David Chun made a great find among an early filer this proxy season.
Many companies are under increasing pressure by the SEC to disclose specific metrics and targets. Issuers (companies) are resisting, claiming that their metrics and targets are confidential information, which disclosure might compromise their competitive position. This is often (but not always) a difficult proposition to defend, especially if your company is allegedly paying bonuses based on EPS targets and is already providing earnings guidance to the investor community.
Well, Equilar, David’s firm, turned up the proxy of AEP, where they provide an explicit EPS guidance range, and disclose how their senior executive bonuses are tied to that very same range. That seems pretty straightforward.
Unfortunately, when the SEC asked for more disclosure, they were thinking that all comp plans would be as simple as AEP’s. But tying senior executive bonuses only to EPS, while simple, is not necessarily optimal. Many companies have more involved bonus plans. Some of this complexity is functional and value-enhancing, some of it is simply obscurantism. Who is going to decide which is which? The SEC’s enforcement division? Developing.
A steep descent brings Clinton’s plane to Charleston’s hilltop airport. After an appropriate wait, she steps from the plane and pretends to wave to a crowd of supporters; in fact, she is waving to 10 photographers underneath the airplane’s wing. She pretends to spot an old friend in the crowd, points and gives another wave; in fact, she is waving at an aide she had been talking with on the plane minutes earlier.
What most people don’t consider is the fact that this is normal, not exceptional, presidential politics. She didn’t learn to be this kind of an actor just after Indiana.
BTW, we all know where she learned the “point and wave” trick. Some people can pull it off brilliantly.
Some can’t.
Don Boudreaux had the best depiction of the what drives a person to such ignominy.
Posted by Marc Hodak on May 13, 2008 under Collectivist instinct | Comments are off for this article
Over 100 officials burst into the plant. These were the same officials who had been known, in previous similar raids, to have “used humiliation, opposite-sex searches and long periods of secrecy.” Here is how it went down:
Larson said the agents told workers to stay in place then separated them by asking those with identification to stand to the right and those with other papers, to stand to the left.
“There was plenty of hollering,” Larson said. “You couldn’t go anywhere.”
When asked who was separated, Larson said those standing in the group with other papers were all Hispanic.
In America.
I remember when we didn’t live in a society where hundreds of people could be rounded up and asked for their papers.
So it’s kind of refreshing (in a pointy-headed, academic way) to see a regime where their thirst for power is completely out in the open, where those in power don’t pretend to give a rat’s *ss about anything other than keeping it. The Burmese junta is completely open like that. Amazing. Dissent or challenges of any kind? Not tolerated. Democracy? Out of the question.
In democracies, politicians disguise the fact that in a choice between their stated ideals versus getting power, most of them consider ideals expendable. In Burma, they are completely open to everyone (but their own people, if they can manage it) that in that in a choice between helping millions of their fellow citizens versus risking losing any part of their grip on power, their fellow citizens are expendable.
Posted by Marc Hodak on May 8, 2008 under Self-promotion | Comments are off for this article
That was the working title for this article that I just published in Forbes. Another possible title was “Defending Outrageous CEO Pay.” Anyway, it appears in their special report on Competition. Dissenting mail (not quite hate mail) has already started rolling in.
Mr Fritzl reportedly criticised media-coverage of his case as “totally one-sided”, and added that he was “not a monster”.
I don’t doubt that the reporting has been one-sided, given my research into how the media exploits scandals. But how one-sided is the statement that, “He has, however, admitted holding Elisabeth captive and repeatedly raping her.” Over 24 years. And what is the other side of his story, the side that points out his humanity? Referring to his captive daughter/grandaughter’s severe illness that required hospitalization:
“Without me [she] would not be alive anymore… I was the one who made sure that she was taken to a hospital,” Mr Fritzl said.
“I could have killed all of them – then nothing would have happened. No-one would have ever known about it,” he added.
I don’t know if “monster” is the right word, but in this case I would consider that a fine semantic distinction, not a fundamental issue of media bias.
Fritzl’s attempt at defending his humanity strongly reminded me of the following quote attributed to another man captured just a few miles from Fritzl’s home:
My name is Franz Ziereis, born 1903 in Munich, where my mother and brothers and sisters are still living. I, myself, am not a wicked man…
In the same note, here is his description of the prison that he commanded.
