Corporate Greed at its worst: why capitalism needs rules

[RandomGuy]

ALL BUSINESS: Tone deaf on CEO pay

By RACHEL BECK, AP Business Writer
Fri Oct 27, 1:10 PM ET

NEW YORK - As if Countrywide Financial Corp.'s CEO isn't getting paid enough, the mortgage lender's board is taking the unprecedented step of lavishing him with $10 million in retirement money.

And he isn't even retiring.

Countrywide is spinning it as a "reimbursement" because Angelo Mozilo agreed to stay on at the helm until 2009 instead of retiring this year as was expected. That will come on top of the hefty salary he will get to stay at work.
The company released details of Mozilo's financial package on the same day it announced plans to lay off 2,500 Countrywide employees. Talk about tone-deaf timing.

Mozilo has long drawn flak for his pay, which the Calabasas, Calif.-based company has defended as appropriate since under Mozilo's watch Countrywide has become the nation's largest mortgage lender.

Over the last decade, Countrywide's market capitalization has gone from just over $2 billion to levels above $20 billion. Its stock has had more than a seven-fold gain during that time — which shows that shareholders have been rewarded.

But some investors still think Mozilo's big payouts show his too-cozy relationship with board members who are supposed to be monitoring his work.

Last year, Mozilo made nearly $142 million, including $2.7 million in salary, $19.6 million in bonus and $119 million in realized stock-option gains. That's not all — he got plenty of perks, including $40,282 for country-club memberships, $230,452 for personal use of company aircraft and $29,750 for tax and investment advice, according to securities filings.


That made him the sixth highest-paid executive in corporate America, according to a study of 2005 compensation at 1,400 public companies by the independent governance research firm The Corporate Library.

Mozilo, who co-founded Countrywide and has been at the helm since 1998, was expected to retire this year, but last Friday the company announced he would stay on through 2009.

When details of his contract were released in a regulatory filing on Tuesday, it first looked like Countrywide had gotten the message that Mozilo's compensation was out of hand. His base pay had been cut to $1.9 million, while his bonus would range from $4 million to $10 million annually depending on the company's return on equity and net income.

But thrown into the mix was also the promise of the retirement "reimbursement" that would pay Mozilo $10 million over the next three years, an arrangement that compensation experts say may be the first of its kind. Of that, $5 million is guaranteed while the rest is contingent on the company's shareholder return ranking at the median or above those in the Standard & Poor's Financial Services Index.

"This is allowing him to have his cake and literally eat it too," said Patrick McGurn, executive vice president and special counsel to Institutional Shareholder Services, a proxy advisory firm. "He is entitled to get retirement pay even though he chose to not retire and still work. It is not a reimbursement. It is an entitlement."

Countrywide declined to comment beyond what was said in the securities filing.

News of the pension payout came as the Countrywide announced Tuesday that it earned $648 million in the third quarter, up only slightly from $634 million a year earlier. Facing a slowdown in its lending business due to the housing slump, Countrywide also said it plans to cut $500 million in expenses, which will include reducing its work force by 2,500, or 5 percent.

Mozilo's pay continues to rankle the pension plan of the American Federation of State, County and Municipal Employees, a Washington-based government workers union.

Its proposal to give Countrywide shareholders an annual nonbinding advisory vote on executive compensation was defeated last spring by a narrow margin — 43 percent for, 55 percent against and 2 percent abstaining. This week, they took up that cause again, filing to have the proposal voted on by shareholders at next year's annual meeting.

"It takes a huge amount of creativity to put more money in this CEO's pocket," said Richard Ferlauto, director of pension and benefits policy for the AFSCME. "The compensation committee of this board is failing to do its job. They are either deaf to shareholders or totally incompetent."

Still, many on Wall Street have decided to look the other way. Analysts cheered during the company's conference call that Mozilo was sticking around. The stock in recent days has jumped 10 percent to more than $38 a share, largely fueled by news that Countryside would buy back $1 billion to $2 billion worth of stock in the fourth quarter.

That conveniently managed to dim the spotlight on Mozilo's retirement pay.

Rachel Beck is the national business columnist for The Associated Press. Write to her at rbeck(at)ap.org

[johnsmith]

But this isn't cheating though. Not really "fair" but not cheating.

[RandomGuy]

$142,000,000 divided by 2500 laid off employees is $58,000+ each.

If I worked for this company that would tell me volumes about the value my work had.

Speaking of value, what has this guy really done that is worth that much? Could the same results have been gotten for say, $10,000,000? $1,000,000? $100,000?

If the board is spending that much money on him, at the expense of the employees, isn't that a bit short-sighted in a modern job market? How does the company then go out and attract new talent when it is so obviously not committed to its employees?

Free market economics is a good thing, but we have rules that limit unfair behavior. Does the overly cosy relationship with the corporate board that sets his pay cross the line into being unfair?

[RandomGuy]

If the laid off employees had played golf on a regular basis with the board, would they have been laid off?

Weak corporate governance can be just as harmful to a good functioning economy as anything.

[1369]

Seems to me that if the stockholders aren't happy with how their company is being run, they need to make changes. But then again, it looks like they're happy with how their stock has performed.

