February 16, 2011

Intelligent Design Is Intelligent Economics

With the blind-gamblerization of the Shareholder, Intelligently Frameworked Corporate Compensation is squarely the Need of the Time.
(The China Daily Feb 11, 2011)
I learn that pilots of the airplanes that fly us make about $60,000 a year. If this is True, This Is SCARY. For what can you get for $ 60,000. How can this paltry payment attract good people into the profession, and keep the ones already in from not being frustrated with what they can buy for work of such responsibility. Honest to God, I am now scared of flying.

And This is Beyond Ridiculous, when the same airline companies are able to pay it’s Executives and CEOs tens of millions in ‘compensation’. It’s the pilots that we as customers and society want to be well paid and cared for (for motivatedly flying us safely), not the pretty-face CEO, who might not even know how his company executes its businesses. The pretty, vacuous nature of Executive-dom was clearly apparent in 2008-09. The Bank Execs had zero clue what hit them, their apologists in the media and pseudo-intelligentsia bamboozled about that the crisis was a ‘black swan’ event (sic); and the Executives and CEOs of most companies (banking & non-banking) looked at the Government to tell them what to do (nee, help them out). They had no idea how their respective companies are impacted and how they will steer their companies to keep them in black. All they knew is that they need to guard their bonuses (for what!?) somehow, lay people off if that’s what it takes...and/or wrench concessions and tax cuts from Government to maintain them. For this kind of "value add", who wants to pay millions of dollars a year to these guys, with many more millions in perks, private jets, spicy escorts, resort retreats, et al.?

Nah, market “forces” do not evolve a sensible compensation distribution curve in Corporations. Nor do Shareholders. Especially today’s shareholders, that are mere gamblers in company stock. We have no clue what the company they bought does, and how to discern how well it is being managed. It’s just a ‘greater fool Hope’ running full throttle. Even our bets on stocks are placed by managers of funds into which we “invest”. And the crisis of 2008 should have made it clear how “insightful” (sic) these guys are!

Executive Compensations are ‘decided’ by the Company Board-members, that are appointed by…..the Executives themselves! Makes zero sense this system.

There needs to be strong regulations around how much variance any individual’s compensation can have from the median for that company. Also, the ones at the top should have most of the compensation squarely derived from the profits made by the company. It is not a company’s responsibility to equalize Executive compensation from one year to the next.

A regulatory correction of corporate compensation curve is the need of the hour to steer clear of the vicious Deflation cycle that we all fear for. Deflation itself is NOT the cause of layoffs and Unemployment; it is the thoughtless “solution” of it with layoffs that is. Even China has recognized that building and sustaining demand needs them to even out the distribution of the spoils of corporate success. That is also the best bulwark against demand plop, unemployment….and even disinflation (assuming disinflation is even a problem by itself).

Fox News recently had this poll: (left side graphic added by this writer)

With the irreversible gamblerization of the shareholder, Regulations/Restrictions around Executive Compensation packets are Overdue.

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