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Expose on Insider Loans
Ctimes2 writes "Everyone's been grousing a lot lately about high priced CEO's and compensation packages, in no small part due to the 'Enron incident'. Business2.0 has a lengthy but enjoyable feature about how corporate loans became 'compensation packages', forgivable, sometimes tax free the and norm for corporations. And Slashdot's favorite whipping boy Microsoft, while not leading the pack, certainly isn't the poster child for trustworthy finance. More importantly (or rather, to our eternal annoyance), the article provides some much needed information trolls can add to their 'CEO's are bad!' rants: "Insider lending added thrust to the long surge in executive pay that has pushed the average major-company CEO's compensation from 45 times that of the average worker in the early 1970s to about 500 times worker pay today.""
I mean, who would manage to forget that MS actually makes money.
Come to think of it, glancing down that list of companies.... MS seems to be the only one making ANY money.
Sorry, ya'll, but it seems that 'appropriate' MS bashing will indeed get you an article on SlashDot.
And really, this isn't a troll, this is disgust at having actually read thru what I thought was going to be an interesting read.
compensation jumped from 45x to 500x, eh? Is that with ot without inflation?
Seriously, though, CEO compensation has historically been so high that increases are its far beyond the range of complaining. The difference between a CEO pulling in 100 million versus 500 million might be noticable to the CEO, but in relation to the average worker's salary, anything that high just gets muddied. It's like having a conversation with Einstein and all of a sudden he gets 2x smarter. Would you be able to tell?
The PBS series "Frontline" did a show called "Bigger Than Enron" that has an excellent website to go along with the show. It contains interviews with many of the key players here, including former SEC Chairman Arthur Levitt, current chairman Arthur Pitt, and others.
It's acutally more robust than the B2.0 article, and goes into some detail about how politicians and businesspeople push for the SEC to have less power than it needs. At one point Levitt describes how the heads of different congressioinal committees were threating to pull funding entirely from the SEC if Levitt didn't quit pushing for accounting reforms, the exact reforms that turned out to be so necessary. This was in April of 2000, just before the all the shit started to hit the fan.
Coming on in conjunction with today's announcement by the Bush Administration that they don't want to give the SEC too much money, it's certainly not too much of a stretch to see a pattern develop.
And Slashdot's favorite whipping boy Microsoft
Don't forget, MS pays Slashdot to serve you this page.
Who needs who?
from the still-waiting-for-slashdot-to-loan-me-ten-million dept.
Well..maybe if VA was actually SUCCESSFUL, they'd have money to loan casually, and we'd be having this conversation about some other people. Working for Microsoft doesn't make someone evil, and working for doesn't make you a saint.
Sounds like more like a jealous pissy fit as seems to happen pretty much in this "community". Don't like them....beat em. If you can't...then who sucks? If you gave a rats ass about "Free Software" you'd be advocating the BSD license....GNU is pretty much just around to be a minor pain in the ass to corporations. If that's how you feel...be honest about it and call it what it is.
I know I'll get modded as a troll or flamebait, but I am being serious.
If you really look at differences between the pays of employees at various levels, in terms of % figures, it would be mindboggling. As we go up the ladder, the % seems monstruous. But, isnt that what capitalism is? The essence of capitalism is to make people envious of another person's achievements, and that makes society run, technology better, so on and so forth. The flip side of it is ofcourse, turmoil in times like this. :(
It has been happening ever since Veblen's days. We notice it now because we are prone to target people with a lot of money now, whereas we "the people who do all the work" dont have any
"Do something man. Right now."
Employees in the U.S. need to wake up! You don't live in the land of the free, you live in a modern Feudal state!
Go read the typical employee non-disclosure agreements and contracts: it is little more than thinly veiled modern day indentured servitude. You don't think so? Code for Microsoft for awhile, then try jumping ship to Sun.
Who are the robber barons? Why, our CEO's. Who are the knights in armor? Why, our fine, robe-clad judicial system, paid by the highest bidder! Who are the mercenaries? The congressional branch of the U.S. govornment, of course!
Seriously people, the U.S. is rife with corruption and apathy.
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The problem that has been developing, and has been more or less identified as a problem for the past 3 to 5 years, is that a publicly traded company no longer manufactures and sells products, but manufactures press releases and sells stock. The important capital equipment is no longer machines, but, as has been shown by Nike and most other multi-national corporations, savvy marketing departments.