The "union" comments sound like sour grapes.

[johnsmith]

$142,000,000 divided by 2500 laid off employees is $58,000+ each.

If I worked for this company that would tell me volumes about the value my work had.

Speaking of value, what has this guy really done that is worth that much? Could the same results have been gotten for say, $10,000,000? $1,000,000? $100,000?

If the board is spending that much money on him, at the expense of the employees, isn't that a bit short-sighted in a modern job market? How does the company then go out and attract new talent when it is so obviously not committed to its employees?

Free market economics is a good thing, but we have rules that limit unfair behavior. Does the overly cosy relationship with the corporate board that sets his pay cross the line into being unfair?


Again, it's not fair, but it's not cheating either. Your question regarding the company attracting new talent is an interesting one though and is something often discussed at my company. We pay below average in regards to industry standards and we are constantly losing our young talent to higher paying companies, however, college grads never stop coming in.

[RandomGuy]

Seems to me that if the stockholders aren't happy with how their company is being run, they need to make changes. But then again, it looks like they're happy with how their stock has performed.

The "union" comments sound like sour grapes.

Do most stockholders really read proxy reports? Financial reports?

How much time do YOU spend reading up on the companies in your portfolio?

Are you SURE that the board here IS the voice of the stockholders?

It would seem that they are not quite acting in the long term interests of those stockholders.

[RandomGuy]

Again, it's not fair, but it's not cheating either. Your question regarding the company attracting new talent is an interesting one though and is something often discussed at my company. We pay below average in regards to industry standards and we are constantly losing our young talent to higher paying companies, however, college grads never stop coming in.

If a form of theft isn't illegal, does that make it ethical?

All it means is that I have found a way of stealing that isn't illegal (yet).

[101A]

...
All it means is that I have found a way of stealing that isn't illegal (yet).

So, if not the company he works for; who would YOU have determine an employee's worth?

[RandomGuy]

Your question regarding the company attracting new talent is an interesting one though and is something often discussed at my company. We pay below average in regards to industry standards and we are constantly losing our young talent to higher paying companies, however, college grads never stop coming in.

What does it cost the company to train all the new grads?

How much does the lower productivity of new employees cost when compared to keeping more seasoned employees?

Human capital is not unlike physical capital. You get what you pay for. I think the cost of not retaining people is higher than most think. The long term cost of not having a ready pool of talented promotable people is not one that can be easily measured either.

[RandomGuy]

So, if not the company he works for; who would YOU have determine an employee's worth?

I would simply have caps on total compensation. At some point you have to wonder how much is really due to talent, and how much is due to weak corporate governance.

Is a CEO's job REALLY that special?

[101A]

I would simply have caps on total compensation. At some point you have to wonder how much is really due to talent, and how much is due to weak corporate governance.

Is a CEO's job REALLY that special?

CEO's only? How about actors, anchormen(women), athletes and lottery winners? Just trying to clarify your positions.

How would you structure your cap - what would its basis be?

[johnsmith]

If a form of theft isn't illegal, does that make it ethical?

All it means is that I have found a way of stealing that isn't illegal (yet).


I totally agree with you on this, I'm just saying that if it's not illegal, they'll do it. Ethics don't play a big part for many exec's.

[johnsmith]

What does it cost the company to train all the new grads?

How much does the lower productivity of new employees cost when compared to keeping more seasoned employees?

Human capital is not unlike physical capital. You get what you pay for. I think the cost of not retaining people is higher than most think. The long term cost of not having a ready pool of talented promotable people is not one that can be easily measured either.


The industry I work in isn't a fair comparison to say, the home finance industry.

We can pretty much plug in anyone as long as they can use a computer, they'll pick up everything as they go, the training is minimal. The cost of not retaining people is offset by the fact that we pay below industry standards. My solution to this has worked well for me, just do my job better then everyone else, then demand the money by threatening to leave. Once that money runs out, I'll use company time to find a higher paying job with another company..............suckers.

[RichieRich]

I don't see a problem with it at all. The man earned it. If you want the same pay then go to college, get a degree, and move your way up.
It is the American way!!!

[johnsmith]

I don't see a problem with it at all. The man earned it. If you want the same pay then go to college, get a degree, and move your way up.
It is the American way!!!


Unfortunately, this is becoming somewhat true. I have no problem working your way up the corporate food chain, as that is what I'm trying to do. What I do have a problem with, and I think RG and pretty much everyone else will agree, is when you do it at the expense of the very people that got you there.

[RichieRich]

Unfortunately, this is becoming somewhat true. I have no problem working your way up the corporate food chain, as that is what I'm trying to do. What I do have a problem with, and I think RG and pretty much everyone else will agree, is when you do it at the expense of the very people that got you there.

I disagree. Most top executives got there by working 80 hour weeks and initiating business strategies that the workers had no or little involvement and are more often than not are the reason for the layoffs. Even top executives get canned.

[101A]

A business doesn't exist to provide jobs or FOR its employees; from the mail room to the CEO.

A business exists solely for the benefit and behest of the owners of that business, otherwise there would be no business, at all.

It is theirs, they own it. They decide how to allocate the resources to further their agenda.

