take multiple directorships. The CEO of Company X might have non-executive directorships at Company Y and Company Z. Since executive directors sitting on their own remunerations committee would clearly constitute a conflict of interest, the members are usually drawn from non-executive directors.

The trouble is, Fred Ceo from Company X sits on the remuneration committees of Company Y and Company Z. And Fred's own remuneration committee consists of Gary Boss (CEO of Company Y) and Carl Chief (CEO of Company Z), who are both non-executive directors of Company X. It doesn't take a genius to work out that there is a temptation to put upward pressure on remuneration as a non-exec in the hope that you'll benefit from it as an exec director back your the home company, in a back-scratching exercise.

Wall street exposed this a couple few years back- I couldn't find the dang article despite about an hour of searching - but it pretty much said what you said- that the system is out of whack because (they call them compensation commitees usually) has board members on both commitees, and last I looked, several compensation commitees have the board members on both commitees, and support for the CEO determines if they stay on the board of directors.

There is very little difference between a CEO and a congressman, EXCEPT that a congressman has much more oversight through the voters than the CEO- A congressman can determine his own salary, and so does an american CEO, through clever manipulation of the system.


Amlord- CEOs ARE NOT rare- it is an artificle position- there are millions of poeple with enough training and ability to take over those positions, they have made it impossible through thier own manipulations to take those positions- don't believe it? See how many biz school graduates we have in this country, more than enough competent poeple, easily as competent as anyone we have in the boardroom today, willing to work for the low price of a million a year !

I know darn well that several poeple on this board can just as easily run HP or GM into the ground as well as those CEOs have done!

Sarbanes-Oxely is a toothless wonder full of double speak and false promises as well- oh sure, it makes some things a little harsher IF CAUGHT- but they have made the burden of proof so high as to be nearly imposssible to get a conviction- it is the equivilent of making all murder convictions punishable by death, but the only way to get a conviction is to have 4 police officers tape the murder, with your own grandmother present to witness the crime- the person has to pretty blantantly get caught. It is pretty obvious Ken Lay is guilty, but he still is a free man six years later, making millions off his former CEO status to this day. He is not a poor man, though he should be.

In real marketplace economics, bad decisions = loss of money, the "risk" part of the equation in a true free market economy- but in our system, CEOs operate far outside market economics, were loss can = pay raise!

ROTFLMAO!

CR, I do believe you've pointed me in my next career direction. Trouble is, I'll have to get reborn into a wealthy family to have a shot at it. Don't think that's in my cards, karma or destiny.

The way business has evolved in this country hints at why high regulation of industry has developed in other countries. I don't have the answers and won't try to propose any, but ignoring the problem does nothing as well.

So I'll make this starting proposal: People ought to stop rationalizing the behavior of US CEOs. Take a good, hard look at what's going down. Maybe solutions will come from this exercise.

1) How do we reform the boardroom in this country to reflect actual market forces?

I think the boardroom itself is where the absence of the market forces are.

2) Should CEO's and Boardrooms be held more accountable for their fiduciary responsibilities- instead of the current system of no real responsibility of all, outside of outright fraud?
I really really fear overregulation far more than I would underregulation.

3) Should publically traded companies face the same risk for the managers as a privately owned corporations- i.e.- if the company goes bankrupt, thre is some of the same pain as an entrepenuer would have- some losses?
No.

From what I gather from this debate and the responses made the main argument is actually income inequality. I think a debate on income inequality and the effects it has on our society, economic markets and politics would probably be a lot more interesting.

I also feel the debate points and arguments made in regards to income distributions made in other nations in comparison to the US lacked the balanced view that most nations have far more restrictive markets, higher taxes, more income distribution by means of gov. measures and less competition. In other words our own system comes with it's faults as does theirs. Which faults are we more inclined to accept and have to deal with?

Bucket- I have no problem with the large salaries themselves- I believe that the salaries should be as high as the market will bear, as long as the market is allowed to actually determine those salaries- it is not the salaries themselves, but they way they have managed to manipulate the system way out of whack.

