Why are corporations doing so well as the economy struggles?

[Direckshun]

This is something I'd like to see your explanations on.

Corporations are recording record profits in 2012. Not good profits, record profits.

And yet our economy struggles at a little under 3% growth and a high unemployment rate.

Why, in your opinion, is the economy so bad yet businesses are doing so great?

http://economix.blogs.nytimes.com/20...orate-profits/

Record Corporate Profits
United States corporate profits reached a record high in the third quarter of this year, even adjusted for inflation, according to a report from the Bureau of Economic Analysis.
By CATHERINE RAMPELL
November 29, 2012, 3:00 pm



The increase from the second quarter was entirely a result of stronger business at home. Profits received from American-owned businesses abroad fell slightly in the third quarter, which may not be surprising given the recession in Europe and the slowdown in China.

Additionally, all of the growth in domestic corporate profits was accounted for by the financial sector.

Domestic profits of financial corporations rose $71.3 billion in the third quarter, after falling $39.7 billion in the second. Domestic profits of nonfinancial corporations, on the other hand, decreased $1 billion in the third quarter, after rising $27.8 billion in the second quarter.

[chiefzilla1501]

Originally Posted by KCWolfman

This class warfare BS is old hat.

This isn't class warfare. This is about executives serving their corporation vs working their own self interests.

[blaise]

Originally Posted by chiefzilla1501

This isn't class warfare. This is about executives serving their corporation vs working their own self interests.

I bet most executives serve their corporation first.

[KCWolfman]

Originally Posted by chiefzilla1501

Far fetched? Look up wage gaps, executive compensation (be sure to look at overall compensation including bonuses), and overall pay of executives not just ceo's.

I can't believe there are people in denial that executive pay is going up across the board.

I would not be in denial if I had a viable source telling me EVERY corporation is increasing executive compensation to astronomical amounts. All it takes is a link to an unbiased source.

[KCWolfman]

Kodak, Schwinn, Lehmann Brothers, Reader's Digest, Hostess have all declared bankruptcy over the last 3 years.

Cost Plus, Ram Energy, Crown Media, Thompson Reuters, Great Wolf Resorts, Dex One, Metalico, American Apparel, and Inventure Foods have all asked for a restructure review from the courts.

This doesn't support your wealthy eating poor people scenario at all.

[chiefzilla1501]

Originally Posted by KCWolfman

I would not be in denial if I had a viable source telling me EVERY corporation is increasing executive compensation to astronomical amounts. All it takes is a link to an unbiased source.

Again... I seriously can't believe there are people who can't see the obvious here.

http://online.wsj.com/article/SB1000...584787190.html
http://www.haygroup.com/us/press/details.aspx?id=33833

What you see are two stories. Corporations were so oblivious that in 2010, in the midst of a recession, they raised executive compensation by 10%. This is MEDIAN value, not average value. So yes, this indicates that it's happening in lots of places, not just with a few bad apples. Secondly, what you're seeing is a trend where shareholders are putting more pressure on boards of directors to finally restructure executive pay. Good step, but why did it take this long? And how long before the boards and shareholders stop paying attention? And keep in mind that these increases are ON TOP of massive increases made to median compensation pay during recessionary years. Let that sink in. That while corporations were tanking during the recession, MEDIAN executive pay was hitting record level increases.

So good progress. But it has to keep going, and it's not nearly enough to balance the gap. The best corporations are the ones where boards heavily monitor the gap between executive and median wages. But many of them don't care. In fact, there are too many boards that are serving their executives instead of working on behalf of their shareholders.

[La literatura]

chiefzilla is a communist. Kill him.

[chiefzilla1501]

Originally Posted by KCWolfman

Kodak, Schwinn, Lehmann Brothers, Reader's Digest, Hostess have all declared bankruptcy over the last 3 years.

Cost Plus, Ram Energy, Crown Media, Thompson Reuters, Great Wolf Resorts, Dex One, Metalico, American Apparel, and Inventure Foods have all asked for a restructure review from the courts.

This doesn't support your wealthy eating poor people scenario at all.

