Posted by Marc Hodak on April 9, 2009 under Collectivist instinct | 
How would you finish that sentence? I would perhaps say something like, “but if someone were to physically threaten by wife or child, watch out for my stick or gun.” Someone else might say, “but if I catch that guy abusing his dog again, I swear I’ll sock him.” What would you say?
"My job! Down with property!"
Well, in France, this rationale seems perfectly acceptable among at least 45 percent of the people:
“I’m against violence but if these things keep happening it’s because there is an underlying despair,” said Socialist legislator Jean-Marc Ayrault
“These things” refers to the French phenomenon of ‘bossnappings’–the forcible detention of top management by workers in response to the threat of layoffs. That’s right, getting laid off from your job is an excuse for violence in France.
In the U.S., few people would condone getting laid off as an excuse for violence. It’s not a coincidence that the closest thing we have to a company run on French attitudes is also the source of the phrase “going postal.”
Socialists, however, believe that one person hiring another is an immoral act, yet also claim that being fired warrants a violent response. Inconsistent, I know, but I’m not making this up.
“This sort of thing (bossnappings) will inevitably happen again,” said Bruno Lemerle of the CGT union in the Peugeot car plant in Sochaux, France’s biggest factory.
“Those who sow misery reap fury. The violence is done by those who cut jobs, not by those who try to defend them,” he said.
Of course, the defining aspect of socialism is that they believe that worker violence is is OK, while employer attempts to thwart it are evil.
Posted by Marc Hodak on April 8, 2009 under Collectivist instinct |
Here is the top legislator highlighting the difference between her interest as a citizen versus her interest as a legislator:
“I certainly don’t want my taxes raised but one thing I do recognize is that we are in the middle of a financial meltdown,” California Assembly Speaker Karen Bass, a Democrat, told Reuters in an interview.
“We have a constitutional obligation to balance the budget so we had no choice” but to raise taxes, Bass said.
Here is the basic equation she is hoping her sheeple will ignore:
State tax revenues – State expenditures = State income (deficit)
In other words, from her perch, the **only way** to prevent a deficit is to increase taxes. She would, in principle, have a point if state expenditures had already been cut to the bone. Here is how BOTH haves of that equation look:
Both halves of the equation
As you can see from this graph (which is impossible to find on the California’s Dept. of Finance site), declining tax revenues are clearly the driving force behind California’s budget problems. Not.
On the other hand, regarding the title of this post, they might be right.
Posted by Marc Hodak on under Economics |
Stimulus spending in Iraq, via Michael J. Totten:
“It’s a well-executed and targeted display of money as power,” Captain Boyes said. “It’s a weapon system. It’s great. We have to interact with the locals. Not only is the platoon leader going out to find a viable candidate for this grant, he has to spend that time analyzing the business, talking to the shop owner and seeing what the business needs. The money can be used for anything to start a business. It can be used to expand a business, to hire new employees, anything like that. They’ll go in there and talk to the shop owner and ask him what are the top three needs.”
Sadr City
“We typically don’t put any dollar amount on it,” Captain Looney said. “We say what are your top three needs to improve your business? And we’ll ask them how much that will cost. Most of the time they have a well thought-out plan. They’ll give us exactly what they need, how much each item costs, and we’ll bounce that off what we know from our own experience and how much we know it should cost. We’re not going to let them say it costs 5,000 dollars for a small generator. We’re not going to be raked over the coals. Most people are honest. They give us a fair estimate of the costs. As soon as we give them the money, they use the money immediately to improve their location.
“I can take you to a hookah bar and chai shop,” he continued, “where we’ve given them a grant and they made drastic improvements to the outside. That had a great impact because it showed what U.S. forces are willing to do for Iraqis. It’s a cultural and social hub of this neighborhood. Many people see what we’ve done for them. We didn’t just make an investment with one person, the business owner. There may be hundreds of local men in the area who go to this hookah shop every week, and we made an impact with all of them.”
Park, Sadr City
“We see it as a business opportunity for them and a security opportunity for us,” Captain Boyes said. “We’ve increased the general atmospherics. People are more open to talking to us or giving us a phone call and giving us information. We have had actual tangible results where people have called up and told us where IEDs were placed. And the only reason he called us is because his brother received a microgrant.”
What is lost on most voters in the more comfortable quarters of civilization is that any form of government spending is a “display of money as power.” Unfortunately, our’s is not quite as well-executed or targeted.
Posted by Marc Hodak on April 7, 2009 under Executive compensation, Revealed preference |
Pretending to be one of the culpable
Goldman Sachs CEO shared his idea of how executive compensation should look:
• Compensation should take into account strict adherence to a firm’s management and controls, especially with respect to a person’s judgment and exercising that judgment in terms of risk in all of its forms. That evaluation must be made on a multi-year basis to get a fuller picture of the effect of an individual’s decisions.