How about we go over some of the basics of a capitalist/commerce system:

1) You take risk to make a gain- i.e. "betting the farm" on the market - not wise, but risky, and can pay off big- it is just gambling to me, but the analogy is correct

2) When risk and lose, the poeple making the risk are the ones to lose most, because they gain the most when they win.

3) Marketing, product developement, company morale, etc, are all in the balliwick of management- not labor!

4) Labor is only one component, though a very important one, in the whole expense of the company, marketing, book keeping, company morale, product developement, sales, are other components that are of at least equal importance of a solvent company- no matter how productive the workforce, if you can't sell your product, you simply don't have a company- even if the widgets are the greatest widgets on earth.


Right now, there is no risk at all, aside from outright criminal conduct, on the part of the boardroom. The biggest risk takers are those employees that are convinced that this company will be a good company to have a career with. They stand to lose everything by working for a company for 20 years while the execs lose and risk nothing-

this is the seperation of the market from the boardroom.

The entire US publically traded company system is completely divorced from the market- they have essentially done what the AMA has done, they have carved thsemselves out a niche of privilege that has nothing to do with market forces whatsoever= you just have to sit in one comp commitee as a trustee and you will see how divorced it is!

I don't care if a CEO makes 400 million times more money than his employees, as long as his company and it's health is doing well- success should be rewarded, but when the company is NOT succesful, THEN they should lose thier wealth, just like thier employees.

There is this "boogeyman" of regulation, but something has to be done about these unrestrained sociopaths= and make no mistake, they are sociopaths, no different in thought process than a serial killer, except that instead of taking lives, they take away the future of thousands of families, and there is no real punishment in our system to fit the crime.

CR,

I think you have your terminology a bit mixed up, which is leading to you debating one thing and others debating something else.

"Market forces" is not Wall Street. It does not imply risk or reward. Market forces refers to the allocation of resources, supply, demand and price. http://en.wikipedia.org/wiki/Market



Getting a job is not a risk, in any conventional sense of the word. A job is performing a duty and getting certain compensation. The length of the employment term may vary and there is certainly "risk" that it won't last as long as you would like, but nothing is life is guaranteed. Getting a job with a Big Three company is much more secure than getting a job with one of the million or so start-ups that are formed every year.

I think you may have a skewed view of success. A company does not need to make oodles of profit to be "successful". Based on market conditions, simply holding the line may be successful. Often, limiting losses is successful. It all depends on what the expectations of the owners (i.e. the stockholders) is. Meeting expectations is success. Hitting a mark lower than expected is not (in general).

Your viewpoint that CEOs are all sociopaths is very telling. It says a great deal about your bias here. I am not a CEO, nor do I know any (except the CEO of the start up I work at). I judge them like I judge anyone: by what they do. Unreal expectations are always met with disappointment. Not every CEO is a success for a given company and not every CEO gets the lavish bonuses and severance that you assume are automatic. A more balanced and analytical viewpoint is required here.

By your very defintion you make my point for me- CEO salaries are determined by CEOs, and not who hires them- by the very nature of the way they determine compensation-

In economics, a market is a mechanism which allows people to trade, normally governed by the theory of supply and demand, and thereby allocates resources through a price mechanism. It typically involves a bid and ask process.

1) there is no ceo shortage in this country- perhaps Nurses have a shortage, certainly teachers, but no CEO shortage- for every Wagoner, there is 100K eager MBAs ready to take his place- but he, and others, have cleverly manipulated the system to where they are not subject to the market place. - so, supply and demand are out the window- no such thing when it comes to the board room. If schools for MBAs and schools of business just couldn't get enough graduates to fill the need- perhaps I would agree with you- but the fact is, there are lots and lots of poeple that could fill these positions for far less money. I would even go so far as to say that a CEO of a corp as big as GM would probably make less money than the highest paid union employee- because there are far more CEO wannabees out there then there are good line foremen!

