Richest 2% hold half of world's assets

[JohnnyHumongous]

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LMAO. You obviously arent an investor. Mutual fund share's arent "unreturned", they are voted by the mutual fund managers. It is clearly in their self-interest to vote for solid corporate governance. the same is true of the other large block of share ownership, pension funds.

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Then why has CEO pay continued to sky rocket?
Why haven't these managers voted against the nearly $1 billion dollar pay packages?
Why not esp when CEO pay has time and time again been show to be unrealated to stock performance?
Why do CEOs leave their jobs so often?

You're claiming this problematic rule isn't actually problematic, despite the problematic results of it.

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I have a theory that high CEO and top executive play has an unobserved function as an incentivizing mechanism. The corporation is typically structured as a pyramid; as you go up the ladder there are fewer and fewer employees at each level. To motivate the employees at one level to move up to the subsequent level you have to pay them a fair bit more to motivate them both to outshine their peers at their current level, and to take on more responsibilities at the next level.

At an extreme, you may have thousands of people at the "analyst" (or entry-level) position... to motivate these people to take a long view and strive to be VPs, directors or even higher like CEO you have to have high pay packages at these levels because only a small percentage of analysts will reach those levels. If 5% of analysts will make director level, and directors make 1 million per year, then even though the chance is small that any given analyst will move up all the way to director, the payoff is so large that analysts will be conscious of doing what it takes to eventually reach that level, i.e. working hard, developing their skillset and making key contacts within the firm because if they end up being that 1 of 20 who can make it the payoff is large.

The analyst gets paid say $50k a year in salary, but he also makes an implicit salary of 5% of 1 million per year 20 years down the road or whatever. Assuming directors will make that money (and perhaps 2, 3 million or more as they advance) for 10 or 15 years after reaching that level, using present value calculations shows that this expectation, even adjusted for the 5%, can be a lot of money. So by paying the CEO more, the directors more etc., you end up "paying" all the people below more as well. You also probably get better results out of these people due to increased incentive to be promoted. Yes some companies have likely "overpaid" those top executives relative to what they currently provide in value. But they perhaps make a lot of this back at the lower levels.

[MidGe]

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Enron didn't collapse because they paid their executives too much. lol. Exec. salaries and market cap are pretty much on different planes of existence.


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Agree with that entirely. Enron went down because of the lies and abuse of the so-called entrepreneurs who ran the company. They were truly fleecing the market and others, most of all for their own benefits, in terms of options, bonus, etc. At the end of the day ENRON was just a gigantic pyramid scheme, selling Grey fiber. That's what AC'ers are suggesting/promoting as an alternative to a regulated market! Who lies best, wins all! [img]/images/graemlins/smile.gif[/img]

[JohnnyHumongous]

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Enron didn't collapse because they paid their executives too much. lol. Exec. salaries and market cap are pretty much on different planes of existence.


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Agree with that entirely. Enron went down because of the lies and abuse of the so-called entrepreneurs who ran the company. They were truly fleecing the market and others, most of all for their own benefits, in terms of options, bonus, etc. At the end of the day ENRON was just a gigantic pyramid scheme, selling Grey fiber. That's what AC'ers are suggesting/promoting as an alternative to a regulated market! Who lies best, wins all! [img]/images/graemlins/smile.gif[/img]

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Maybe you should consider that the Enron management were actually employees, "laborers", and the shareholders were the capitalists. Just like a business-owner runs the risk of a secretary stealing staplers, the shareholders of Enron ran the risk that Enron management would break the law and endanger the company. This was a risk they probably underestimated before the Enron scandal, but now shareholders are more alert to this possibility and they have moved to take appropriate precautions.

I don't think you can find many capitalists or ACers who endorse what happened at Enron, or wouldn't work to eliminate the possibility that such malfeasance could occur. The possibility for such a scandal isn't somehow a feature of capitalism. It just means that shareholders previously underestimated the probability one would occur. Let's say you live in a county that has never had a tornado as far back as records have been kept (say 150 years). Then one summer there are 2 tornadoes in your county. Whereas before you may have laughed at the prospect of buying tornado insurance, now you may consider it as the probability may be 1/75 or more that a tornado could hit any given year. Or you may refit your house to be more stable during a tornado. The point is you have revised the probability of a negative result, found it to be higher than you previously estimated, and you act accordingly.

[MidGe]

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The possibility for such a scandal isn't somehow a feature of capitalism.

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Agreed again, but it seems that government intervention in a capitalist system, at least does some policing and therefore reduces the situation that would be the result of a free for all.

[tomdemaine]

1. The workers always get screwed and the capitalists are evil bastards!

2. Prove it.

1. Here's an example where one group of people arbitrarily defined as workers got screwed by another group arbitrarily defined as capitalists.

[JohnnyHumongous]

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The possibility for such a scandal isn't somehow a feature of capitalism.

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Agreed again, but it seems that government intervention in a capitalist system, at least does some policing and therefore reduces the situation that would be the result of a free for all.

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So the government intervened in this situation to help the capitalists against their exploitation by the laborers they hired to work in their business. This government intervention may have been useful, but the same function of monitoring and enforcement could probably have been created by the capitalists themselves (perhaps in the form of a regulatory commission), and it probably could be done with less inefficiency and more effectiveness than if the same function is provided by the government.

[MidGe]

yeah! Go back to the wild west time and industrialist barons in US history or robber barons in European history. You seem very regressive in your wishes, to me, and I fail to see any overriding benefits from being so.

[pvn]

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And people say capitalists make money with no risk. I guess those imperialist pigs should have done more research, eh?

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Yeah. like the mums and dads, workers of ENRON, whose retirement savings disappeared because of the beneficial CEO and rest of the management team who were, for a while, showing the true entrepreneurial lies/spirit! It only caught up with them. Anyway their families still have a few millions accumulated by the same CEO. during their forced impoverishments of the small guys. [img]/images/graemlins/smile.gif[/img]

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Shudda listened to warren buffet.

Rule number 1: diversify.

Rule number 2: you're probably better off with an index fund.

[pvn]

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Enron didn't collapse because they paid their executives too much. lol. Exec. salaries and market cap are pretty much on different planes of existence.


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Agree with that entirely. Enron went down because of the lies and abuse of the so-called entrepreneurs who ran the company. They were truly fleecing the market and others, most of all for their own benefits, in terms of options, bonus, etc. At the end of the day ENRON was just a gigantic pyramid scheme, selling Grey fiber. That's what AC'ers are suggesting/promoting as an alternative to a regulated market! Who lies best, wins all! [img]/images/graemlins/smile.gif[/img]

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Right. You realize that Enron is no longer in business, right? Whereas the various pyramid schemes foisted on us by government are still chugging right along.

[pvn]

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The possibility for such a scandal isn't somehow a feature of capitalism.

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Agreed again, but it seems that government intervention in a capitalist system, at least does some policing and therefore reduces the situation that would be the result of a free for all.

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You realize that Enron only existed in the first place because of government regulation? Their entire business model (even the *overt* one they actually advertised to outsiders) revolved around it.

In the real world, investor opinion keeps companies in line. Of course there are short term abberations. But government is no panacea - we still have crime despite goverment efforts.

What, exactly, did government regulation *do*, anyway? The shareholders still lost all their value *despite* regulation. Consumers were screwed despite (and more accurately, VIA) regulation. The company ground to a halt not because of government but because of the market. The economic realities of profits and loss stopped the company's activities via bankruptcy; if we actually depended on government, they'd still be in business for years before any action was finalized.