Unit2Sucks said:

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calbear93 said:

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82gradDLSdad said:

---

calbear93 said:

---

dimitrig said:

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bearister said:

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America's Small Businesses Need a Marshall Plan | Howard Schultz

"With a new coronavirus relief measure stalled in Congress, CEOs of some of the world's biggest companies have banded together to send a message to Washington: Get money to small businesses now!

"By Labor Day, we foresee a wave of permanent closures if the right steps are not taken soon," warns the letter, organized by Howard Schultz and signed by more than 100 CEOs, including the heads of Salesforce, Alphabet, Facebook, Microsoft, Walmart, McDonald's, Disney, Quibi, IBM, Merck, Marriott, the Business Roundtable, the U.S. Chamber of Commerce and more.

Axios Markets editor Dion Rabouin writes that the letter to the top four congressional leaders lays out a recipe for a sizable small-business aid package.

The project, Schultz's first big public push since he suspended his run for president, calls for:

"federally guaranteed loans, at favorable terms, that will enable small businesses to transform and sustain themselves."

"Businesses should have flexibility in how loan funds are used."

"The hardest-hit businesses should be eligible for at least partial loan forgiveness."

"Relief needs to be delivered expeditiously. Building on the existing PPP infrastructure would be one way to quickly stand up a new loan program."

"These funds must flow to all small businesses in need, particularly those run by people of color, who have traditionally had less access to capital."

Between the lines: Neither the House's HEROES Act nor the latest version of Senate Republicans' HEALS Act include significant funding for small businesses besides the PPP extension.

The last word: "Tens of millions of Americans have already lost their jobs in this pandemic. ... By year end, the domino effect of lost jobs as well as the lost services and lost products that small businesses provide could be catastrophic." Axios


https://www.howardschultz.com/lettertocongress/

---

Sounds like these large companies are realizing that without small businesses they may not have very many customers. I doubt they are doing this from the kindness of their hearts.

---

Why is "compassion" and "empathy" limited to us and not to CEOs of companies? Why vilify others? Writing those things do not elevate us or anything we have done, and make our ass sitting behind a computer any more heroic.

I believe there is a lot connecting all of us, and the faster we move on from this culture of dividing and vilifying each other by party, class, and race, the better.

---

Part of the resentment has to be due to extremely bloated CEO compensation. Compensation has skewed during my working lifetime and the magnanimous CEOs can only say, "I've got nothing to do with that. It's all in the hands of the BODs."

---

A big part of that has been from the governance folks who promote alignment of shareholder interest with those of management. .

---

I think it's also due in large part to the process that companies use for exec comp. They all hire Compensia (or similar) to help them with the analysis. Every company seems to target 75% for their pay. Because every company aims to comp above average, you have constant upward pressure on pay. Every time compensation is reset it's based on the new higher market.

I don't disagree that rising equity values juice the results some, but the entire ecosystem is built to remove value from consideration. Execs get paid a lot because execs get paid a lot.

It's not any different from QB pay in the NFL.

---

That is absolutely right. The whole concept of peer group companies, whether they benchmark or not, makes it so that there will not be any new resetting downward. And as you stated, each company thinks their executives are a bit special and should get above average, meaning, the entire average will go up every year.

82gradDLSdad said:

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calbear93 said:

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82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

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calbear93 said:

---

dimitrig said:

---

bearister said:

---

America's Small Businesses Need a Marshall Plan | Howard Schultz

"With a new coronavirus relief measure stalled in Congress, CEOs of some of the world's biggest companies have banded together to send a message to Washington: Get money to small businesses now!

"By Labor Day, we foresee a wave of permanent closures if the right steps are not taken soon," warns the letter, organized by Howard Schultz and signed by more than 100 CEOs, including the heads of Salesforce, Alphabet, Facebook, Microsoft, Walmart, McDonald's, Disney, Quibi, IBM, Merck, Marriott, the Business Roundtable, the U.S. Chamber of Commerce and more.

Axios Markets editor Dion Rabouin writes that the letter to the top four congressional leaders lays out a recipe for a sizable small-business aid package.

The project, Schultz's first big public push since he suspended his run for president, calls for:

"federally guaranteed loans, at favorable terms, that will enable small businesses to transform and sustain themselves."

