Be careful that you don't become too successful

[Lost User]

An awful lot of salesmen's pay is due to commission on successful deals. Their basic salary is deliberately kept low, this persuades them that if they wish to eat and live well then they need to sell the wares of their employers. Bonuses would thus never need to be paid as the logical extension of paying bonuses would be paying school kids to attend school irrespective of the grades the school kid earned. So if commission was paid on successful deals, commission with be re-payable of unsuccessful deals and commission suspended where the deal is under query. Perhaps there are arguments in limiting the upper limit on what cash value of the commission as there must also be limits below which no commission must be paid on completed sales. Thus the customer should be more happier, the employer is satisfied to the legitimacy of such deals as it would be almost self-policing, and shareholders/boardroom would not be called to authorize or justify bonuses as bonuses are never earned. And buying or selling financial products is the wares of the employer. Financial products are different from the products of, say, an Office Equipment manufacturer/reseller, but is there sufficient similarity to suggest such a system of commissions could work?

[Lost User]

Richard A. Abbott wrote:

paying school kids to attend school irrespective of the grades the school kid earned.

Now, what government would be foolish enough to do that? Oh![^] :wtf: But what really galls is that Adult Education has been pillaged to pay for this. Evening Classes offered a second chance to those having left school without qualifications, and there are now so few options locally. Makes you proud to be British.

Bob Emmett

[Lost User]

I can appreciate the EMA scheme. There no longer exists traditional apprenticeships. There are very limited quantity of junior level appointments in industry or commerce. Without EMA, there would be little incentive for kids to further their skill-base and without that the unemployment queues would be very much higher which would be rather more costly than EMA. However, post 16 education should not be treated along the same lines as statutory education. Adult education funding comes from different budgets and is a separate issue, as is the "Learn Direct"

Bob Emmett wrote:

Makes you proud to be British

Yep it does.

[Lost User]

Richard A. Abbott wrote:

I can appreciate the EMA scheme.

I appreciate its objectives, but why pay kids to disrupt those trying to gain qualifications?

Richard A. Abbott wrote:

There no longer exists traditional apprenticeships.

True.

Richard A. Abbott wrote:

There are very limited quantity of junior level appointments in industry or commerce.

True.

Richard A. Abbott wrote:

Without EMA, there would be little incentive for kids to further their skill-base.

Surely, the incentive to further your skill base is to increase the range of entry-level options available to you. (Including the possibility of working overseas.) Or am I just old fashioned? The affordability of acquiring that skill set relates more to benefits and grants.

Richard A. Abbott wrote:

unemployment queues would be very much higher which would be rather more costly than EMA.

Not if you paid them £30 a week. :)

Richard A. Abbott wrote:

Adult education funding comes from different budgets

Although not directly related, the funding of EMA results in a cut in what is available elsewhere. The Government has directed spending to Basic Skills in Literacy and Numeracy, and GCSEs. As the only increasing demographic in Adult Ed. appears to be under 19s, this would seem indicate a failure of statutory education, which should be addressed.

Richard A. Abbott wrote:

Bob Emmett wrote: Makes you proud to be British. Yep it does.

I admire your patriotism, sir, in the face of all the evidence. :)

Bob Emmett

[Oakman]

I agree that's the way compensation should be handled - but should the government be the ones to control compensation? Will donating to the party in power be part of the yardstick measuring performance? Should a Congress that thinks it's okay ex post facto to impose 90% tax rates and sets up its payraises to happen without even a vote, be the group that determines what a fair rate of pay is?

Jon Smith & Wesson: The original point and click interface

[Rob Graham]

The problem is not the compensation itself, that should be decided by the marketplace, not the government. Fair compensation rules would turn out to be anything but, quickly becoming a vehicle for advancing the current faction in power's agenda and world view. The real issue is corporate governance, particularly compensation committees, which have become entrenched, incestuous and beyond the reach of shareholder control. A prohibition on service on multiple boards, particularly interlocking service (companies that are mutual suppliers or have complementary business), and a prohibition on the requirement of supermajority votes to overturn board sanctioned proposals or members would both help bring some rationale back to executive compensation. Your proposal for option purchase would also help realign compensation with actual performance.

[Oakman]

Rob Graham wrote:

The real issue is corporate governance, particularly compensation committees, which have become entrenched, incestuous and beyond the reach of shareholder control.