Stop with the ridiculous accusation that I'm crying class warfare. I am talking about executives that have jobs and are working on behalf of their own self interests instead of the company they work for or the shareholders they serve.

I don't care about the wage gap. I'm not going to complain about Apple executive pay increases, which are based on performance AND are in addition to massive investments they are making to R&D and marketing. I am critical of executives who are raising their compensation by 10% while they are making cuts across the company and not investing in their companies, and the boards that enable that behavior.

[La literatura]

Originally Posted by KCWolfman

Kodak, Schwinn, Lehmann Brothers, Reader's Digest, Hostess have all declared bankruptcy over the last 3 years.

Cost Plus, Ram Energy, Crown Media, Thompson Reuters, Great Wolf Resorts, Dex One, Metalico, American Apparel, and Inventure Foods have all asked for a restructure review from the courts.

This doesn't support your wealthy eating poor people scenario at all.

I'm not connecting the dots. How do bankruptcies go against his argument?

[chiefzilla1501]

Originally Posted by blaise

I bet most executives serve their corporation first.

Raising your compensation while you are asking all your division heads to make massive cuts (and then demanding that less people work more hours to drive even higher results on limited budgets) is NOT serving your corporation first. It's selfish.

If this behavior was going on and executive pay stayed flat, dropped, or increased moderately... fine. But instead, executives are making a strategic decision that rather than use an extra few million dollars to invest in their company, they are going to instead use it to fund a bonus increase for themselves.

[HonestChieffan]

Originally Posted by chiefzilla1501

Raising your compensation while you are asking all your division heads to make massive cuts (and then demanding that less people work more hours to drive even higher results on limited budgets) is NOT serving your corporation first. It's selfish.

If this behavior was going on and executive pay stayed flat, dropped, or increased moderately... fine. But instead, executives are making a strategic decision that rather than use an extra few million dollars to invest in their company, they are going to instead use it to fund a bonus increase for themselves.

How wide spread is this behavior? Do you have some information on the ceo pay levels in various corporations and industries that show its widespread?

How many CEOs have taken a no raise or a reduction?

Is the data different for companies that are growing in profitability vs those flat or in a decline?


oops never mind. Here is a link to 2009 pay for CEOs. Looks like many actually did take a reduction.

http://usatoday30.usatoday.com/money...database_N.htm

[chiefzilla1501]

Originally Posted by HonestChieffan

How wide spread is this behavior? Do you have some information on the ceo pay levels in various corporations and industries that show its widespread?

How many CEOs have taken a no raise or a reduction?

Is the data different for companies that are growing in profitability vs those flat or in a decline?


oops never mind. Here is a link to 2009 pay for CEOs. Looks like many actually did take a reduction.

http://usatoday30.usatoday.com/money...database_N.htm

I have a lot more faith in the Wall Street Journal to get the story right, and they showed 10% increases on MEDIAN executive pay. Which means that even halfway down the list, you're seeing exorbitant pay increases. This wasn't based on average pay. Executive compensation has become so complicated that the source of data is pretty critical.

I don't know the answer to growing in profitability vs. those flat or in a decline. But given that this economy is in a recession and most companies heavily skew toward the latter, it should be unsettling that we're seeing pay increases at all, let along exorbitant increases.

And keep in mind... this is a minimum of what they're making. We're not factoring in things we may not realize they are making but were difficult to account for. And we're not even touching the key discussion point that many executives are paid on options, which means they make a shitload of money when their company grows and they make a lot of money if the company tanks too. So we're not even factoring in the economic impact of our executives gambling on decisions to boost their own pay -- that needs to be factored in to, because the risk of a bad decision becomes an added cost to the corporation.

[HonestChieffan]

Originally Posted by chiefzilla1501

I have a lot more faith in the Wall Street Journal to get the story right, and they showed 10% increases on MEDIAN executive pay. Which means that even halfway down the list, you're seeing exorbitant pay increases. This wasn't based on average pay. Executive compensation has become so complicated that the source of data is pretty critical.