The inmates had to haul stones until they collapsed, then they were shot and their record was annotated “Trying to escape”. On 30 April 33, inmates of the camp office were ordered to assemble the court yard. There they were shot like wild animals by SS Oberscharfuehrer Niedermeyer and the Gestapoagent Polaska. Altogether, as far as I know, 65,000 inmates were murdered in Mauthausen. In most cases, I myself took part in the executions.
The theology of evil is a difficult, some might argue loaded, philosophical issue. But the psychology of evil is straightforward: apparently, nobody believes that they are a wicked person.
Posted by Marc Hodak on May 5, 2008 under Economics | Comments are off for this article
Barbara Corcoran wrote two books subtitled “…and other business lessons I learned from my mom.”
The lessons themselves are interesting and useful, but Corcoran, who boasts straight D’s in high school and college demonstrated that there were some important economics lessons that were missing or forgotten. The other morning on the Today Show, she gave her take on the current crisis of foreclosures: the big financial institutions lured poor suckers to buy homes they couldn’t afford in order to make a buck, and the government wasn’t doing enough to help these poor people. Some of you might recall that real estate brokers were involved somewhere in the this process…hmm, what was that? Oh, yea brokering the transactions. Hey, Corcoran is a broker!
Apparently, one of the lessons her mom taught her was, “always cast blame in every direction but yours.”
Corcoran established her credibility on economics, as it were, beginning in November 2005, when she was pooh-poohing economists who were warning about the unsustainability of the housing boom:
It’s funny what’s happening right now – there’s so much uncertainty in the market, and everybody’s been spooked by all the media coverage that’s out there that it really is a great time to buy. It’s a great opportunity right now, and I don’t think it’s going to last very long…This ‘bubble babble’ is baloney, and it’s scaring people away and making buyers “think about it”, and while they’re “thinking about it”, the house prices are going to go up, and I truly believe that.
By next Fall, Corcoran was singing a different tune…about why people should be buying:
If you look at the actual sale prices, the deals that are happening now, prices have already come down, and they’ve come down by a lot.
Another lesson she learned was, “It’s OK to mislead your customers in order to make a sale.”
That was the headline of a WSJ article primarily about holders who don’t want more say. In fact, the three skeptics it cited are surprising to anyone who plays in the corporate governance world.
Charles Elson, chairman of the Weinberg Center for Corporate Governance at the University of Delaware, has rarely seen a governance reform he didn’t like. But in this case, he says that it isn’t the job of shareholders to tweak compensation plans; if you have a problem with the board’s work, go after the board, not their work. This attitude is similar to the attitude held by most people (including Elson) regarding the line of demarcation between the board and management; if the board doesn’t like what management is doing, it should reconsider the management, not get involved in the particulars of management policy.
Edward Durkin is Director of Corporate Affairs United Brotherhood of Carpenters. It’s not often that a union man is against anything that would make management’s job more uncomfortable, but Durkin says:
a simple “yes” or “no” vote on pay plans would lead to a “hollow” dialogue between investors and directors. The union manages 95 pension funds with around $40 billion invested in thousands of companies. Reviews of each of those proxies would necessarily be cursory, he says. In response, he would expect directors to standardize compensation packages, which could lead to less flexible and poorer pay plans.
Durkin prefers to target a smaller group of companies, gain an deeper understanding of what is really going on, and engage management in a discussion about their practices. In other words, he’s already fulfilling the promise of “Say on Pay” without the ham-fisted proxy fights or legislation that impose unnecessary costs on the shareholders. In fact research shows that management engagement by major shareholders is one of the few activist tactics that actually works in altering corporate governance for the better.
Finally, Peter Clapman questions the wisdom of “Say on Pay.” Nobody would accuse Clapman of being a tool of management; he is former governance chief at the giant fund manager TIAA-CREF, and a partner in U.K.-based investors’ group, Governance for Owners LLP.
The quality of a proposal is not, of course, to be judged by who lines up for or against it; it should be judged on the merits. It’s just nice to see some of the corporate governance mavens espousing a more thoughtful approach than the press headlines.
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