[johnsmith]

I agree with both of the above posts, 101A and RichieRich.

[boutons_]

October 30, 2006

Dodging Taxes Is a New Stock Options Scheme

By ERIC DASH

In the latest twist in the stock options game, some executives may have changed the so-called exercise date — the date options can be converted to stock — to avoid paying hundreds of thousands of dollars in income tax, federal investigators say.

That appears to be what happened at Symbol Technologies and Mercury Interactive, and federal securities regulators are now sifting through options data at other companies for evidence of similar tax-avoidance schemes.

The Securities and Exchange Commission’s stock options inquiry has so far focused on the practice of pushing back the grant date on stock options, which can guarantee profits when the grants are exercised. Its interest in exercise dates may signal an emerging front in its widening investigation into stock option abuses at more than 100 companies, from Silicon Valley start-ups to well-known giants like Apple Computer and UnitedHealth Group. The Justice Department and the Internal Revenue Service are separately examining dozens of companies.

As those cases have progressed, at least 46 executives and directors have been ousted from their positions. Companies have taken charges totaling $5.3 billion to account for the impact of improper grants, according to Glass Lewis & Company, a research firm that advises big investors on shareholder issues.

And further investigations, indictments and restatements are expected. Securities regulators are now focusing on several cases where it appears the exercise dates of the options were backdated, according to a senior S.E.C. enforcement official, who asked not to be identified because of the agency’s policy of not commenting on active cases. Besides raising disclosure and accounting problems, backdating an exercise date can result in tax fraud.

“Tax avoidance is a big issue,” said Marc A. Siegel, research director of the Center for Financial Research and Analysis, an independent forensic accounting advisory firm in Rockville, Md. “There is no real excuse for intentionally trying to misreport an exercise date.”

An option grant gives the holder the right to buy shares of stock in the future at a predetermined “exercise” price. If the current market price is higher than the price at which the option was granted, the option holder captures the gain. Profits from options are subject to income tax when the options are exercised.

Backdating an exercise date can reduce that tax burden. By reporting an exercise date with a lower price than the date on which the options were acquired, executives may understate their gains and lower their income tax. It may also cause their companies to take improper tax deductions, leading to reporting problems down the road.

In other cases, executives can benefit by reporting an exercise date with a higher price than the one on which the options were acquired. Instead of acquiring their new shares with cash, executives sometimes use stock to pay the cost of converting their options, including the taxes on the profits. A higher market price means that the executive needs fewer shares to pay those costs.

As with backdated grants, improper adjustments of exercise dates are most likely to have taken place during the dot-com boom of the 1990s and to have subsided in 2002, when more stringent reporting requirements were introduced. And, as with the backdating inquiry, it appears that federal investigators are combing through data to identify patterns, where executives consistently exercised their stock options at a favorable price, like a monthly or quarterly low. In suspicious cases, investigators may follow up by requesting brokerage firm records and other transaction documents from companies to see if the actual and reported exercise dates match up.

Because backdating exercise prices involves false financial reporting and improper accounting, the cases fall under the S.E.C.’s oversight. But in similar investigations, S.E.C officials have alerted the Internal Revenue Service of possible tax issues in the securities cases they were examining.

The practice of backdating exercise prices first emerged in two of the first investigations into improper options practices. Both Christopher Cox, the S.E.C. chairman, and Linda Chatman Thomsen, the agency’s enforcement director, cited the abuse in their testimony before Congress last month.

In 2004, as part of a broader case of accounting fraud, the Justice Department and the S.E.C. accused several former executives at Symbol Technologies, a producer of bar code equipment, of manipulating their option exercise dates.

Federal prosecutors and regulators accused Leonard Goldner, Symbol’s former general counsel, of devising a plan that let him and a handful of other senior executives push back the option exercise dates on the filings used to report stock acquisitions, without the knowledge of the company’s board or shareholders.

Rather than report the actual exercise dates, they could choose the most advantageous date from among the preceding 30 days to come up with a lower exercise price, according to court filings. This so-called look-back practice allowed Symbol’s senior executives to avoiding paying hundreds of thousands in income taxes, court filings claim.

Consider the case of Kenneth V. Jaeggi, Symbol’s former chief financial officer. On June 9, 2000, Mr. Jaeggi signed a securities filing stating that he had exercised 101,250 stock options in late May, at the second-lowest price for Symbol shares in the preceding 30 days. In fact, government prosecutors testified in court that that the options were never actually exercised until they were paid for on June 30.

Instead of Mr. Jaeggi’s actual gain of $4.48 million, the gain reported to the I.R.S. was $3.02 million — a difference of $1.46 million, according to Frank Stamm, an I.R.S agent who testified as a government witness. The result was that Mr. Jaeggi avoided paying more than $596,000 in taxes in 2000, according Mr. Stamm’s testimony.

Mr. Goldner, the Symbol general counsel, pleaded guilty to conspiring to obstruct the I.R.S. from collecting income tax in June 2004 and forfeited $2 million; he also settled the civil charges with the S.E.C. Mr. Jaeggi pleaded not guilty to the fraud charges, and his lawyer, Steven F. Molo, denied that his client had acted improperly. “He didn’t look back. He didn’t do anything wrong,” Mr. Molo said. “The government failed to prove any illegality because there was none.”