This means that if your product is stock, then as long as the stock remains relatively stable with respect to the overall market your product is doing well. To help keep you primary product, your stock, stable it is useful to have stable sales of some sort of ancillary product that your marketing department can then use to promote your primary product, stock. Most dot coms had wonderful marketing but no real sales, so, eventually, the stock became worthless or was never bought at all. Enron had sales, but when investigated, proved to be fraudulent, which wasn't a problem in itself, but nobody wants to deal with a dishonest agent. M$ has sales, cash reserves, and an excellent marketing department, so it makes lots of money. This does, not, however mean that it is fundamentally different from Enron or a dot com.
The thing to remember is that Enron set up a complex financial structure based on it's stock. True, there were many people robbing the company of millions of dollars, and there was gross accounting fraud, but the thing that brought the company down was the stock. If the stock price had not fallen and triggered certain payment which then waterfalled into audits and investigations, it may have been years before we would have known how corrupt the organization, and on reflection, the industry was.
And the same is true of M$. Stock is a profit center. M$ pays in stock options instead of cash, thus saving not only the cash but also fabricating a profit by not reporting the cost of disbursing the stock option. Also, M$ saves a lot of money in taxes by deducting the stock options from it's revenue. M$ strikes deals with traders and directs M$ employees to use those brokers to trade options. The brokers make a lot of money not only on the trades but also on the loans. There was an article a year or two ago detailing the complex stock transactions, and questioned whether M$ would be profitable without using stock as a profit center. As long the stock remains high, we expect M$ to be a successful company.
So no, the fact that M$ is making money means very little. If it is padding it books with past and future profits to meet analyst expectations, if it is using stock as a profit center, if is neglecting it's customers to meet short term investor expectation, then it has all the same problems as any other doomed company, and, if it cannot handle the web of deceit, will fall.
"She's a scientist and a lesbian. She's not going to let it slide." Orphan Black
The only thing he said was "unethical". There was no express mention of "fraud".
And consider your own words. Just as the "it's bad because it's rich" dogma has a lot of issues, so too does the "it's good because it's rich", which you've gone at least as far in emphasizing.
On top of that, it seems that you guys skipped economics in college and can't tell that those rich people do far more for the opportunities available to poor people than any government program ever has
Sort of an apples-to-oranges comparison, but I don't necessarily buy into it anyway.
Unless you were an investor in or employee of Enron, Worldcom etc, you have no right to complain because their fraud has not affected you.
You make this bold statement a few sentences after telling the original poster that he skipped economics? The ripple effects of an organization as large as either of the above two going under is *enormous*, affecting almost everyone.
Heck, with Worldcom *alone* and ignoring indirect effects, a hell of a lot of my packets get routed through UUNET.
There have been major changes to law, a lot of "earnings revisions" from companies that have been claiming bullshit (which drives down the market more). There have been companies going out of business that are vendors to the companies in trouble.
Again: pure socialist systems tend to have issues. That doesn't mean that pure capitalist (i.e. without government regulation) systems are useful. For example, in the real world you can end up with monopolies...
It's hard to say why someone "deserves" money, so I'm not going to make claims in that area. I, personally, think that companies that give their top officers that much money are *stupid*, though. Does a CEO *really* have skills that are 1000 times harder to obtain than an engineer, justifying a 1000x pay ratio to the engineer? (Okay, maybe a bit less, since we can factor in a lack of job security.)
May we never see th
I thought boards were supposed to be held in check by the stockholders. When boards act irresponsibly wouldn't the board members be sued for malpractice? Surely not all all stock is owned by the insiders themselves or small investors that can't afford a lawsuit - a big chunk is owned by large institutional investors that were supposed to know better.
Were the stockholders so blinded by the inflation of stock values that they didn't check whether the company is using their money to create value instead of lining the pockets of management?
I guess I've answered by own question.
Stop worrying about the risks of nuclear power and start worrying about the risks of not using nuclear power.
This is why the free market always fixes problems-- it took care of Enron, Global Crossing and Tyco rather fast, and exerted its maximum penalty- death, on the companies.
While congress is a bunch of jack asses that do more harm than good and never get anything done that actually helps people.
Its time for a constitutional ammendment that for every line of law added to the US Code, two lines of previous law must be removed, until the US code is no more than 5,000 pages in total (or some character count that's a better representation.)
This country was supposed to have a revolution every so often , and people were supposed to be the ones running it. Now we have a government out of control, trying to eliminate any participation of the people and eliminate our human rights.
WAKE UP!
Where are the americans? It seems the majority have lost sight of liberty, libertarianism and the idea that america was supposed to be.
Yeah, and you guys panned the ipod too: http://apple.slashdot.org/article.pl?sid=01/10/23
"Insider lending added thrust to the long surge in executive pay that has pushed the average major-company CEO's compensation from 45 times that of the average worker in the early 1970s to about 500 times worker pay today."