I don't know the answer to growing in profitability vs. those flat or in a decline. But given that this economy is in a recession and most companies heavily skew toward the latter, it should be unsettling that we're seeing pay increases at all, let along exorbitant increases.

And keep in mind... this is a minimum of what they're making. We're not factoring in things we may not realize they are making but were difficult to account for. And we're not even touching the key discussion point that many executives are paid on options, which means they make a shitload of money when their company grows and they make a lot of money if the company tanks too. So we're not even factoring in the economic impact of our executives gambling on decisions to boost their own pay -- that needs to be factored in to, because the risk of a bad decision becomes an added cost to the corporation.

Source of pay is easy to get to, its public information for publicly traded companies. You can go to the use link and pick by company and see the pay in total

[chiefzilla1501]

Originally Posted by HonestChieffan

Source of pay is easy to get to, its public information for publicly traded companies. You can go to the use link and pick by company and see the pay in total

How are you measuring options, including backdated options? Were they exercised? Are you factoring in long-term incentive payouts? Are you factoring in that at any point in time, the CEO can walk out the door and collect an astoundingly high golden parachute and retirement package EVEN IF THEY FAILED? Are you factoring in the 5-year cost the CEO incurs on the corporation for making a terrible long-term decision and then walking out before the decision actually negatively affects the company? What about perks, including non-related work expenses on the company dime?

On the surface alone... median pay is way up. Beneath the surface, there's a ton of that shit above that makes the problem even worse, because we're not even fully calculating the cost of executive compensation.

[chiefzilla1501]

Originally Posted by chiefzilla1501

How are you measuring options, including backdated options? Were they exercised? Are you factoring in long-term incentive payouts? Are you factoring in that at any point in time, the CEO can walk out the door and collect an astoundingly high golden parachute and retirement package EVEN IF THEY FAILED? Are you factoring in the 5-year cost the CEO incurs on the corporation for making a terrible long-term decision and then walking out before the decision actually negatively affects the company? What about perks, including non-related work expenses on the company dime?

On the surface alone... median pay is way up. Beneath the surface, there's a ton of that shit above that makes the problem even worse, because we're not even fully calculating the cost of executive compensation.

You asked for solutions. There are plenty out there.

• Stop croney practices between boards and executives. Boards should to the greatest extent possible serve the shareholders, not be in cahoots with executives
• Force boards to set more compensation on long-term incentives
• Have actual threat of negative financial compensation for failure. This is huge. Our compensation structure rewards gambling and it rewards failure (it definitely doesn't punish failure)
• Continue to force transparency behind exactly what executives are being paid for and how much the median worker is being paid
• Continue to reduce cheating. Stop CEOs who are using unethical but legal practices to boost their compensation.
• Give shareholders more power to affect compensation decisions

[HonestChieffan]

Originally Posted by chiefzilla1501

How are you measuring options, including backdated options? Were they exercised? Are you factoring in long-term incentive payouts? Are you factoring in that at any point in time, the CEO can walk out the door and collect an astoundingly high golden parachute and retirement package EVEN IF THEY FAILED? Are you factoring in the 5-year cost the CEO incurs on the corporation for making a terrible long-term decision and then walking out before the decision actually negatively affects the company? What about perks, including non-related work expenses on the company dime?

On the surface alone... median pay is way up. Beneath the surface, there's a ton of that shit above that makes the problem even worse, because we're not even fully calculating the cost of executive compensation.

Depends on the option but the options I received were of zero value until they were exercised. We were awarded so many shares at market price the day of option declaration. We could not exercise for 3 years and had to exercise in 10. To exercise we had to pay the option price.

Options are not a gift of stock. I recall only one option I received that was never exercised. I know a couple were dynamite with splits taking place. And a couple were not so much.


Another incentive was paid in the form of a Incentive award. That was stock that was given to the managers who earned them. No cost to the awardee. However, you paid regular income tax in the year of the award on the full value.

Another compensation was a Long Term Incentive. I don't even recall how that was supposed to work but I recall it didn't pay squat.

Do you have any actual examples of the things you rail against or is it just a global broad sweeping diatribe?