The jury could not reach a verdict in the initial trial earlier this year, and Mr. Jaeggi, along with several other Symbol executives, is awaiting a second court trial next spring. Symbol, which Motorola agreed to acquire last month, paid a $37 million penalty in 2004 to resolve a number of civil accounting fraud charges.

More recently, Mercury Interactive, a software testing company based in Mountain View, Calif., acknowledged that backdated exercises were among a variety of stock option abuses identified in an internal investigation, which led to the removal of several of the company’s top officers.

Mercury investigators found at least three occasions when it appeared that Amnon Landan, the company’s former chief executive, and several other former top managers reported “a date that differed from the date at which the exercise actually happened,” according to an update in the company’s annual report. That difference “reduced the executives’ taxable income significantly and exposed the company to possible penalties for failure to pay withholding taxes.”

A Mercury spokesman declined to comment, as did Jonathan M. Cohen, a lawyer for Mr. Landan. In September, Mercury proposed paying $35 million to resolve the S.E.C.’s charges related to its stock options practices. And in regulatory filings this month, the company said that it was discussing settlement terms with the I.R.S. and cooperating with the Justice Department. Mercury agreed to sell itself this summer to Hewlett-Packard in a $4.5 billion deal with that has faced several delays.

Some lawyers who have been hired by companies as outside investigators said they did not currently expect backdated exercises to become a widespread issue.

Reviewing exercise dates for past option grants, however, is not currently a standard part of the internal investigations that at least 153 companies have acknowledged so far. And new accounting guidelines released in July do not direct auditors to give greater scrutiny to exercise dates. “I know the investigators are aware of this gambit,” said William D. Sherman, a partner at Morrison & Foerster in Palo Alto, Calif., which is involved in several investigations. “But by and large,” he added, “we not finding much of it.”

But Mr. Siegel of the Center for Financial Research and Analysis said that it would not surprise him if investigations into the backdating of exercise dates became a bigger deal. “The whole thing about backdating was that you were in the world of the Internet bubble,” he said. “You had inadequate internal controls, a high incentive to make the options package lucrative, war for talent and low regulatory presence. It wouldn’t surprise me if both the grants and exercise dates got misreported.”

[101A]

Illegal activity often has short-term benefits. It seldom is a good long-term strategy, however.

[johnsmith]

Illegal activity often has short-term benefits. It seldom is a good long-term strategy, however.


See Enron.

[boutons_]

October 29, 2006

Businesses Seek Protection on Legal Front

By STEPHEN LABATON

WASHINGTON, Oct. 28 — Frustrated with laws and regulations that have made companies and accounting firms more open to lawsuits from investors and the government, corporate America — with the encouragement of the Bush administration — is preparing to fight back.

Now that corruption cases like Enron and WorldCom are falling out of the news, two influential industry groups with close ties to administration officials are hoping to swing the regulatory pendulum in the opposite direction. The groups are drafting proposals to provide broad new protections to corporations and accounting firms from criminal cases brought by federal and state prosecutors as well as a stronger shield against civil lawsuits from investors.

Although the details are still being worked out, the groups’ proposals aim to limit the liability of accounting firms for the work they do on behalf of clients, to force prosecutors to target individual wrongdoers rather than entire companies, and to scale back shareholder lawsuits.

( the Repugs are naturals to understan "we do the work we are responsible for, but we aren't liable or culpable for anything we do" :lol )

The groups hope to reduce what they see as some burdens imposed by the Sarbanes-Oxley Act, landmark post-Enron legislation adopted in 2002. The law, which placed significant new auditing and governance requirements on companies, gave broad discretion for interpretation to the Securities and Exchange Commission. The groups are also interested in rolling back rules and policies that have been on the books for decades.

To alleviate concerns that the new Congress may not adopt the proposals — regardless of which party holds power in the legislative branch next year — many are being tailored so that they could be adopted through rulemaking by the S.E.C. and enforcement policy changes at the Justice Department.

( ah, the corrupt business want an ACTIVIST SEC to gut Sarbanes-Oxley Act as the law of the land )

The proposals will begin to be laid out in public shortly after Election Day, members of the groups said in recent interviews. One of the committees was formed by the United States Chamber of Commerce and until recently was headed by Robert K. Steel.

Mr. Steel was sworn in last Friday as the new Treasury undersecretary for domestic finance, and he is the senior official in the department who will be formulating the Treasury’s views on the issues being studied by the two groups.

The second committee was formed by the Harvard Law professor Hal S. Scott, along with R. Glenn Hubbard, a former chairman of the Council of Economic Advisers for President Bush, and John L. Thornton, a former president of Goldman Sachs, where he worked with Treasury Secretary Henry M. Paulson Jr.

That group has colloquially become known around Washington as the Paulson Committee because the relatively new Treasury secretary issued an encouraging statement when it was formed last month. But administration officials said Friday that he was not playing a role in the group’s deliberations.