"Businesses should have flexibility in how loan funds are used."

"The hardest-hit businesses should be eligible for at least partial loan forgiveness."

"Relief needs to be delivered expeditiously. Building on the existing PPP infrastructure would be one way to quickly stand up a new loan program."

"These funds must flow to all small businesses in need, particularly those run by people of color, who have traditionally had less access to capital."

Between the lines: Neither the House's HEROES Act nor the latest version of Senate Republicans' HEALS Act include significant funding for small businesses besides the PPP extension.

The last word: "Tens of millions of Americans have already lost their jobs in this pandemic. ... By year end, the domino effect of lost jobs as well as the lost services and lost products that small businesses provide could be catastrophic." Axios


https://www.howardschultz.com/lettertocongress/

---

Sounds like these large companies are realizing that without small businesses they may not have very many customers. I doubt they are doing this from the kindness of their hearts.

---

Why is "compassion" and "empathy" limited to us and not to CEOs of companies? Why vilify others? Writing those things do not elevate us or anything we have done, and make our ass sitting behind a computer any more heroic.

I believe there is a lot connecting all of us, and the faster we move on from this culture of dividing and vilifying each other by party, class, and race, the better.

---

Part of the resentment has to be due to extremely bloated CEO compensation. Compensation has skewed during my working lifetime and the magnanimous CEOs can only say, "I've got nothing to do with that. It's all in the hands of the BODs."

---

A big part of that has been from the governance folks who promote alignment of shareholder interest with those of management. When you look at most of the executive compensation, it comes from equity grants. It also came from tax rules before TCJA where performance based compensation was permitted to be deducted even if it exceeds one million. It also came from proxy advisory firms who promote long-term equity compensation and performance based compensation over fixed or cash compensation. With the historic rise in equity, those policies resulted in bloated compensation. Hell is paved with good intentions. Just like the real estate asset bubbles and 2008 financial crisis were created by the good intention of the federal government subsidizing home ownership and mortgages, the rise in executive compensation rose from tax laws intended to limit executive compensation, governance folks trying to limit fixed executive compensation, and the asset bubbles and rise of equity markets.

---

When you give someone stock, not options, that is not incentive based. All you have to do is not cause the stock to crash before you cash out. The two companies I worked for paid their CEOs in huge amounts of stock. The stock did nothing and they sold when they could. Incentive/performance based my ass. On the flip side, I got years of stock Options when Pacbell was bought by SBC. The stock went from 60 to 20 during those years. I made $2500 dollars before they shipped me to IBM. Don't get me started on that company. The compensation game is so skewed it's sickening.

---

The funny thing is that proxy advisory firms and other governance folks trying to reign in executive compensation do not treat options as incentive based, arguing that options over 10 year period will go up in value. Most would agree that time-based vesting stock or RSUs are not performance based, but most companies have performance based vesting of stock or RSUs, such as relative TSR.

---

I don't trust any one or any group who's been charged with 'reigning in' executive compensation. They've probably been paid hundreds of millions of dollars too for having zero impact. Rigged game. I defy anyone to show me evidence otherwise. BTW, I've voted Republican my entire voting life so this isn't coming from some bleeding heart liberal. But even an old righty can only get hit over the head so long. I don't see either side actually addressing this.

---

The proxy advisory firms are a shady organization, but if there is any undue influence, I would say it comes from selling their advisory services to companies to get the right recommendation while also being in bed with activist shareholders on hostile takeovers. The SEC has been very focused on proxy plumbing and getting the proxy advisory firms to have liability corresponding the their proxy solicitation role.

BearChemist said:

---

---

I always wondered if it was all an act, but I think like OJ as another famous example, the lie has become the truth. I think he has no idea who he is, what he believes, or what is true anymore, all he knows is how to perform the character he created.

No matter how many videos like this surface, his 25% base will not be swayed. The probably think that he destroyed Swan while the rest of us see a bumbling idiot more akin to a Naked Gun movie than a mastermind.

