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Exec Comp Restrictions Get Tougher

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Re: Exec Comp Restrictions Get Tougher [#permalink] New post 19 Feb 2009, 13:14
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Regular folk aren't angry because they're jealous. They're angry because many folks in the upper 15% are living in a self-referential bubble. They are angry because they feel they are suffering the brunt of it and most importantly, they are angry because there is a perception that the upper 15% have very little compassion or even a willingness to really understand what the "rest of the country" is really going through emotionally, mentally, physically.


Hear hear.
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Re: Exec Comp Restrictions Get Tougher [#permalink] New post 19 Feb 2009, 13:16
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Alex, I will preface this with that I really respect many of the posts you write, and while I absolutely believe kids are completely innocent in this whole thing and have spent many hours volunteering with under priveleged kids - I completely disagree with you what you wrote. We can agree to disagree, but I wanted to express my view just the same.

I beleive it's called wealth envy and what's sad is that there was a time in this country where people didn't 'expect' things. They worked hard and knew that life wasn't fair, but figured if they tried their hardest things might work out for the best. It was called the American Dream - work hard and you can expect to earn the fruits of your labor. People were humble and proud of what they did, now the entitlement generation believes everything should be handed to them. And if things don't go well, they sue someone or blame rich people.

Now, it's not, work hard and enjoy what you produce. Now, it's this mythical dehumanized top 1% of people that is to blame for everyone's problems. It's their fault, not yours. It wasn't your fault that you quit high school and got your girlfriend pregnant at 17. It's not your fault that you really, really wanted a new kitchen with stainless steel appliances, when you haven't even saved for your kid's college education, but it's those fat cats on Wall Street who caused this whole mess. They are the reason you're losing your house. Those rich guys up in New York and out on the West Coast in San Francisco who only got those high paying jobs because of their daddy's connections.

No, Alex I really feel for the innocent kids that are caught up in all of this, but I have no sympathy for people that tried to live a lifestyle they couldn't afford. I'm sorry, but I'm just not going to take stupidity as an excuse. Not when we live in a country where a person can do anything they want if they want it bad enough. In a 3rd world country, it is much, much, much harder to rise out of poverty, but in America I'm not going to forgive stupidity, laziness, greed, or envy. They don't get a pass anymore. They have in the past few decades and I'm not going to do it. And I'm not going to be a hippocrit about it, as I take responsibility for EVERY decision I make in my life. It's not someone elses fault if I lose my job and have been so content that I never made my self better over the course of 5 years of employment. Sometimes you get a tough break in life, it happens to EVERYONE, but it is what you make of these tough breaks that defines your character. If you get angry at people and things you can't control, then what have you accomplished? How is their suffering going to make your situation any better? Just get over it. You'll be a much happier person when you only worry about what you can control - and that is YOU!!

So, just forget about this mythical 'top 1%', and just worry about yourself. Worry about how you are going to make life better for you and your family. Work hard and save your money in case something terrible happens. Always prepare for the worst financially, but hope for the best. Take responsibility for your own choices. If that were to hapen, it might mark America's next great renaissance, but we'll see.

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Remember: taxpayers are footing the bill. It's coming out of the pockets of the regular folk who are about to lose their jobs and health insurance and homes.

Actually, if politicians have their way, it's the top 1% and all the MBA-types that will be footing the bill. Only the top 50% of people in this country pay any taxes anyway. It's going to be those same kids that suffer.
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Re: Exec Comp Restrictions Get Tougher [#permalink] New post 19 Feb 2009, 13:31
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Re: Exec Comp Restrictions Get Tougher [#permalink] New post 19 Feb 2009, 13:37
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AlexMBAApply wrote:

Now, I want some of you MBA-types to look these kids in the eye, and tell them that they have to leave the house because their daddy and mommy got a little happy and tried to redo the kitchen. I also want you to look the mother in the eye and tell them they have to leave.



Hey kids, your mommy and daddy were stupid and lived beyond their means. Pack your stuff, move into a small apartment, listen to Dave Ramsey, take some baby steps, and get your life back in order.
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Re: Exec Comp Restrictions Get Tougher [#permalink] New post 19 Feb 2009, 14:28
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The flip side of all of this is communism. Everyone is equal and everyone is working for the good of the collective. Clearly, this model doesn't work out so well either. It is human nature to want to better or place in society. We work hard so that our kids can have a better and easier life than we did.

