Posted by Marc Hodak on October 15, 2011 under Executive compensation, Politics | 
Depiction of Goldman Director (not based on any facts)
Last January, when I was still updating this blog regularly, I wrote about various unions bringing suit against Goldman Sachs for their compensation practices. In particular, they objected to the firm’s longstanding formula that employees would get about 45 percent of net revenues, with the bulk of their pay being determined after the company knew what those net revenues would be, i.e., as “bonuses.” The allegation was that this program (basically a profit-sharing system) created incentives toward excessively risky and short-term behavior against the interests of the shareholders. If the latter were true, and if the board approved of such a plan knowing that were true, it would arguably constitute a breach of their fiduciary duties. Of course, there are a couple of big “ifs” in that allegation, both of them needing some substantiation before a board’s culpability could even begin to be ascertained.
Last week, the Delaware Chancery Court decided that in the absence of any substantiation whatsoever, and insisting on these things called facts, that they had to dismiss the case.
I only wish that the fiduciaries who brought this fact-challenged suit could be held accountable for the far more provable waste of their investors’ resources for their personal profit, i.e., maintaining their union sinecures. Wouldn’t some enterprising plaintiffs lawyer love to find that e-mail from a top union official that says, “I know this case doesn’t have any merit, but hiring lawyers to publicly poke Goldman’s eye would help me get re-elected.” Or at least these enterprising lawyers could allege without any facts that this was the motivation. Alas, there is no private party willing to waste their own money to bring such a frivolous suit.
Posted by Marc Hodak on October 6, 2011 under History |
Numbers don’t tell the whole story. In fact, they don’t tell any story, which is why people are generally less interested in numbers than they are in the narratives that form around them. Steve Job’s life is full of amazing stories about form+function, mechanical beauty, and inspiration. An alien could add up the deluge of accolades in the 24 hours since his passing and infer, with good reason, that Steve Jobs was important to humanity.
But someone could also reach that conclusion by crunching a few numbers so far invisible among the accolades. Those numbers net out to $364 billion. That would be the increase in market capitalization of Apple over the times Jobs led that firm, plus the market values of Pixar and NeXT at the times he sold them, net of the relatively negligible amounts he put into them. In a narrative form, we would refer to those as the market value added of Steve Jobs.
To be sure, Jobs didn’t create that value all by himself. He had a lot of co-investors, work colleagues, and not a few Chinese factory workers helping him. Still, his vision, creativity, and energy put it all together, creating those immense opportunities for all those he led, as well as for the millions of consumers who looked at his company’s creations and went “Wow.”
Even net of the contribution of all his partners in enterprise, at an estimated net worth of $7 billion, Jobs probably captured only a tiny fraction of the value he created for society. I mention that not to suggest he was under-compensated, but to suggest that the same is probably true for innumerable other entrepreneurs with far less fame than Jobs.
But Jobs has one unique distinction among all entrepreneurs, or, for that matter, among any builder, mogul, or monarch: The enterprises under his leadership created more value than any others in history.
The fact that he did this in 56 years is today’s tragedy; what has the future lost by the random cutting of an extra 20 years of his extraordinary life–a period when many business leaders are hitting their stride?