My wife showed me one of her HS friend on FB saying that Trump is incredible because he offered to pay for Vanessa Guillen's funeral. "And if I can help you out with the funeral, I'll help you out, financially, I'll help you," Trump said. I would say the chances of him writing a check are about 10%. When you pay attention to Trump's history you see how frequently he talks about donating or giving money away, but he never actually does it.

Unit2Sucks said:

---

When you pay attention to Trump's history you see how frequently he talks about donating or giving money away, but he never actually does it.

---

Not just about giving money, about everything. Trump talks a big game but rarely has the follow-through.

sycasey said:

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Unit2Sucks said:

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When you pay attention to Trump's history you see how frequently he talks about donating or giving money away, but he never actually does it.

---

Not just about giving money, about everything. Trump talks a big game but rarely has the follow-through.

---

I don't know, any day now he's going to sign that executive order which he says will be unconstitutional and will "do" healthcare. His base may have to throw out their pocket constitutions, but those were just a prop anyway.

82gradDLSdad said:

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calbear93 said:

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82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

dimitrig said:

---

bearister said:

---

America's Small Businesses Need a Marshall Plan | Howard Schultz

"With a new coronavirus relief measure stalled in Congress, CEOs of some of the world's biggest companies have banded together to send a message to Washington: Get money to small businesses now!

"By Labor Day, we foresee a wave of permanent closures if the right steps are not taken soon," warns the letter, organized by Howard Schultz and signed by more than 100 CEOs, including the heads of Salesforce, Alphabet, Facebook, Microsoft, Walmart, McDonald's, Disney, Quibi, IBM, Merck, Marriott, the Business Roundtable, the U.S. Chamber of Commerce and more.

Axios Markets editor Dion Rabouin writes that the letter to the top four congressional leaders lays out a recipe for a sizable small-business aid package.

The project, Schultz's first big public push since he suspended his run for president, calls for:

"federally guaranteed loans, at favorable terms, that will enable small businesses to transform and sustain themselves."

"Businesses should have flexibility in how loan funds are used."

"The hardest-hit businesses should be eligible for at least partial loan forgiveness."

"Relief needs to be delivered expeditiously. Building on the existing PPP infrastructure would be one way to quickly stand up a new loan program."

"These funds must flow to all small businesses in need, particularly those run by people of color, who have traditionally had less access to capital."

Between the lines: Neither the House's HEROES Act nor the latest version of Senate Republicans' HEALS Act include significant funding for small businesses besides the PPP extension.

The last word: "Tens of millions of Americans have already lost their jobs in this pandemic. ... By year end, the domino effect of lost jobs as well as the lost services and lost products that small businesses provide could be catastrophic." Axios


https://www.howardschultz.com/lettertocongress/

---

Sounds like these large companies are realizing that without small businesses they may not have very many customers. I doubt they are doing this from the kindness of their hearts.

---

Why is "compassion" and "empathy" limited to us and not to CEOs of companies? Why vilify others? Writing those things do not elevate us or anything we have done, and make our ass sitting behind a computer any more heroic.

I believe there is a lot connecting all of us, and the faster we move on from this culture of dividing and vilifying each other by party, class, and race, the better.

---

Part of the resentment has to be due to extremely bloated CEO compensation. Compensation has skewed during my working lifetime and the magnanimous CEOs can only say, "I've got nothing to do with that. It's all in the hands of the BODs."

---

A big part of that has been from the governance folks who promote alignment of shareholder interest with those of management. When you look at most of the executive compensation, it comes from equity grants. It also came from tax rules before TCJA where performance based compensation was permitted to be deducted even if it exceeds one million. It also came from proxy advisory firms who promote long-term equity compensation and performance based compensation over fixed or cash compensation. With the historic rise in equity, those policies resulted in bloated compensation. Hell is paved with good intentions. Just like the real estate asset bubbles and 2008 financial crisis were created by the good intention of the federal government subsidizing home ownership and mortgages, the rise in executive compensation rose from tax laws intended to limit executive compensation, governance folks trying to limit fixed executive compensation, and the asset bubbles and rise of equity markets.