Well said! :thumbsup::thumbsup: You are the indisputed master of the pithy statement. ;)

Jon Smith & Wesson: The original point and click interface

[Stan Shannon]

Rob Graham wrote:

beyond the reach of shareholder control

I have never understood how any of this could be 'beyond shareholder control'. Are the people on the compensation committees forcing people to be shareholders? Wouldn't the normal course of evetns be for the shareholders to simply stop being shareholders if they don't approve of the compensation packages?

Chaining ourselves to the moral high ground does not make us good guys. Aside from making us easy targets, it merely makes us idiotic prisoners of our own self loathing.

[Lost User]

Bob Emmett wrote:

but why pay kids to disrupt those trying to gain qualifications?

With the gulf between entry requirements for University and the GCSE's achieved by school children, the 'A' levels or GNVQ's fill this gap that is taught either at 6th Form Colleges or those traditional F.E. Colleges. I think it not a question of educational disruption but a case of necessity and this necessity comes with a price and that price is the £30 EMA which incidentally has not changed even though inflation causes a reduction in purchasing power. Thus, the £30 today is an effective "pay cut". Yes, bonuses are paid in addition to those £30 weekly payments but this is subject to various rules including required attendance and graded attainments.

Bob Emmett wrote:

Or am I just old fashioned?

Probably. But I generally agree with you.

Bob Emmett wrote:

Not if you paid them £30 a week.

Unemployment pay is a bit larger than that but then, unlike with EMA payments, parent claimed child benefit stops, so living on £30 weekly unemployment pay is all but impossible and more so considering the economic plight we are currently experiencing not forgetting those unemployment black-spots that existed prior to the current plight. Reducing a person to poverty should not be a government objective. Perhaps other approaches to resolve unemployment is needed and I'm not convinced that using training organisation such as "Action for Employment" is beneficial to the unemployed nor to the tax payer, especially if they are operating in unemployment black-spots. What is needed is government creating the conditions required that may persuade companies to come to those block-spots, then unemployment levels is likely to fall.

Bob Emmett wrote:

under 19s, this would seem indicate a failure of statutory education, which should be addressed.

Very true, but remedy is expensive and becomes a long term issue. Cannot be resolved overnight. Though there are some very bright school leavers, alas, many leavers are just able to read, write and do very basic numeracy. But this is not just a British problem as our American cousins would tell you. And this "Basic Skills in Literacy and Numeracy" is also part of this post 16 education yet looking at the competence of those trying to enter University, perhaps this stage (post 16

[Rob Graham]

The problem is that voting rules, combined with shares owned by the board themselves guarantee that most shareholder actions will fail. One would expect that what you say should happen, but it almost never seems to,perhaps because most of the shares are held in large pools like mutual funds, and possibly not voted at all. I might point out that shareholders rarely if ever have a vote on which board members sit on the compensation commitee. Combine that with less than 1/5 of the board standing for reelection any given year, and it becomes quite difficult to unseat an irresponsible board.

[Oakman]

Rob Graham wrote:

I might point out that shareholders rarely if ever have a vote on which board members sit on the compensation commitee

You made reference to this, of course, but let us not forget that it is entirely possible that the CEO whose compensation is being considered today is likely to be a member of the compensation committee that considers the rewards of the people who are today sitting in judgement. Instead of a circular firing squad, it's a circular looting squad.

Jon Smith & Wesson: The original point and click interface

[Stan Shannon]

I still don't get it though. I mean, sure, a guy like me with 401Ks and IRAs and all, can't keep track of what is going on in the board rooms of every single company. But surely there are big share holders in those same companies who do keep track of such things. If I were one of them and felt the compensation was too much, I would pull out. Something somewhere just does not add up with all of this. It doesn't make any sense. The only explanation would be if all the big share holders were also on compensation committees and they were all just playing the masses of small investors for chumps. The entire thing would be nothing but one big ponzi scheme. But even that would not be possible unless there were massive government corruption at every level. There is no reason for the system to not be working except for something intentionally fouling the natural order of the markets.

Chaining ourselves to the moral high ground does not make us good guys. Aside from making us easy targets, it merely makes us idiotic prisoners of our own self loathing.

[Rob Graham]

Did I mention that all unvoted shares are automatically counted as votes for the Board's position? And since may are now requiring 75 and 80% super-majorities to overrule the board, or introduce new rules the board is opposed to, it's pretty difficult to change direction. And just who do you suppose counts the votes.