There is no "right" answer in all of this. But, to think that the federal government has a responsibility to bail out every single person/family that over extended themselves is not the right answer. The very same people that are saying that failed industies (IB, Auto) should be forced to live the with consequences of there actions, are the same ones that don't want to live with the consequences of taking out mortgages that they could never repay.
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Re: Exec Comp Restrictions Get Tougher [#permalink] New post 19 Feb 2009, 15:32
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http://online.wsj.com/article/SB123491033872703471.html
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The stimulus bill, which was signed into law Tuesday by President Barack Obama, contains a provision that limits bonus payments to no more than one-third of annual total compensation at banks and other companies that have taken federal bailout money. For the biggest such institutions, the limit affects the five top officers, plus the 20 next most highly compensated employees -- effectively the 25 highest-paid people at an institution.

But the law doesn't define how those 25 are to be identified. It leaves the details to the Treasury Department, which is supposed to announce interpretive rules in the coming weeks.

One possible interpretation, according to lawyers, results in an oddly circular effect that could cap pay for everybody. If a bank identifies the 25 people it intends to pay the most this year, then restricts their pay, that group no longer would be this year's 25 highest paid. Then 25 new people would become the highest paid, and their bonuses will have to be capped, and so forth.

Another possibility is that a bank could cap the pay of the 25 who earned the most in 2008. Those people likely would no longer be the highest paid in 2009. But that means a different group would have that distinction, and this second group's pay would then be capped the following year, while the first group's pay would be uncapped.

The result could be a "weird game of leapfrog" in which groups of 25 executives trade places as the highest paid every year, said Christian Chandler, an executive-compensation attorney at Hogan & Hartson LLP in Washington.

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Some experts and industry insiders predicted unintended consequences nonetheless. Typically, big banks and Wall Street firms have paid their top earners a small salary, but offered the potential to earn a large bonus depending on performance. By being forced to cap bonuses, banks will have no choice but to ratchet up salaries, some predict.

"To be put in a situation where you're limiting performance-based compensation is the dumbest thing you can do," said the senior executive at the investment bank. "Everything that shareholder advocates have been seeking for years is thrown out the window."

This executive offered a hypothetical example of a head of commodities trading paid $10 million in 2008, only $250,000 of which represented salary. "If you want to keep this commodities trader, you have to increase his salary to $8 million," he said. But the trader collects that substantial sum even though "you have no idea about his total performance for the year" -- and the firm can't recoup his salary if his performance falls short, the executive said.

Alan Johnson, managing director of Johnson Associates Inc., a New York compensation consultancy that advises Wall Street firms, predicted that the legislation as written would result in a mass exodus of top earners. "Who would stay for a 90% pay cut?" Mr. Johnson asked.
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Re: Exec Comp Restrictions Get Tougher [#permalink] New post 19 Feb 2009, 16:45
I'm just curious, to those that support the exec comp caps, how much do you want to be paid if you ever become a top exec in an organization?
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Re: Exec Comp Restrictions Get Tougher [#permalink] New post 19 Feb 2009, 18:13
Jb32, if you were a woman, that post would make me want to make love to you.

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Re: Exec Comp Restrictions Get Tougher [#permalink] New post 19 Feb 2009, 18:40
jb32 wrote:
http://online.wsj.com/article/SB123491033872703471.html
Quote:
The result could be a "weird game of leapfrog" in which groups of 25 executives trade places as the highest paid every year, said Christian Chandler, an executive-compensation attorney at Hogan & Hartson LLP in Washington.


That reminds of that scene from the movie Casino, where Andy Stone try to convince Ace to take over the casino:

ACE: You know, I don't know if I could do this even if I wanted to. The Gaming Commission would never give me a license. I have at least two dozen gambling and bookmaking pinches on me.
STONE: You don't have to have a license to work in a casino. All you gotta do is apply for one. The state law says you can work in a casino while they're processing your application. They got a ten-year backlog.
ACE: But what happens when they do find out?
STONE: Why would they want to find out? We're puttin' a hundred million into this desert here. Why would they want to lock us out? And besides, they'll never find out. All you gotta do is keep changing your job title. Like, uh, from Casino Executive to Food and Beverage Chairman. And what happens it, they take your application, they put it at the bottom of the pile. I know guys workin' there for thirty years, don't have a license.