Its members include Donald L. Evans, a former commerce secretary who remains a close friend of President Bush; Samuel A. DiPiazza Jr., chief executive of PricewaterhouseCoopers, the accounting giant; Robert R. Glauber, former chairman and chief executive of the National Association of Securities Dealers, the private group that oversees the securities industry; and the chief executives of DuPont, Office Depot and the CIT Group.

Jennifer Zuccarelli, a spokeswoman at the Treasury Department, said on Friday that no decision had been made about which recommendations would be supported by the administration.

“While the department always wants to hear new ideas from academic and industry thought leaders, especially to encourage the strength of the U.S. capital markets, Treasury is not a member of these committees and is not collaborating on any findings,” Ms. Zuccarelli said.

But another official and committee members noted that Mr. Paulson had recently pressed the groups in private discussions to complete their work so it could be rolled out quickly after the November elections.

Moreover, committee members say that they expect many of their recommendations will be used as part of an overall administration effort to limit what they see as overzealous state prosecutions by such figures as the New York State attorney general Elliot Spitzer and abusive class action lawsuits by investors. The groups will also attempt to lower what they see as the excessive costs associated with the Sarbanes-Oxley Act.

Their critics, however, see the effort as part of a plan to cater to the most well-heeled constituents of the administration and insulate politically connected companies from prosecution at the expense of investors.

One consideration in drafting the proposals has been the chain of events at Arthur Andersen, the accounting firm that was convicted in 2002 of obstruction of justice for shredding Enron-related documents; the conviction was overturned in 2005 by the Supreme Court. The proposals being drafted would aim to limit the liability of auditing firms and include a policy shift to make it harder for prosecutors to bring cases against individuals and companies.

Even though Arthur Andersen played a prominent role in various corporate scandals, some business and legal experts have criticized the decision by the Bush administration to bring a criminal case that had the effect of shutting the firm down.

The proposed policies would emphasize the prosecution of culpable individuals rather than corporations and auditing firms. That shift could prove difficult for prosecutors because it is often harder to find sufficient evidence to show that specific people at a company were the ones who knowingly violated a law.

( ah, you mean like Kenny Boy's defense? "The guys I hired were rotten crooks, but I was not personally responsible for knowing nor trying to find out that they were rotten crooks" )

One proposal would recommend that the Justice Department sharply curtail its policy of forcing companies under investigation to withhold paying the legal fees of executives suspected of violating the law. Another one would require some investor lawsuits to be handled by arbitration panels, which are traditionally friendlier to defendants.

In an interview last week with Bloomberg News, Mr. Paulson repeated his criticism of the Sarbanes-Oxley law. While it had done some good, he said, it had contributed to “an atmosphere that has made it more burdensome for companies to operate.”

( they want to be more freedom be Enrons and rotten Wall Street firms with less checks and transparency, right, got it )
Mr. Paulson also repeated a line from his first speech, given at Columbia Business School last August, where he said, “Often the pendulum swings too far and we need to go through a period of readjustment.”

Some experts see Mr. Paulson’s complaint as a step backward.

“This is an escalation of the culture war against regulation,” said James D. Cox, a securities and corporate law professor at Duke Law School. He said many of the proposals, if adopted, “would be a dark day for investors.”

Professor Cox, who has studied 600 class action lawsuits over the last decade, said it was difficult to find “abusive or malicious” cases, particularly in light of new laws and court decisions that had made it more difficult to file such suits.

The number of securities class action lawsuits has dropped substantially in each of the last two years, he noted, arguing that the impact of the proposals from the business groups would be that “very few people would be prosecuted.”

People involved in the committees said that the timing of the proposals was being dictated by the political calendar: closely following Election Day and as far away as possible from the 2008 elections.

Mr. Hubbard, who is now dean of Columbia Business School, said the committee he helps lead would focus on the lack of proper economic foundation for a number of regulations. Most changes will be proposed through regulation, he said, because “the current political environment is simply not ripe for legislation.”

( exactly, "activist" and hidden regulatory changes rather than public legislative action )
But the politics of changing the rules do not break cleanly along party lines. While some prominent Democrats would surely attack the pro-business efforts, there are others who in the past have been sympathetic.

People involved in the committees’ work said that their objective was to improve the attractiveness of American capital-raising markets by scaling back rules whose costs outweigh their benefits.

“We think the legal liability issues are the most serious ones,” said Professor Scott, the director of the committee singled out by Mr. Paulson. “Companies don’t want to use our markets because of what they see as the substantial, and in their view excessive, liability.”

( so this is a ruse to attract more capital to further engorge the already wildly profitable capital markets industry )

Committee officials disputed the notion that they were simply catering to powerful business interests seeking to benefit from loosening regulations that could wind up hurting investors.

“It’s unfortunate to the extent that this has been politicized,” said Robert E. Litan, a former Justice Department official and senior fellow at the Brookings Institution who is overseeing the committee’s legal liability subgroup. “The objectives are clearly not to gut such reforms as Sarbanes-Oxley. I’m for cost-effective regulation.”

( mtoherhood. Of course, who can possibly against cost-effective anything? )

The main Sarbanes-Oxley provision that both committees are focusing on is a part that is commonly called Section 404, which requires audits of companies’ internal financial controls. Some business experts praise this section as having made companies more transparent and better managed, but many smaller companies call the section too costly and unnecessary.