---

When you give someone stock, not options, that is not incentive based. All you have to do is not cause the stock to crash before you cash out. The two companies I worked for paid their CEOs in huge amounts of stock. The stock did nothing and they sold when they could. Incentive/performance based my ass. On the flip side, I got years of stock Options when Pacbell was bought by SBC. The stock went from 60 to 20 during those years. I made $2500 dollars before they shipped me to IBM. Don't get me started on that company. The compensation game is so skewed it's sickening.

---

The funny thing is that proxy advisory firms and other governance folks trying to reign in executive compensation do not treat options as incentive based, arguing that options over 10 year period will go up in value. Most would agree that time-based vesting stock or RSUs are not performance based, but most companies have performance based vesting of stock or RSUs, such as relative TSR.

---

I don't trust any one or any group who's been charged with 'reigning in' executive compensation. They've probably been paid hundreds of millions of dollars too for having zero impact. Rigged game. I defy anyone to show me evidence otherwise. BTW, I've voted Republican my entire voting life so this isn't coming from some bleeding heart liberal. But even an old righty can only get hit over the head so long. I don't see either side actually addressing this.

---

The proxy advisory firms are a shady organization, but if there is any undue influence, I would say it comes from selling their advisory services to companies to get the right recommendation while also being in bed with activist shareholders on hostile takeovers. The SEC has been very focused on proxy plumbing and getting the proxy advisory firms to have liability corresponding the their proxy solicitation role.

---

I'll admit I don't understand many of the terms you use. Here is what I do know, Randall Stephenson made $30,000,000 per year as AT&'s CEO. Under his watch the stock went nowhere, AT&T was forced to pay 3 billion to T-Mobile for the failed merger, DirecTV was purchased and driven into the ground and is now on the verge of extinction , the iPhone game changer moment did nothing for T, etc., etc., etc. And yet Randy kept getting loads and loads of stock. Now the stock price went nowhere but it didn't go down and so for providing very, very average CEO-ship Randall just retired a fabulously wealthy man. Oh, and T has $150 billion of debt to wrestle with along with five too many tv services and a movie company that the new guy nor Randall have any experience running. Rigged.

---

That sounds like bad oversight. On the break-up fee, I would not blame him for the payment of the break-up fee for the failed merger with T-Mobile. These merger agreements and allocation of risk are extremely dynamic, and it is not easy to get aligned to avoid a more costly hostile takeover if you don't get aligned with the target's board.

Not sure when this was, but it there were that type of misalignment between performance and pay, I would be surprised if the proxy advisory firms recommended a favorable vote on say on pay. If there is less than 70% support (even if 50% is the pass / fail), then there will be recommendation against the compensation committee member re-election. And institutional investors are getting tougher. See Blackrock's action against Qualcomm.

82gradDLSdad said:

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calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

dimitrig said:

---

bearister said:

---

America's Small Businesses Need a Marshall Plan | Howard Schultz

"With a new coronavirus relief measure stalled in Congress, CEOs of some of the world's biggest companies have banded together to send a message to Washington: Get money to small businesses now!

"By Labor Day, we foresee a wave of permanent closures if the right steps are not taken soon," warns the letter, organized by Howard Schultz and signed by more than 100 CEOs, including the heads of Salesforce, Alphabet, Facebook, Microsoft, Walmart, McDonald's, Disney, Quibi, IBM, Merck, Marriott, the Business Roundtable, the U.S. Chamber of Commerce and more.

Axios Markets editor Dion Rabouin writes that the letter to the top four congressional leaders lays out a recipe for a sizable small-business aid package.

The project, Schultz's first big public push since he suspended his run for president, calls for:

"federally guaranteed loans, at favorable terms, that will enable small businesses to transform and sustain themselves."

"Businesses should have flexibility in how loan funds are used."

"The hardest-hit businesses should be eligible for at least partial loan forgiveness."

"Relief needs to be delivered expeditiously. Building on the existing PPP infrastructure would be one way to quickly stand up a new loan program."

"These funds must flow to all small businesses in need, particularly those run by people of color, who have traditionally had less access to capital."

Between the lines: Neither the House's HEROES Act nor the latest version of Senate Republicans' HEALS Act include significant funding for small businesses besides the PPP extension.