[Stan Shannon]

Than it remains a simple matter of shareholders refusing to comply. In this modern age, it should not be so daunting a challange to create a system where all the share holders can take down a given compensation package at will. I just can not comprehend how the shareholders are not ultimately the ones calling the shots if there is any honesty left anywhere in the system at all. Without them, there would be no compensation at all. It should be the most immediate form of democracy imaginable. What we have here is a failure to communiate.

Chaining ourselves to the moral high ground does not make us good guys. Aside from making us easy targets, it merely makes us idiotic prisoners of our own self loathing.

[Lost User]

Stan Shannon wrote:

What we have here is a failure to communiate

Then find out from the company you hold shares in what the rules are for holding an "Extraordinary General Meeting".

[Stan Shannon]

Why should it require any meeting at all? Why not have an online townhall where people invested for any amount in company X can discuss the conditions of that company. If company X changes its compenstation package, a general alert goes out and all the stockholders make a decision. They can't stop people from selling their shares. No investors, no compensation.

Chaining ourselves to the moral high ground does not make us good guys. Aside from making us easy targets, it merely makes us idiotic prisoners of our own self loathing.

[Rob Graham]

Stan Shannon wrote:

company X changes its compenstation package, a general alert goes out and all the stockholders make a decision. They can't stop people from selling their shares. No investors, no compensation.

Unfortunately, the vast majority of shareholders are too greedy to just dump their shares at a huge loss; that's what it would take - selling requires buyers. In the end, all that is impacted is the market cap of the company, and there is nothing to prevent the comp from being awarded anyway. Look carefully at what happened with Merrill Lynch. it reflects exactly what you propose; shareholders dumped the stock, the companies market cap plunged, resulting ultimately in a fire sale to B of A. Yet the Merrill Lynch execs got ungodly comp packages after the fact, comp packages awarded by the board as the company was in it's final death spasm. ML was looted by it's own board, plain and simple, and BofA did nothing about it after purchasing ML.

[Lost User]

Stan Shannon wrote:

Why should it require any meeting at all?

Because if you want to influence the company or even to sack the board then you have to go about it in the correct, proper and time honoured way. This could be at the Company's Annual General Meeting or by the execution of a proper supported request as defined by the company's published rules, to hold an EGM with a special resolution. Even if the resolution from an AGM or EGM is passed it may not have the required weighting for the resolution to become mandated. Anything else from a shareholders point of view is a no go. Nobody is saying that they can't stop people selling their shares, well there are known legal restraints, but you as an individual shareholder holds very little influence compared to, for instance, corporate holdings of those shares.

[Stan Shannon]

Rob Graham wrote:

Unfortunately, the vast majority of shareholders are too greedy to just dump their shares at a huge loss; that's what it would take - selling requires buyers.

Yes, but, obviously money going out in bonuses means less payback for investors if the company is not actually successfully earning profits. So it remains very odd to me that poorly managed companies would not almost immediately begin declining in the stock market as investors took their lumps and moved their money elsewhere. Even I'm smart enough to keep my investments well diversified. I could afford a loss on stocks invested with a single company if I knew for certain it had inordinate compensation packages. It just seems to me that greed would actually result in completely different behavior.

Rob Graham wrote:

Look carefully at what happened with Merrill Lynch. it reflects exactly what you propose; shareholders dumped the stock, the companies market cap plunged, resulting ultimately in a fire sale to B of A. Yet the Merrill Lynch execs got ungodly comp packages after the fact, comp packages awarded by the board as the company was in it's final death spasm. ML was looted by it's own board, plain and simple, and BofA did nothing about it after purchasing ML.

But where did the money they were looting come from? Was it share holder investments? Are you telling me that its not overtly illegal for these companies just to pocket money that has been invested in their stocks? They can just take it anytime they like and spend it as they please? If it is profits they made off those investments than so what? That is their money isn't it?

Chaining ourselves to the moral high ground does not make us good guys. Aside from making us easy targets, it merely makes us idiotic prisoners of our own self loathing.

[Stan Shannon]

Richard A. Abbott wrote:

you as an individual shareholder holds very little influence compared to, for instance, corporate holdings of those shares.

But to me that brings us back to my original question - why don't those who do have influence, exercise it? They should certainly be able to say "hey, enough with the bonuses already!" and expect it to be heard.

Chaining ourselves to the moral high ground does not make us good guys. Aside from making us easy targets, it merely makes us idiotic prisoners of our own self loathing.