Members of the two committees said that they had reached a consensus that Section 404, along with greater threat of investor lawsuits and government prosecutions, had discouraged foreign companies from issuing new stock on exchanges in the United States in recent months.

( the publicly traded companies really don't want their financial shenanigans to be public )

The committee members said that an increase in stock offerings abroad was evidence that the American liability system and tougher auditing standards were taking a toll on the competitiveness of American markets. But others see different reasons for the trend and few links to liability and accounting rules.

Bill Daley, a former commerce secretary in the Clinton administration who is the co-chairman of the Chamber of Commerce group, expects proposed changes to liability standards for accounting firms and corporations to draw the most flak. But he said that the changes affecting accounting firms are of paramount importance to prevent the further decline in competition. Only four major firms were left after Andersen’s collapse.

Another contentious issue concerns a proposal to eliminate the use of a broadly written and long-established anti-fraud rule, known as Rule 10b-5, that allows shareholders to sue companies for fraud. The change could be accomplished by a vote of the S.E.C.

( ie, the stockholders are shut up, and depend on the clubby and business friendly SEC to police companies. self-regulation/policing always fails, big business knows that )

John C. Coffee, a professor of securities law at Columbia Law School and an adviser to the Paulson Committee, said that he had recommended that the S.E.C. adopt the exception to Rule 10b-5 so that only the commission could bring such lawsuits against corporations.

But other securities law experts warned that such a move would extinguish a fundamental check on corporate malfeasance.

“It would be a shocking turning back to say only the commission can bring fraud cases,” said Harvey J. Goldschmid, a former S.E.C. commissioner and law professor at Columbia University. “Private enforcement is a necessary supplement to the work that the S.E.C. does. It is also a safety valve against the potential capture of the agency by industry.”

[RandomGuy]

CEO's only? How about actors, anchormen(women), athletes and lottery winners? Just trying to clarify your positions.

How would you structure your cap - what would its basis be?

Good questions.

I think the cap should be a percentage of overall oranizational revenue with a further absolute cap of about 50 million per year from any one organization, adjusted for inflation. Alternately, one could use a multiple of the average compensation of the organization for executives. Similar to the "cut" that ancient sailors and captains would recieve at the end of long profitable voyages.

Athletes with endorsement contracts outside of their team can make as much as market allows.

Lottery winners are not employees, and not subject to a cap.

[RandomGuy]

I totally agree with you on this, I'm just saying that if it's not illegal, they'll do it. Ethics don't play a big part for many exec's.

Yup. Good games require good rules. Basketball wouldn't quite be as fun to watch from my perpective without rules.

[DarkReign]

I totally agree with you on this, I'm just saying that if it's not illegal, they'll do it. Ethics don't play a big part for many exec's.

RG, he never said it was ethical or right, he said it isnt cheating.

Hes right.

[Gordon Gekko]

The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind.

[RandomGuy]

The industry I work in isn't a fair comparison to say, the home finance industry.

We can pretty much plug in anyone as long as they can use a computer, they'll pick up everything as they go, the training is minimal. The cost of not retaining people is offset by the fact that we pay below industry standards.

I would argue that the costs of not retaining people is greater over time than showing a committment to people. I don't see the two as equal. All your company is essentially doing is OJT for your competitors, who will get the best and the brightest, make them eventually into managers, and those managers will increase the collective "intelligence" of those competitors.


My solution to this has worked well for me, just do my job better then everyone else, then demand the money by threatening to leave. Once that money runs out, I'll use company time to find a higher paying job with another company..............suckers.

Bingo. Your solution is a perfectly rational one. Corporate managers are bitching about people not having any loyalty to the company, but will turn around in a heartbeat and fire people at the drop of a hat. I am all about labor flexibility, but you can't have your cake and eat it too from this perpective. Loyalty flows both ways.

[RandomGuy]

I don't see a problem with it at all. The man earned it. If you want the same pay then go to college, get a degree, and move your way up.
It is the American way!!!

The man "earned" it by getting cosy with the board in a way that the 2500 fired employees couldn't.

It wasn't any special talent or insight, other than ass-kissing. :donkey :makeout

[RandomGuy]

Illegal activity often has short-term benefits. It seldom is a good long-term strategy, however.

Neither is unethical behavior a good long-term strategy, but it still happens, as in this case.

I am not saying that you have to be "locked" into ossified labor structures, ala Germany. That is stupid.

I wish that the modern US job culture had a bit more commitment to people. I think that lack of commitment is a sypmtom of the wider "short-term" malaise that has US corporations pursuing "this quarter" profits at the expense of real long term growth.

That can't really be fixed or mandated at the government level, but getting rid of grossly overcompensated positions would treat at least a symptom of that malaise.

[RandomGuy]

A business doesn't exist to provide jobs or FOR its employees; from the mail room to the CEO.

A business exists solely for the benefit and behest of the owners of that business, otherwise there would be no business, at all.

It is theirs, they own it. They decide how to allocate the resources to further their agenda.