• Individual performance must not be viewed in isolation. Individual compensation should not be set without taking into strong consideration the performance of the business unit and the overall firm. Employees should share in the upside when overall performance is strong and they should all share in the downside when overall performance is weak.
• No one should get compensated with reference to only his or her own P&L. Compensation should encourage real teamwork and discourage selfish behavior, including excessive risk taking, which hurts the longer term interests of the firm and its shareholders.
• Compensation should include an annual salary plus deferred compensation, which is appropriately discretionary because it is based on performance over the entire year.
• The percentage of compensation awarded in equity should increase significantly as an employee’s total compensation increases.
• For senior people, most of the compensation should be in deferred equity. Only the firm’s junior people should receive the majority of their compensation in cash.
• As I mentioned earlier, an individual’s performance should be evaluated over time so as to avoid excessive risk taking and allow for a “clawback” effect. To ensure this, all equity awards should be subject to future delivery and/or deferred exercise over at least a three-year period.
• And, senior executive officers should be required to retain the bulk of the equity they receive until they retire. In addition, equity delivery schedules should continue to apply after the individual has left the firm.
In other words, it should look a lot like Goldman Sach’s executive compensation plan.
Read more of this article »
Posted by Marc Hodak on April 6, 2009 under Executive compensation, Self-promotion |
A very slick, new on-line journal has just come out tackling what is probably the biggest regulatory problem of our time: financial regulation. This journal has great stuff from David Evans and Arnold Kling. And the top compensation expert anywhere.
Posted by Marc Hodak on under Collectivist instinct |
Fair share: What I think you should spend on stuff that I want
Example: Massachusetts experiment in universal health care, dubbed RomneyCare by some, is…guess what…costing more than anticipated. This was one of those public-private partnerships where the state makes a deal with private firms in order to get them to accept a big, hairy policy change. The state then sees that the changes they forced on everyone cost more and did less than originally advertised, then goes back to change the deal with the private firms to their detriment.
In Massachusetts, a consumer group called Health Care for All (don’t you love how these self-styled groups get labeled as such by the uncritical press?) says, through a spokesman:
Increasingly employers are getting tremendous benefits under health reform. The question is not whether employers are doing their fair share for the employees they are covering, it’s whether they are doing their fair share for their employees the state is covering.
The translation is, “The state needs the money. These private companies should be providing it, because that is how I figure it.” How this group or the state figures things, of course, is less important than that they’re doing the figuring.
Posted by Marc Hodak on April 3, 2009 under Reporting on pay |
Hope this parachute isn't golden
Finally, an article that looks at CEO pay from a more aggregated perspective, rather than out-of-context or anecdotal “can you believe how much this guy made?” stories. Particulars are as follows:
The median salaries and bonuses for the chief executives of 200 big U.S. companies fell 8.5% to $2.24 million
Including the value of stock, stock options and other long-term incentives, total direct compensation for the CEOs dropped 3.4% to a median of $7.56 million
Everyone reports “cash” versus “equity” compensation as a relevant distinction because that’s the distinction mandated in disclosures, because that’s how they evolved historically. I think it distorts the discussion to call equity “long-term incentives.” Incentives implies motivation to do something, other than pray for the value to go up. No managers, up to the CEO, are meaningfully ‘incented’ by equity in the sense of drawing a line between their behaviors and the results.
To me, the more relevant distinction is fixed versus variable. When the company chooses to give you $2 million each year in restricted stock, no matter how the company has performed, that looks like fixed compensation, every bit as much as salary. If the amount of stock granted is based on performance, it looks like a bonus, except paid in equity rather than cash.
While median CEO salaries grew 4.5%, bonuses fell 10.9% as profits decreased by a median 5.8%
So bonuses (or at least cash bonuses) dropped twice as fast as profits–a pretty good pay-for-performance sensitivity.
CEO compensation decreased more sharply at banks and brokerages, long the source of some of the biggest paychecks. Median annual cash compensation for CEOs in the financial industry fell 43%, to $976,000. Total direct compensation fell 14.2%, to a median $7.6 million.
Well, when you have Lloyd, Jamie, Mack, and others going from a eight-digit bonuses to zero, that’s going to have some impact on the industry’s averages.
Posted by Marc Hodak on March 29, 2009 under Politics |
President Obama talking to bank CEOs about bonuses:
Show some restraint. Show that you get that this is a crisis and everybody has to make sacrifices.
That must have been a little confusing for many of the CEOs in that room. JP Morgan’s Dimon didn’t take any bonus. Morgan Stanley’s Mack didn’t get one, either, for the second year in a row. Citigroup’s Pandit didn’t get a bonus, although it’s difficult to consider how he could have justified one. Goldman Sach’s Blankfein didn’t take any bonus, plausibly leaving about $20 million on the table.