The last word: "Tens of millions of Americans have already lost their jobs in this pandemic. ... By year end, the domino effect of lost jobs as well as the lost services and lost products that small businesses provide could be catastrophic." Axios


https://www.howardschultz.com/lettertocongress/

---

Sounds like these large companies are realizing that without small businesses they may not have very many customers. I doubt they are doing this from the kindness of their hearts.

---

Why is "compassion" and "empathy" limited to us and not to CEOs of companies? Why vilify others? Writing those things do not elevate us or anything we have done, and make our ass sitting behind a computer any more heroic.

I believe there is a lot connecting all of us, and the faster we move on from this culture of dividing and vilifying each other by party, class, and race, the better.

---

Part of the resentment has to be due to extremely bloated CEO compensation. Compensation has skewed during my working lifetime and the magnanimous CEOs can only say, "I've got nothing to do with that. It's all in the hands of the BODs."

---

A big part of that has been from the governance folks who promote alignment of shareholder interest with those of management. When you look at most of the executive compensation, it comes from equity grants. It also came from tax rules before TCJA where performance based compensation was permitted to be deducted even if it exceeds one million. It also came from proxy advisory firms who promote long-term equity compensation and performance based compensation over fixed or cash compensation. With the historic rise in equity, those policies resulted in bloated compensation. Hell is paved with good intentions. Just like the real estate asset bubbles and 2008 financial crisis were created by the good intention of the federal government subsidizing home ownership and mortgages, the rise in executive compensation rose from tax laws intended to limit executive compensation, governance folks trying to limit fixed executive compensation, and the asset bubbles and rise of equity markets.

---

When you give someone stock, not options, that is not incentive based. All you have to do is not cause the stock to crash before you cash out. The two companies I worked for paid their CEOs in huge amounts of stock. The stock did nothing and they sold when they could. Incentive/performance based my ass. On the flip side, I got years of stock Options when Pacbell was bought by SBC. The stock went from 60 to 20 during those years. I made $2500 dollars before they shipped me to IBM. Don't get me started on that company. The compensation game is so skewed it's sickening.

---

The funny thing is that proxy advisory firms and other governance folks trying to reign in executive compensation do not treat options as incentive based, arguing that options over 10 year period will go up in value. Most would agree that time-based vesting stock or RSUs are not performance based, but most companies have performance based vesting of stock or RSUs, such as relative TSR.

---

I don't trust any one or any group who's been charged with 'reigning in' executive compensation. They've probably been paid hundreds of millions of dollars too for having zero impact. Rigged game. I defy anyone to show me evidence otherwise. BTW, I've voted Republican my entire voting life so this isn't coming from some bleeding heart liberal. But even an old righty can only get hit over the head so long. I don't see either side actually addressing this.

---

The proxy advisory firms are a shady organization, but if there is any undue influence, I would say it comes from selling their advisory services to companies to get the right recommendation while also being in bed with activist shareholders on hostile takeovers. The SEC has been very focused on proxy plumbing and getting the proxy advisory firms to have liability corresponding the their proxy solicitation role.

---

I'll admit I don't understand many of the terms you use. Here is what I do know, Randall Stephenson made $30,000,000 per year as AT&'s CEO. Under his watch the stock went nowhere, AT&T was forced to pay 3 billion to T-Mobile for the failed merger, DirecTV was purchased and driven into the ground and is now on the verge of extinction , the iPhone game changer moment did nothing for T, etc., etc., etc. And yet Randy kept getting loads and loads of stock. Now the stock price went nowhere but it didn't go down and so for providing very, very average CEO-ship Randall just retired a fabulously wealthy man. Oh, and T has $150 billion of debt to wrestle with along with five too many tv services and a movie company that the new guy nor Randall have any experience running. Rigged.

---

That sounds like bad oversight. On the break-up fee, I would not blame him for the payment of the break-up fee for the failed merger with T-Mobile. These merger agreements and allocation of risk are extremely dynamic, and it is not easy to get aligned to avoid a more costly hostile takeover if you don't get aligned with the target's board.

Not sure when this was, but it there were that type of misalignment between performance and pay, I would be surprised if the proxy advisory firms recommended a favorable vote on say on pay. If there is less than 70% support (even if 50% is the pass / fail), then there will be recommendation against the compensation committee member re-election. And institutional investors are getting tougher. See Blackrock's action against Qualcomm.