2) the bid and ask process- this is where our system is really, really corrupt and broken- the CEO in 99% of publically traded companies is both the bidder and the asker- there is no seperation of the two- as Julian pointed out.

My solution is quite simple- make entrenched management of publically traded companies illegal. Make all board rooms for day to day operations "contract workers"- i.e.- When google went public, they should have (under my new law LOL) put out for bid the management of the company- subject to ratification annually or whatever time limit by the majority stock holders. Make it quite easy to fire and rehire or contract out CEOs and thier boardrooms, and put the job up for bidding on the open market. I call it "privatizing the board room"- because what we have now is horribly broken and corrupt.

Yes Amlord, for all federal level politicians and large corporation CEOs that DID NOT FOUND THE COMPANY- I consider them evil sociopaths- because that is what they are. There is no way to do that job and have any morals or ethics- and our laws need to reflect that reality.

And exactly how is the market not having influence? You have said this several times but to be honest I am unconvinced by your arguments.
I think a lot of the arguments you give as examples for a lack of market forces in my mind directly reflects the force of the market. You cite the correlation between CEO pay and lack of performance but you neglect to note that with higher risk the market usually does require a greater amount of reward. Meaning only will a CEO take on a position where a company is failing or in need or a rehaul ...which allows for a far greater chance of failure..if their promised return or reward is increased. Isn't this one of the basics of the market system you were going over?

I also believe that this correlation of CEO pay and performance also gets distorted because often corps in times of trouble will hire someone from the outside ..usually the market will demand this as some kind of sign of confidence. It has been proven that CEOs hired outside the company come at a much higher premium then those who were promoted from within. Also at times of trouble the corp is usually experiencing a sense of urgency..again because of the market demands..and I would imagine could be tempted to pay more in hopes of solving the problems and again assuring the market.

You also cited other nations outside of the US as having lower pay rates and that this was indicative of our systems need to be more aligned with the realities of the rest of the world. Yet for someone like me who believes in the market and it's abilities and the idea that the market as a collective is much more intelligent than any political system we may have in place..that as globalisation continues and competition is further encouraged globally that American CEO pay rates WILL become a liability and the market will adjust itself.

Basically my argument is that if the market can not bear this then it won't. And that the increase in CEO pay has in fact been a condition of the market through tax policy, market forces, trends and conditions and just the general focus and importance the market has placed on the CEO. It is not a distortion but I personally believe it will be a dying trend and I believe corp America will become more and open sourced.(you guys like to call it outsourced) BUT there will always be a need for the outsider to come and make good..and the pay will always reflect this need and it's value.

We are somewhat on the same page here Bucket- I beleive that the main reason that US corporations are losing market share is because of bad management and an out of balance system of rewarding board rooms- and it is indeed correcting itself on a global scale- Toyota vs GM would be the perfect example- Toyota making gains for the last 4 decades and GM losing for the last 4 decades (overall losing, yes, it has good quarters and bad, but overall, GM has had it's butt handed to it by the rest of the world) , and then those very boardrooms NOT looking inward, but outward to external forces, not to change thier behavior, but to find someone to blame politically for thier bad decisions.

It is for America's financial future that I worry about this problem- we keep harping over and over on labor costs- but ignore the fact that there are a great deal many companies with higher legacy and labor costs that are taking market share from US companies with less legacy costs and labor costs- yet, CEO salaries continue to rise, they continue to do the same wrong things over and over, and then blame others for thier failures.

GM is my favorite example because it has really done everything wrong management wise for a very long time, yet still continues to hire these high paid thieves. Eventually, the market will slap GM down permanently if they keep it up- and I am not happy about that at all- I want GM to capture back market share and become the worlds greatest company again- but, not likely to happen as long as we have the self serving folks that are there in office.

If America IS to compete globally, and really compete, not just through political muscle/bullying and do well, we need to reform our boardrooms, and make it cheap and easy to fire these guys when they do not perform to contracted spec- and make sure the CEO doesn't write the contract, as it is done now.

