[quote=CA renter]
Where we disagree is that I believe most truly “rich” people do NOT put their own money at risk, and they are NOT the people who create and build bussinesses. They are the parasites (executives, investors, etc.) who either buy or come into an existing **corporation** that sheilds them from personal responsibility, and proceed to direct all the profits into their own pockets, leaving an empty shell of a once-great company behind. They do nothing to benefit society at large, and collude with other like-minded people who keep close watch over the “circle of winners” and their money flows. These are the “capitalists” I rail against, and I have yet to see a convincing argument that would convince me that they are in any way beneficial or useful to society.
If you look at companies run by entrepreneurs versus the “corporatists,” you’ll see that the people who created the businesses do not make many, many multiples more than most of their employees. For the most part, you only see this behavior in the large corporations where the risk of the company’s failing does not severely, adversely affect the executives (they are not emotionally attached to the company because they didn’t start and grow it, and/or they are protected by laws of incorporation from any liability if the company fails).
I think it’s important for us as a society to rethink what we are trying to reward, and how we go about doing it. [/quote]
Here’s the problem with your “parasites”: they are put into place via a board of directors who are voted into these positions by the shareholders – the owners. Yeah, I think a lot of what goes on in large public companies is digusting, but you know what I do about it? I don’t buy their frickin’ stocks! If all shareholders – owners, that is – spent a few hours each year looking over their proxies, voting rationally, and otherwise exercising some prudence over their investments, maybe folks like Thain, et al wouldnt’ be able to rape the companies like they do. Likewise, if everyone just avoided – that is, didn’t buy the stocks of – companies with shitty corporate governance (which is 95% of the big ones), their stocks would go to zero, they wouldn’t have access to capital and they’d either (a) go out of business, or (b) be forced to change their governance, with all that implies. My point is that these compensation problems at large public companies are in large measure the fault of: THE INVESTORS WHO CONTINUE TO BUY THEIR STOCKS AND NOT VOTE THEIR PROXIES PROPERLY. That is, individual investors, pension funds, mutual funds, etc. etc. My personal solution is simple: I don’t invest in companies that don’t do business the way I want it done. Generally this means that the company is very small, I have to know someone on the board personally, I have access to management, and I know that management is open to suggestions on governance matters. Unfortunately this criteria eliminates every company in the S&P 1000.
Now, when you talk about “entrepreneurs who created the businesses” not “making” many multiples more than their employees, you’re talking about “salaries and bonuses” here. But if you were to include the value of the retained earnings in the company and the value of these entrepreneurs’ equity stake, they absolutely make just as many multiples as the “corporatists,” and often more. But they make it through increasing the value of their ownership rather than in “pay.” For example, Warren Buffett’s wealth has not grown through salary, but rather through the value of his ownership stake increasing at a high rate over a long period of time. Have Berkshire’s employees’ pay increased at anything close to the same rate as Buffett’s wealth? Of course not. So it’s six of one, half dozen of the other. But I agree with the point I think you’re trying to make in that I’d rather see executive pay take the form of increased ownership – and not in the form of options – as opposed to increased cash compensation. Compensation at the large companies these days is clearly not tied to the long-term performance of the underlying companies. And that’s a big problem.