That may be true, but there's only one driving force behind the gigantic pay for America's CEOs: Good Old Fashioned Greed. If USians didn't feel that the only way to prove their status in society was to amass a huge pile of money then this wouldn't have happened. I mean you can't really argue that a personal fortune of more than, say, a hundred million is actually going to help you live a happier life.
"The new wave is not value-added; it's garbage-subtracted" - Esther Dyson, Dec 1994
Joined IBM as CEO in 1993 and left in March 02. When he joined, the common perception was that IBM was a dinosaur overdue for extinction. Sure it had world class engineers and a huge patent portfolio and masses of installed fortune 500 customers, but mainframes were on the way out. The bottom line was that IBM weren't making products that people wanted to buy at the right price, and it was costing a lot to make them.
now fast forward to 2002. IBM is profitable and leading the way once more. Gerstner essentially turned the company around, and in doing so generated billions of dollars for his shareholders. So despite the fact that I can't justify the need to earn tens or hundreds of millions of dollars each year, from the shareholder perspective he was worth every cent.
"The new wave is not value-added; it's garbage-subtracted" - Esther Dyson, Dec 1994
This is why the free market always fixes problems-- it took care of Enron, Global Crossing and Tyco rather fast, and exerted its maximum penalty- death, on the companies.
While congress is a bunch of jack asses that do more harm than good and never get anything done that actually helps people.
What about the "penalities" on those who caused those companies to die? Right now, I don't see anyone in immediate jeopardy of a long sentence in a "pound-me-in-the-ass" prison. Just a few token arrests of higher-ups. The "free market" requires some level of government regulation to insure that buyers of goods can be confident that they will receive what the seller has advertised. If the government doesn't do its best to keep fraud out of the marketplace, then the market itself will fall apart. This disillusion is part of the reason behind this most recent stock market crash, as well as others in the past.
Companies who, in an effort to keep their stock price high, fraudulently report profits as they're burning cash like crazy deserve to die. CEOs and others who develop and execute schemes to defraud shareholders to receive pay in excess of what they would have received if they were telling the truth need to be punished severely. I believe the government needs to do all three of the following things to such crooks: (1) seize all assets from those involved in the fraud and from those, including family members, involved in covering up the fraud (like the ImClone guy who couldn't sell his own stock, so he asked his daughter to sell hers), (2) send them to prison for many years (if those involved knew that they were likely to destroy the company beforehand, then they deserve a life sentence), and (3) after the long sentence prevent them from ever working again in any capacity at a publicly traded company.
People are really underestimating the damage that the managements of Enron and Tyco, among others, has done to the United States. It's probably going to take the country the better part of a decade to recover from this decline. And if history is any guide, the ones that inflicted the damage are going to get off lightly. A year in prison, a $1 million fine, and a promise not to do it again would be my over/under line on punishments on those like Ken Lay's. And after the ordeal, he'll still have most of his 9-figure fortune that he obtained largely through fraud.
If I go into a bank, hold it up, and walk out with $100K, I would be looking at a 10+ -year sentence, and no one would be dramatically hurt, either physically or financially. A couple of people who attempted to defraud Michael Jordan out of a few hundred grand are facing up to 25 years in jail for an action that would have not ruined the superstar's livelihood, let alone that of thousands. In neither case would the perpetrators expect to keep their illegally-obtained goodies.
If this type of fraud or extortion is grounds for a sentence of 10 years or more, then why isn't executive fraud held to the same standards when formulating a punishment. The MAXIMUM sentence in the new law passed by Congress for executive fraud is 10 years. Those at companies who have already collapsed will be subject to a maximum sentence of FIVE YEARS, because the actions in question took place before the enactment of the new law. And as far as a I know, there's no requirement that the sentencing judge of a guilty party include forfeiture of assets in the sentence. Does anyone else see something unjust in this picture?
Whether the U.S. government is overstepping its bounds and stomping all over its citizens rights is a debate for another thread. But I do believe that the government has been derelict in one of its few duties in a "free market" economy: keeping people honest. Would you really want to take part in a completely unregulated market? Ironically, the only such markets that I know to exist have been those that are outlawed by governments, such as the market for cocaine and heroin in the U.S. In markets such as these, fraud and violence is just as likely to gain someone additional market share as a supplier who produces a superior product. Would you call such a market truly free?
"He worked hard, he deserved it," is a BS argument, unless you think that everyone else who works hard deserves to be paid equally.
Note that I'm not arguing for equal pay (though I often think that might be better than the current situation). Some people do deserve to be paid more than others, but not thousands of times more.