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Re: Exec Comp Restrictions Get Tougher [#permalink] New post 19 Feb 2009, 18:50
adcxaway wrote:
I'm just curious, to those that support the exec comp caps, how much do you want to be paid if you ever become a top exec in an organization?


I'd be real happy if I ever made over a hundred grand a year. Two would be amazing, though I honestly don't know what I'd do with that much money.

Another point to think about - doesn't forcing banks to pay larger base salaries as opposed to bonuses (like just about every other industry on earth) also encourage more long-term thinking on the part of the bank? If everyone's out to make deals that drive up their annual bonus, it seems to me that that would lead to a lot of competition for short-term profitmaking at the expense of making sound policy that would drive long-term prosperity for your organization (and, thus, the industry as a whole). I've read a number of comparisons of American vs. Japanese auto companies that make just this point. Besides, what's the problem with going to larger base salaries and smaller bonuses anyway? If people don't perform, fire them! Why is that even an issue?

Also, I like how the responses to this point were "that's communism!" and a joke about the mentally retarded. Stay classy, y'all.
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Re: Exec Comp Restrictions Get Tougher [#permalink] New post 19 Feb 2009, 19:01
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The "tough sh*t" attitude I get from some of you posters here frankly sickens me.

All I'm saying is have some compassion and empathy. I'm not talking about who's right and wrong. Or even who's to blame. Or providing a clinical analysis of why "regular folk" should own up to their responsibilities. Empathy isn't about telling people why they screwed up. It's simply connecting on an emotional level with people who are going through very tough times - AND without judgment for how they got there. And it's starting from that very basic human level to frame the discussion.

In other words, your ability to empathize with someone isn't conditional on whether that person made poor decisions or not. Once you are willing to understand on an emotional and human level what someone else is going through (and without judgment), the discussion becomes much more complicated. That's all I'm saying. That when you bring in the human dimension to any discussion - whether it's social, political, economic, religious, etc. - your opinion may or may not change, but how you frame the discussion will.

And yet the response is yet more flippant and smug posts from people like RahlowJenkins. If you want to know why people hate MBAs and business types, well you have your answer with some of the posts on this thread (and deservedly so). And jerz, I know you were trying to be funny, but what if I told you that I have family who has Down Syndrome? Especially when my intent was to get people to be a little more compassionate and to have some more heart. I know it's the internet and all, and there's always a chance for some juvenile behavior and trolls, but I thought the GMAT Club was full of adults (and hopefully adults with some iota of humanity and heart - I know, words you would never hear in an MBA classroom...).

I don't expect any of you in b-school to even discuss this on this level because frankly if you do you'll likely get laughed at by your understandably nervous classmates in this kind of economy. But I really hope that through life you will be able to see and frame problems from a less dispassionate perspective. We're not talking about widgets, but problems that impact people's lives here.

There's not much more I can say. Let's just hope that should (god forbid) some of you get into dire straits (even if it was your fault), there are people out there who are willing to open up to you without judgment.

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Re: Exec Comp Restrictions Get Tougher [#permalink] New post 19 Feb 2009, 19:02
Toubab wrote:
adcxaway wrote:
I'm just curious, to those that support the exec comp caps, how much do you want to be paid if you ever become a top exec in an organization?


I'd be real happy if I ever made over a hundred grand a year. Two would be amazing, though I honestly don't know what I'd do with that much money.


If I had those aspirations, I would forego business school and seek a job with the federal government.
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Re: Exec Comp Restrictions Get Tougher [#permalink] New post 19 Feb 2009, 19:08
Toubab wrote:
I'd be real happy if I ever made over a hundred grand a year. Two would be amazing, though I honestly don't know what I'd do with that much money.

Another point to think about - doesn't forcing banks to pay larger base salaries as opposed to bonuses (like just about every other industry on earth) also encourage more long-term thinking on the part of the bank? If everyone's out to make deals that drive up their annual bonus, it seems to me that that would lead to a lot of competition for short-term profitmaking at the expense of making sound policy that would drive long-term prosperity for your organization (and, thus, the industry as a whole). I've read a number of comparisons of American vs. Japanese auto companies that make just this point. Besides, what's the problem with going to larger base salaries and smaller bonuses anyway? If people don't perform, fire them! Why is that even an issue?