The lack of national protections wouldn't have anything to do with Toyota's gain over the four decades tho? A lot has happened a lot more than just poor management like you claim..a lot that is obviously indicative of the fact that the market is unavoidable. Regarding boardrooms lack of market influence I agree but I don't believe you and I agree because I feel that insulation from the emotional sways of the market is in some degree needed. American corps are without question the most stock market influenced companies in the world. And auto manufacturer stocks are very very tumultuous and easily effected by the emotions of the market of that quarter..very short sited. I would imagine that some removal from this is needed in the boardroom.



Here I find your argument extremely inconsistent. You complain that the market does not have enough influence..and yet in the same breath complain about all the factors and indicators that the market uses to measure auto corps. Labor costs are a major component or indicator for the market's reactions to these companies. You use the Toyota GM comparison well use it here too...Toyota has about a 1000 USD less labor costs per car then GM does..why? It has to do with production, capital investment, efficiency, and a younger workforce. You don't think this discrepancy effects the demands the market makes on GM? You don't think that perhaps the market desires to see GM increase productivity, efficiency and lessen it's pension/health care payouts? And you are right they are not fixing the problem..labor costs, efficiency, productivity and health care and pension payouts are still lacking on the GM side when compared to Toyota.


If you really wish to complain about America's commitments to compete globally you should follow trade news more closely. What was said in regards to the WTO trade negotiations was quite the challenge to others..specifically the EU and America has just highlighted on the global stage one of the most important and influential issues in regards to free and fair trade. Also moving forward to free and fair global trade is not something America can do alone..it is cooperative reform that is needed.

Regarding making it cheap to fire CEOs I think you are not considering the concepts behind large or enticing severance packages and do not realize the perceived importance they are to the Board and not just the CEO. CEOs have control over information that indicates how well or not well they are performing their job that they are expected to willingly share with the board. This relationship and the powers within it need to be kept aligned so that all parties have access to this knowledge. The large severance packages are intended to make CEO entrenchment (and deception) less enticing. This is a matter of making the information, regardless of it's indications, valuable.

Hmmm- where do you come up with this figure?

"Toyota has about a 1000 USD less labor costs per car then GM does..why? It has to do with production, capital investment, efficiency, and a younger workforce."-

I should have been more clear- I am comparing Toyota factories in America using UAW employees- the only way they are able to sav 1000usd per unit (in America) would be savings in some other areas other than labor contracts. -

Toyota has basically done everything right- and thier cars are not cheaper- walk into a Toyo dealership and compare apples to apples- and, like in the other thread, I think most of it has to do with good marketing and using the 80s and late 70s "marketing capital" (my own words there, I couldn't think of another way to put it- basically, alot of poeple still automatically think Japanese cars are superior in price and quality than American cars, when, me, as a gear head and a pench penny guy, found them to be horribly overpriced for what you get, and consumer reports and such I have found to be totally wrong in many of thier articles, from actually working on the vehicles) and continually listening to customer wishes in regards to new car productions compared to GM.

There were petitions, protests and even poeple approaching GM execs telling them not to go with cars like the Pontiac GTO- a horrible idea from the word "jump" in America- great in Australia, but horrible here. GM execs just don't listen to thier customers.

Protections for cars in Japan do have some factor in car sales in Japan, but since Toyota, Honda and others have opened plants in the US, and hire UAW workers, or if not union, pay competitive to UAW in wages and benefits- these jobs are NOT "warm body" jobs- the MORE seniority, typically the higher productivity and quality- so I don't know why a "younger workforce" is a good thing in your quote- for instance, at Chrysler, the Viper assembly line was only staffed with 15 year + employees- because it was a great line to work on, and they picked by seniority, to reward the top most productive employees. Those guys and gals were totally into thier jobs, I toured there, and those folks should have been hired as salespoeple for the company- they loved thier products!

Now, an article I posted earlier shows Japanese auto manufacturers in Japan to be paid higher than UAW workers, with less overtime (to much overtime was in part of the last 3 UAW contracts I saw- because, once again, long term employees are so productive it is actually cheaper to work those guys OT vs hiring "a younger workforce") basically, thier labor costs were HIGHER in every area vs American UAW workers.