That's just my point. This isn't the owners, this is the board that is supposed to represent those owners. Weak corporate governance is rife in this country. Better than others, but still weak.

These guys are getting tons of shares that are diluting my earnings as a shareholder, and that pisses me off.

Is it really good for the long term success of this company to send this kind of message to its employees? To siphon off that much of the resources that could have been paid out to those shareholders?

[RandomGuy]

One additional point:

What is good for individual businesses IS NOT what is good for us as people or a society.

It may be good for any business to cheaply pollute, but we all pay a price for that. It may be good for businesses to collectively say that you need to work 60 hours a week "so that we are competitive", but is that good for society?

[JoeChalupa]

I'll admit I wouldnt' have a problem taking all that jack if I was a CEO.

[101A]

That's just my point. This isn't the owners, this is the board that is supposed to represent those owners. Weak corporate governance is rife in this country. Better than others, but still weak.

These guys are getting tons of shares that are diluting my earnings as a shareholder, and that pisses me off.

Is it really good for the long term success of this company to send this kind of message to its employees? To siphon off that much of the resources that could have been paid out to those shareholders?


The shareholders need to pay more attention to who is on the board; read the minutes of the meetings, and keep up. The board needs to be held accountable for its actions. Now, if the profits and dividends are up under this cat, I'm thinking the shareholders are happy; I haven't looked.

[101A]

One additional point:

What is good for individual businesses IS NOT what is good for us as people or a society.

It may be good for any business to cheaply pollute, but we all pay a price for that. It may be good for businesses to collectively say that you need to work 60 hours a week "so that we are competitive", but is that good for society?

But we are left with that, aren't we? You can't reach any of the philosopher's social ideals, ultimately. Capitilism with limited taxation and regulation has "succeeded" more than any other socio-economic model because of its ability to produce so much wealth - both individually and collectively. Is it divided "fairly" or "to do the most good for society". No, but if it were (even if that were your goal and WAS possible), there wouldn't be NEARLY as much wealth to divide. The incentive to create it in the first place would be removed.

[Extra Stout]

One additional point:

What is good for individual businesses IS NOT what is good for us as people or a society.

It may be good for any business to cheaply pollute, but we all pay a price for that. It may be good for businesses to collectively say that you need to work 60 hours a week "so that we are competitive", but is that good for society?
You Communist. The purpose of your pathetic existence is to toil for the comfort of the wealthy elites. If you deserved a good life God would have had you born into wealth like he did them. Know your place and get back to work.

[Andrew Jorgenson]

The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind.

God save us if we vote to take his paltry few dollars and run. God save this country if that is truly the wave of the future. We will then have become a nation that makes nothing but hamburgers, creates nothing but lawyers, and sells nothing but tax shelters. And if we are at that point in this country, where we kill something because at the moment it's worth more dead than alive--well, take a look around. Look at your neighbor. You won't kill him, will you? No. It's called murder and it's illegal.

Well this too is murder -- on a mass scale. Only on Wall Street, they call it "maximizing share-holder value" and they call it "legal". They substitute dollar bills where a conscience should be. Dammit! A business is worth more than the price of its stock. It's the place where we earn our living, where we meet our friends, dream our dreams. It is, in every sense, the very fabric that binds our society together.

So let us now, at this meeting, say to every Garfield in the land, "Here, we build tings. We don't destroy them. here we care about more than the price of our stock. Here, we care about people.

[1369]

God save us if we vote to take his paltry few dollars and run. God save this country if that is truly the wave of the future. We will then have become a nation that makes nothing but hamburgers, creates nothing but lawyers, and sells nothing but tax shelters. And if we are at that point in this country, where we kill something because at the moment it's worth more dead than alive--well, take a look around. Look at your neighbor. You won't kill him, will you? No. It's called murder and it's illegal.

Well this too is murder -- on a mass scale. Only on Wall Street, they call it "maximizing share-holder value" and they call it "legal". They substitute dollar bills where a conscience should be. Dammit! A business is worth more than the price of its stock. It's the place where we earn our living, where we meet our friends, dream our dreams. It is, in every sense, the very fabric that binds our society together.

So let us now, at this meeting, say to every Garfield in the land, "Here, we build tings. We don't destroy them. here we care about more than the price of our stock. Here, we care about people.

Whoa, nice "Other People's Money" reset.

I always thought Penelope Ann Miller was hot.

[RandomGuy]

The shareholders need to pay more attention to who is on the board; read the minutes of the meetings, and keep up. The board needs to be held accountable for its actions. Now, if the profits and dividends are up under this cat, I'm thinking the shareholders are happy; I haven't looked.

They don't do those things, by and large. Some do, but most people simply don't have the time.

Those who are paid to do so, don't really invest with any real conscience, so don't really care about ethics.

:bling has no conscience. We do and should act accordingly.

[clambake]

"I could break you, in two pieces over my Knee. I could dump the stock just to burn your ass, but I happen to want the company, and I need your block of shares".

[RandomGuy]

But we are left with that, aren't we? You can't reach any of the philosopher's social ideals, ultimately. Capitilism with limited taxation and regulation has "succeeded" more than any other socio-economic model because of its ability to produce so much wealth - both individually and collectively. Is it divided "fairly" or "to do the most good for society". No, but if it were (even if that were your goal and WAS possible), there wouldn't be NEARLY as much wealth to divide. The incentive to create it in the first place would be removed.