>100k out of bschool or by the time you retire?

Are you going into non-profit? Because if it's the time you retire, I'm really curious to know what industry you're in - I know mechanics, rice millers, cafe owners, and a whole range of people that earn a lot more than that.

I think if you drove up the base salary, it would be harder to reward people in terms of % for their performance. Bonuses should be tied in as a performance incentive and not so much base salary. If people that were making 200k (base) + 800k (bonus) were suddenly paid 800k (base), they might have less incentive to perform?

I don't know, I'm not in a HR as a comp expert :P
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Re: Exec Comp Restrictions Get Tougher [#permalink] New post 19 Feb 2009, 20:24
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adcxaway wrote:
I'm just curious, to those that support the exec comp caps, how much do you want to be paid if you ever become a top exec in an organization?

Whatever is the market rate at the time. I'll earn more or less based on my performance. That's all I can ask for.
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Jb32, if you were a woman, that post would make me want to make love to you.

Thanks, I think. :lol:
Alex, no problem disagreeing. I both empathize and sympathize with those people. It sucks to lose your house. The mother of my son lives in the Inland Empire in California and did home mortgages for 6 years. She lost her job last October two months before my son was born. It sucks because she still can't find a job. Of course on the other side of the fence, you probably didn't realize that she was making close to $300K a year in 2004-05. Luckily for her, she saved over $150K, sold her home in 2006 near the top of the market, and rented for the last 2.5 years. She was both prudent and lucky. She had many coworkers that took the other approach and bought $1 million homes on their salaries and thought the streak would last forever. All of them lost their homes last year as soon as the market started to slow. Does it suck, yeah it does. However, one of my favorite quotes from Proverbs sums it up nicely: Proverbs 14:18 The simple inherit folly: but the prudent are crowned with knowledge. Sorry to bring up religion, but it hits at the heart of the arguement.

Finally, I ask that everyone do one thing. If you are going to humanize the people who are losing their homes, then you must do the same for the other side of the coin, the Wall Street Executives. It's not a fair point to bring up stories of kids' parents losing their homes and then refer to Wall Street Executives as some faceless symbol of money and power. They are just as human as any of the rest of us. I would think there are many that feel both guilt and shame for what happened. Some, maybe not, but I would bet many feel disgraced for their failures and would give up their riches if they could do it over again. I mean how would you feel if because of you 10,000 people were out of a job and that was what your legacy on earth would be? You would be remembered and hated as one of the men that caused a global recession. People would mention you in books as one of the worst managers on earth, even if you were right 99 out of 100 times. I mean at our age, we are all wild eyed and thinking everything will go grandly, but in 25 years, you might be head of trading at a major Wall Street firm. One of your employees might be the one that causes your firm to go bankrupt and you'll have to live with that forever. I'm just saying that a coin has two sides...that is all I'll write on this thread.
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Re: Exec Comp Restrictions Get Tougher [#permalink] New post 19 Feb 2009, 21:43
jb32, if you are indeed a man of faith, then I'm sure you know that you are your brother's keeper, regardless of whether your brother is simple to inherit folly, or prudent to be crowned with knowledge. And if you are a New Testament guy, then I'm sure you know of the many verses about compassion for your fellow man.

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Re: Exec Comp Restrictions Get Tougher [#permalink] New post 19 Feb 2009, 21:45
Hi jb..

That question was actually directed at Toubab... as I'm really curious to whatever s/he plans to do.

However, I do agree wholeheartedly with you and I think your points are very valid :)
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Re: Exec Comp Restrictions Get Tougher [#permalink] New post 20 Feb 2009, 07:54
adcxaway wrote:

>100k out of bschool or by the time you retire? Are you going into non-profit? Because if it's the time you retire, I'm really curious to know what industry you're in - I know mechanics, rice millers, cafe owners, and a whole range of people that earn a lot more than that.


Uh... thanks? Yes, I foresee a lot of my career in the non-profit sector (though not exclusively), particularly in international development (where I am now). This career is rewarding to me on many levels - financially, personally, etc. What I do actually makes others' lives better in measurable ways - and the travel is pretty cool too. I'll never make as much as a banker, but I'll work much more reasonable hours and, I think, have a richer working experience. And my MBA will still pay for itself in the long run - it'll just take a little longer than for folks in more lucrative fields.