Now, I guess back to subject-

Risk is why an entrepeneur gets his just desserts- whether it be broke from failure or fabulously wealthy from success. CEOs only get the wealth- and no personal risk.

That is were the real imbalance exists- Bucket- you start a business, it is succesful, you reap the bennies. But you hire someone to run it, using your money, they run it into the ground, do you give them more money to keep doing the same thing over and over?

Really, Bucket- where does the market influence boardrooms- instead of CEOs using the system to manipulate thier salaries outside of any reality? What you have is legal con artists, not clever folks- they may be clever at manipulating the politics of a corp, but need have no real management skills beyond that politicking.

What does a CEO stand to lose for failure? Outside outright fraud- nothing, zip, nada, no risk whatsoever.

Secondly- there are literally millions of folks out there qualified to run that company, that would love to work at that job for far, far less money- like I said, I think any MBA graduate could as easily run a company to ground as these high priced con artists.

The market should reflect that there is no shortage of CEOs in this country. There is a nurse shortage, perhaps a welder shortage, maybe a diesel mechanic shortage- but there is no MBA shortage!

I think if I were to have a free hand in reform in this area- it is the comp boards I would target first. I would make them totally divorced from the company officers- there can be NO personal interactions, and all the comp board salaries are tied to long term financial health of the company.

I would like to see CEO salaries tied to it the same way, but I just don't know how to go about it.

CEO's have control over the information about their job performance?! And so we have to pay them monstrous salaries to in order to be honest?

What we need is more transparency over the corporations in America. Transparency for both the Boardrooms and the Labor Union leaders. In most occupations, people get paid for performance, not simply being honest. If a school teacher or a police officer screws up on the job, those workers are not going to get a $30K severance package, even if they willingly turn in their badges. Likewise, it should not be necessary to pay a year's salary to a CEO who isn't performing.

It is fairly common knowledge ...
General Motors has 514,120 participants in its hourly-rate employee pension plan, all but 142,617 of whom are retired. Pension and health-care costs for those retirees added up to about $6.2 billion in 2003, or roughly $1,784 per vehicle according to Morgan Stanley (MWD ). Compare that to Toyota's U.S. (TM ) plan, which had only 9,557 participants, just two of whom were retired as of Toyota's latest Internal Revenue Service filing covering 2001. Toyota's pension cost is estimated at something less than $200 per vehicle.
source
And those number on pension plan participants and how many are retired with the GM plan compared to Toyota's (a measley 2!) is what I mean by the benefits of a younger workforce.

GM's unresolved problems -- a bloated staff and too many brands -- are now exacerbated by unforeseen factors. Soaring health care expenses, rising to $5.6 billion this year, have eclipsed its hard-won gains in quality and cost control.

Despite GM's assertion that its prospects will brighten in 2006 with the rollout of new large pickups and sport utility vehicles, Wall Street is worried. Debt-rating agency Standard & Poor's is reviewing a possible downgrade of GM to junk-bond status.
source

The U.S. automakers are likely to seek concessions on health care and pension costs in next month's contract talks. Prudential Securities Inc. analyst Michael Bruynesteyn estimates that General Motors' pension and retiree health expenses add $1,360 to the cost of each U.S. vehicle, compared with $107 for Honda.
source



There are NO UAW organized Toyota factories. None.


You keep saying this. I find it odd personally you have taken on this mantra. You seem to have two arguments that don't agree with one another. You want the market to have more influence and then you don't want to have to consider anything the market desires or looks for if it is not what you believe is right. How well exactly do you feel the market would react if GM announced they were putting some nobody just out of college in the CEO position? You think the market would accept this? I don't.

I am not really getting the impression you care too much about my argument and you certainly never address any of the points I have made or dispute any of my claims you are wrong. I feel like my replies are nothing more than a means for you to continue ranting about how CEOs are psychopaths etc. Not really the style of debate I enjoy sooooo I think I am finished with this thread.