So CEO's would be any less driven for $50M, rather than $150M or upwards?

I actually asked this question of a CFO that I have come to admire, and his answer "I would have a real problem [with accepting a pay increase at the same time that 2500 people were laid off]".

He and I agree on that as well as the need to adequately pay valuable people.

But how much is too much?

[RandomGuy]

You Communist. The purpose of your pathetic existence is to toil for the comfort of the wealthy elites. If you deserved a good life God would have had you born into wealth like he did them. Know your place and get back to work.


Of course, what was I thinking...?


Well, off to work for the company that "cares"...
http://datacore.sciflicks.com/metropolis/images/metropolis_large_07.jpg


My job is so rewarding, I don't need health insurance....
http://datacore.sciflicks.com/metropolis/images/metropolis_large_02.jpg


I am sure the company "values" my work...
http://datacore.sciflicks.com/metropolis/images/metropolis_large_03.jpg

[RandomGuy]

By the by, the middle picture is a comment on the normal 10 hour day that those silly unions demanded an end to... :angel

[101A]

So CEO's would be any less driven for $50M, rather than $150M or upwards?

I actually asked this question of a CFO that I have come to admire, and his answer "I would have a real problem [with accepting a pay increase at the same time that 2500 people were laid off]".

He and I agree on that as well as the need to adequately pay valuable people.

But how much is too much?

This just in:

It's not the CEO driving the spending; it's the company, the board; it's their greed, not the greed of the CEO; and YES; people ARE driven to make more money than they could ever spend. See what those guys got for selling Utube? WAAAAAAY more than that CEO's got. They could give the money to those 2500 people, too.

It's probably because he has the stones to can the 2500 people that the company didn't need in the first place that gets him the bling in the first place.


Again I ask: How would you limit incomes - and who would it be limited to?

[Extra Stout]

It's probably because he has the stones to can the 2500 people that the company didn't need in the first place that gets him the bling in the first place.
No, no, no, that's not the American business model.

The American business model is to can 2500 people whether or not the company needs them, collect a huge bonus for the short-term benefit to the bottom line, then negotiate a golden parachute before the damage you've done to the company's sustainable operations becomes apparent and they have to hire all 2500 people back at a premium.

[johnsmith]

No, no, no, that's not the American business model.

The American business model is to can 2500 people whether or not the company needs them, collect a huge bonus for the short-term benefit to the bottom line, then negotiate a golden parachute before the damage you've done to the company's sustainable operations becomes apparent and they have to hire all 2500 people back at a premium.


Ummm, I've never worked for that company.

[101A]

No, no, no, that's not the American business model.

The American business model is to can 2500 people whether or not the company needs them, collect a huge bonus for the short-term benefit to the bottom line, then negotiate a golden parachute before the damage you've done to the company's sustainable operations becomes apparent and they have to hire all 2500 people back at a premium.


:lol
You took the sustained release sarcasm pill today, I see.

[101A]

By the by, the middle picture is a comment on the normal 10 hour day that those silly unions demanded an end to... :angel


Bet the rich CEO this thread refers to works a hell of a lot longer than 10 hour days five days a week. He's probably pretty much never not at work - or a moment from being there.

[MannyIsGod]

I agree it needs rules, but not government applied enforced rules. The people with the most at stake here need to step up and take stock in their investment (damn, its like I'm Irish with these puns! woo). They need to follow what is being done with their companies and voice their opinions on it.

[101A]

I agree it needs rules, but not government applied enforced rules. The people with the most at stake here need to step up and take stock in their investment (damn, its like I'm Irish with these puns! woo). They need to follow what is being done with their companies and voice their opinions on it.


"They" did. They elected a board, who gave the man a big bonus.

[Extra Stout]

Ummm, I've never worked for that company.
Never used a consultant then, I see.

Shooting consultants should be legal. Not only should it be legal, it should be tax-deductible.

[101A]

Never used a consultant then, I see.

Shooting consultants should be legal. Not only should it be legal, it should be tax-deductible.

I am amazed at how many of these there are bumping around finding "work". They have come to see us; don't listent to a damn thing you say, there research is limited to employee cost - and invariably there recomendations are always "downsize".

Useless.

[MannyIsGod]

"They" did. They elected a board, who gave the man a big bonus.That was my point?

[RandomGuy]

Again, something I have been harping on for a while.

Dun dun dun.

[101A]

Again, something I have been harping on for a while.

Dun dun dun.

You mean rules like:

"Increase minority home ownership"?

Worked like a charm.

Capitilists who thrive without rules SHOULD NOT have a safety net from the govt. that allowed them to do so.

[MannyIsGod]

This past week has put the nail in my economic libertarian side's coffin. I just don't trust these fuckers any longer.

[RandomGuy]

This past week has put the nail in my economic libertarian side's coffin. I just don't trust these fuckers any longer.

Lazy-fare capitalism just doesn't work.

It is like a pick up basketball game with no rules and peole fully willing and able to cheat at will.