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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.""
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.
then quote your post:
then, I'll respond:
The High-level execs who were the recipients of these corporate "gifts" ARE Junior! They didn't create the company, hell, they didn't even create much in the way of shareholder wealth. In the tech sector, it was the dot-com investor feeding frenzy that created any wealth that was realized.
You, OTOH are an entrepreneur. That is a very different species from these "boardroom stars," and I would not see your incentive reduced one iota.
Now, answer the original question
utter rubbish
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Look dude, i truly do find that admirable. However, i think the two of you are going to extremes.
Yes, in some distinctive ways American Business is like feudalism (i read a title i can't recall with the same theme, but talking about the 70's), with legal privelege of the few (see the music business and Duke Valenti of the RIAA). This is simply a natural consequence of market forces that tolerated the intense consolidation of American business from the early 80's through present. If Americans really didn't like lower prices for more goods, it wouldn't have worked. It did however set the stage for today's catastrophes by consolodating immense power in a proportional few.
On the other hand. The everyday investor earned more than ever before to buy goods that grew cheaper each year. The whole country went along on the drunken orgy (see above comment), and it approved so long as tommorrow morning, and the hangover (now) never came. Still, people who have faith that the USA will not become Argentina and default on our debt (which it did do in the early days) and make those savings bonds of yours worth less than enron stock (still highly unlikely today).
There is however one important idea that you, my patient, steady, long-term investing friend of mine, did not grasp.
You may have your million dollars in forty years, but it will be worth the same as 100,000 today. Meanwhile, these people of corporate privelege (like the M$ guy, or Bernie Ebbers $400 million!), who get away with it are rich with UnEarned income.
Some of my hosting clients see what I do as unearned, because i'm not sending out their html pages by hand. Meanwhile, i invest massive amounts of time improving daily. These CEOs who have on average 5.5 million dollars today and leave take the cake for the sum total of a couple of years of coasting on reputation.
In conclusion. If Feudalism is the extreme right and your anti-anti-everything rant is the left. Our country is dangerously far to the right. You may dispute this assesment, but historically, American politics today are closer to fascism than they have ever been (driven by George W). Our Senate passed a war resolution quickly to get to a far more important election. It is truly disturbing.
gs
"You never want a serious crisis to go to waste." - Rahm Emanuel
The problem that has been developing, and has been more or less identified as a problem for the past 3 to 5 years, is that a publicly traded company no longer manufactures and sells products, but manufactures press releases and sells stock. The important capital equipment is no longer machines, but, as has been shown by Nike and most other multi-national corporations, savvy marketing departments.
This means that if your product is stock, then as long as the stock remains relatively stable with respect to the overall market your product is doing well. To help keep you primary product, your stock, stable it is useful to have stable sales of some sort of ancillary product that your marketing department can then use to promote your primary product, stock. Most dot coms had wonderful marketing but no real sales, so, eventually, the stock became worthless or was never bought at all. Enron had sales, but when investigated, proved to be fraudulent, which wasn't a problem in itself, but nobody wants to deal with a dishonest agent. M$ 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