Quote:
I think if you drove up the base salary, it would be harder to reward people in terms of % for their performance. Bonuses should be tied in as a performance incentive and not so much base salary. If people that were making 200k (base) + 800k (bonus) were suddenly paid 800k (base), they might have less incentive to perform?


But you can still give out performance-based bonuses - big ones, as a matter of fact. Honestly, how many other industries are accustomed to bonuses exceeding base salary? Very few. And it still works for them.

All I'm saying is that I would think that an employee who knew that the bulk of their annual compensation did not depend on getting deals done at any cost would be more cautious and less fixated on short-term gain.
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Re: Exec Comp Restrictions Get Tougher [#permalink] New post 20 Feb 2009, 08:08
Toubab wrote:
But you can still give out performance-based bonuses - big ones, as a matter of fact. Honestly, how many other industries are accustomed to bonuses exceeding base salary? Very few. And it still works for them.

All I'm saying is that I would think that an employee who knew that the bulk of their annual compensation did not depend on getting deals done at any cost would be more cautious and less fixated on short-term gain.


Investment bankers are brokers, or basically glorified salesmen. Do you know any real estate brokers, business brokers, or sales people that get compensated with enormous base salaries?
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Re: Exec Comp Restrictions Get Tougher [#permalink] New post 20 Feb 2009, 08:10
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jb32 wrote:
I beleive it's called wealth envy and what's sad is that there was a time in this country where people didn't 'expect' things. They worked hard and knew that life wasn't fair, but figured if they tried their hardest things might work out for the best. It was called the American Dream - work hard and you can expect to earn the fruits of your labor. People were humble and proud of what they did, now the entitlement generation believes everything should be handed to them. And if things don't go well, they sue someone or blame rich people.

In a 3rd world country, it is much, much, much harder to rise out of poverty, but in America I'm not going to forgive stupidity, laziness, greed, or envy. They don't get a pass anymore. They have in the past few decades and I'm not going to do it. And I'm not going to be a hippocrit about it, as I take responsibility for EVERY decision I make in my life. It's not someone elses fault if I lose my job and have been so content that I never made my self better over the course of 5 years of employment. Sometimes you get a tough break in life, it happens to EVERYONE, but it is what you make of these tough breaks that defines your character.


I just don't understand how people can say that now we are in the midst of an entitlement generation in support of the argument that executives have every right to complain about their compensation being capped at half a million dollars a year, especially after they failed miserably at their jobs. Yes, borrowers and lenders screwed up, but so did the banks. You say that you always take responsibility for every decision you make in life, and you have no sympathy for irresponsible borrowers, but where is the bankers' culpability? It seems that most people arguing against pay caps quickly point the finger at the borrowers and lenders, but the Investment Banks were all too happy to purchase those mortgages in bulk. So you have no sympathy for borrowers or banks, but somehow the Investment Banks that played a major role in this crisis are somehow different? I'm not trying to start an argument, I just see some major hypocrisy in a lot of the arguments that blast the borrowers and defend the banks.

I agree there were many people who chose to live beyond their means, but let's not cast them all off as stupid or irresponsible. The truth is that many of the borrowers were elderly, poorly educated people who were preyed upon by lending institutions. If you missed 60 Minutes this past Sunday, I highly recommend watching this: http://www.cbsnews.com/video/watch/?id=4803928n.

On the matter of incentive-based pay, I think that this article is very poignant: http://www.sciam.com/article.cfm?id=do- ... to-be-evil
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Re: Exec Comp Restrictions Get Tougher [#permalink] New post 20 Feb 2009, 08:57
Toubab wrote:
Also, I like how the responses to this point were "that's communism!" and a joke about the mentally retarded. Stay classy, y'all.


Speaking ONLY for the "communism" comment, that wasn't meant as a joke. Here in the west we tend to think equate communism with facism and nationalism. They are different. In a truly "communal" (the root of communism) society, everyone works for the collective good. There is no notion of individual wealth or betterment. All I was saying is that this type of society directly opposes human nature and has not been successful. Country that still favor communism do so with oppressive governments.
Re: Exec Comp Restrictions Get Tougher   [#permalink] 20 Feb 2009, 08:57
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Exec Comp Restrictions Get Tougher

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