In fact, President Obama, did anyone in the U.S. make a bigger sacrifice in dollar terms than Lloyd Blankfein? Did any one you know give back $20 million? Or any group that gave up the $200 million sacrificed by his peers? Back in November, I suggested that the politicians would take credit for this sacrifice. I was wrong. They aren’t even acknowledging it.
So, what sacrifices is Obama talking about, then?
It’s very difficult for me as president to call on the American people to make sacrifices to help shore up the financial system if there’s no sense of mutual obligation.
Funny, last I checked, the only people of whom President Obama was asking sacrifices was the “wealthy.” The sacrifice he was asking them to make was to accept a higher taxes on their earnings. If he’s now asking the wealthy to accept lower earnings, isn’t he asking the rest of Americans to be making a sacrifice?
Posted by Marc Hodak on March 26, 2009 under Scandal |
Whenever a scandal involves a group, reporting about the scandal immediately erases distinctions about people within the group. We do the same thing with enemies of the state (or church, or whatever). That’s why it’s dangerous to be part of an out of favor (or even rotten) organization, even if you’ve got nothing to hide, or had nothing to do with the rot.
A purported AIG insider has released a letter that attempts to provide some relevant distinctions regarding the scandalous AIG FP bonuses:
1) On October 22nd 2008 (one month after bailout) Andrew Cuomo
reaffirmed our right to payments under the retention plan.
2) On October 9th Bill Dooley, the head of financial services at AIG,
restated that the treasury and AIG were committed to payments under the ERP.
3) AIG reduced the value of our deferred compensation to zero,
effectively cutting the value of the contracts under the ERP by about 30-50% depending on the amount due to each employee.
4) AIG wiped out the value of our previously earned deferred
compensation, costing me, for example, about half my saving and many others in the company the same.
5) At no time did AIG ask to renegotiate the contracts or plead
extenuating circumstances. Many of us would have worked for much less or for nothing just to clean things up.
6) AIG prepaid 30% of the ERP amount in December with their hearty thanks for a job well done. The treasury knew of and had to approve this.
Is it really fair of them to try to renegotiate after we have
performed on our half of the contract? It would have been fair in
september during the bailout, or in october. Those were extraordinary circumstances. But is it fair of them to come to us after the end of the contract and then ask for the money back after many of us have made personal and professional sacrifices based on these contracts? I, along with many of my colleagues, have expressed a willingness to give the money to charity. But under no circumstances will we accept that we did not earn the money. Is it fair or criminal that Cuomo would threaten us with the release of our names if we don’t return the money? That is blackmail. It is a crime of the most despical nature. Hopefully Cuomo will meet the destiny of the last New York Attorney General to mess with AIG, Spitzer.
Consumers of scandal news simply don’t have the bandwidth to make those distinctions. The MSM, whose own rot is carefully hidden from view, profits from blurring them in the pursuit of a good “story.” Distinctions undermine “the story,” which is inherently more interesting when the facts are selected and interpreted in a particular way.
Unfortunately, no matter how much clarity we begin to get as the details come into sharper focus, the original story is already out there. The people have finished it, put it down, and moved onto the next one, like the consumption of chips and dip–empty calories that never fill you up.
HT: John Carney
UPDATE: Jake DeSantis piles the shame.
Posted by Marc Hodak on March 25, 2009 under Unintended consequences |
Not for the children
Obama’s new tax bill reduces the amount that the ‘wealthy’ (any couple making over $250K) can deduct for charitable contributions. The intent is, in effect, to net the government more money at the expense of wealthy donors. The predictable effect will be that each extra dollar the government gets will more or less come directly from the charities, leaving the putative donors with the same after-tax wealth. Martin Feldstein does the math.
A substantial body of economic research shows that, on average, each 10 percent reduction in the cost of giving raises the amount that a person gives by about 10 percent…
Suppose someone would give $10,000 to a university if that amount were deductible at 35 percent. That deduction would reduce the individual’s tax bill by $3,500. Limiting the deduction to 28 percent would lower the individual’s tax saving on a $10,000 gift to $2,800.
This is where things get interesting: If the 10 percent increase in the cost of giving caused the person to reduce his gift by 10 percent, to $9,000, his tax savings would be 28 percent of $9,000, or $2,520. The government’s revenue loss would be reduced by $980 (from $3,500 to $2,520). The person’s gift to the university would be reduced by $1,000, almost the same amount. Since this high-income person would pay $980 more in taxes but give away $1,000 less, he would end up with an extra $20 for personal consumption.
In other words, the $980 hit that the government is expecting the wealthy taxpayer to take is likely to be taken entirely by a hospital, church, or school. And that, Mr. Obama, is a lesson in tax incidence.
HT: Greg Mankiw
