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CEO pay for performance information April 8, 2007

Posted by Jordi in CEOs, corporate governance.
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NY Times has a great visual interactive that shows the relationship between CEO pay and stock performance.

My quick observations:

– There is lots of vertical dispersion.   Other factors explain CEO pay than stock performance.  Its more intense close to y-axis (little change in company stock.

– There are few egregious sector 1 entries (High CEO pay, falling stock value).

– There is a  general trend towards higher pay for more performance.  Whether that relationship tranlsates into improved performance for the company absent the contributions of that CEO is harder to argue.  A lot harder.

Trust insiders, not shareholders March 16, 2007

Posted by Jordi in Business-Society Issues, corporate governance, Public Interest.
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Dean Baker  discusses the buzz saw whiplash coming from following this spin: shareholders can not be trusted to ste CEO copmensation becuas etehy don’t have the right interests in mind.  OOOOOOOKAYYYYYYYY.

Beat the Press
Representative Barney Frank has proposed a law that would require corporations to have non-binding polls of their shareholders on CEO compensation packages. According to Marketplace Radio, the opponents of this measure claim that shareholders have diverse interests and aren’t in a position to properly assess CEO compensation.

It would be helpful if the media teased this one out a bit further — the shareholders aren’t qualified to determine the pay of their top employee, but the insiders (a corporate board that usually owes their position primarily to the CEO) somehow can be trusted to act in their interest.

The original marketplace story has the full quote from Barney:

BARNEY FRANK: This lack of confidence in shareholders when it comes to CEO compensation greatly contrasts with what we’re told we should impute to shareholders on every other issue.

That seems like a polite understatement.   Intellectual property strangleholds, rolling back Sarbanes-Oxley, high CEO pay(!), stock options, the “free”trade agenda, and widespread outsourcing for low labor costs are all justified on behalf of shareholder interests.

Baker also rightly calls foul on the notion that this is government interference.  Hogwash.  Corporations are creatures of government policy, as are all coporate governnace rules.  This is a question of the best rules for corporations.

Beer slogans to explain the rules of the Economy? March 14, 2007

Posted by Jordi in accounting, corporate governance, insipid, SEC.
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Corporate leaders and their network of elites (former SEC Chairmen and Treasury officials) are gearing up to chip away at the post_Enron regulatory structures. I am agnostic about whether that is a good idea. I did note that the “all star”panels that CNN was falling all over itself to gawk at (like the celebs arriving at the Oscars on teh red carpet) was notably absent of the legislators who passed the law, institutional investors who may favor the corporate governance changes, or any critics of corporate governance.

This passage stood out as an example of the way complex regulatory and economic problems can get boiled down to supposedly “common sense” heuristics. Like when someone says “they moved the goal posts.” The role of a beer ad in defining a conundrum of common sense is even tastier (and less filling!)!

Buffett, Greenspan push for new rules – Mar. 13, 2007
But SEC Chairman Christopher Cox said it is difficult to meld both accounting principles and rules.

“This debate about principles versus rules is like ‘Tastes great versus less filling.’ Ideally, you want the best of both,” he said.

The issue here is the melding of a principle of judgment or best information about a company and rules which impose informational discipline (akin to market discipline- it shakes out the chaff and limits the ability of managers to wriggle away form bad news or honest accounting).

Instead of an explanation from the head of the freakin’ SEC as to why this is hard to do, we get the beer metaphor. Does his shoulder shrugging (Gee! I’d like to have my cake and eat it!) make investors feel better?