---

I have to stop. I don't know how any of this works. I just see CEOs, even good ones, making insane money while most of the workers' pay has stayed relatively stagnant. That's a problem and there is an easy fix. But everyone views the fix, universal pay scale imposed by government, as socialist. I don't really care what you call it. CEOs would still get rich just not stupid rich. And the leftover money would go straight to the employees who help make it happen.

---

Unit2 mentioned that it's like QB pay in the NFL. Reminds me of college football and basketball coaches. "We need to stay even with (or ahead of) our competitors!" And salaries ratchet upward.

Big C said:

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82gradDLSdad said:

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calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

dimitrig said:

---

bearister said:

---

America's Small Businesses Need a Marshall Plan | Howard Schultz

"With a new coronavirus relief measure stalled in Congress, CEOs of some of the world's biggest companies have banded together to send a message to Washington: Get money to small businesses now!

"By Labor Day, we foresee a wave of permanent closures if the right steps are not taken soon," warns the letter, organized by Howard Schultz and signed by more than 100 CEOs, including the heads of Salesforce, Alphabet, Facebook, Microsoft, Walmart, McDonald's, Disney, Quibi, IBM, Merck, Marriott, the Business Roundtable, the U.S. Chamber of Commerce and more.

Axios Markets editor Dion Rabouin writes that the letter to the top four congressional leaders lays out a recipe for a sizable small-business aid package.

The project, Schultz's first big public push since he suspended his run for president, calls for:

"federally guaranteed loans, at favorable terms, that will enable small businesses to transform and sustain themselves."

"Businesses should have flexibility in how loan funds are used."

"The hardest-hit businesses should be eligible for at least partial loan forgiveness."

"Relief needs to be delivered expeditiously. Building on the existing PPP infrastructure would be one way to quickly stand up a new loan program."

"These funds must flow to all small businesses in need, particularly those run by people of color, who have traditionally had less access to capital."

Between the lines: Neither the House's HEROES Act nor the latest version of Senate Republicans' HEALS Act include significant funding for small businesses besides the PPP extension.

The last word: "Tens of millions of Americans have already lost their jobs in this pandemic. ... By year end, the domino effect of lost jobs as well as the lost services and lost products that small businesses provide could be catastrophic." Axios


https://www.howardschultz.com/lettertocongress/

---

Sounds like these large companies are realizing that without small businesses they may not have very many customers. I doubt they are doing this from the kindness of their hearts.

---

Why is "compassion" and "empathy" limited to us and not to CEOs of companies? Why vilify others? Writing those things do not elevate us or anything we have done, and make our ass sitting behind a computer any more heroic.

I believe there is a lot connecting all of us, and the faster we move on from this culture of dividing and vilifying each other by party, class, and race, the better.

---

Part of the resentment has to be due to extremely bloated CEO compensation. Compensation has skewed during my working lifetime and the magnanimous CEOs can only say, "I've got nothing to do with that. It's all in the hands of the BODs."

---

A big part of that has been from the governance folks who promote alignment of shareholder interest with those of management. When you look at most of the executive compensation, it comes from equity grants. It also came from tax rules before TCJA where performance based compensation was permitted to be deducted even if it exceeds one million. It also came from proxy advisory firms who promote long-term equity compensation and performance based compensation over fixed or cash compensation. With the historic rise in equity, those policies resulted in bloated compensation. Hell is paved with good intentions. Just like the real estate asset bubbles and 2008 financial crisis were created by the good intention of the federal government subsidizing home ownership and mortgages, the rise in executive compensation rose from tax laws intended to limit executive compensation, governance folks trying to limit fixed executive compensation, and the asset bubbles and rise of equity markets.

---

When you give someone stock, not options, that is not incentive based. All you have to do is not cause the stock to crash before you cash out. The two companies I worked for paid their CEOs in huge amounts of stock. The stock did nothing and they sold when they could. Incentive/performance based my ass. On the flip side, I got years of stock Options when Pacbell was bought by SBC. The stock went from 60 to 20 during those years. I made $2500 dollars before they shipped me to IBM. Don't get me started on that company. The compensation game is so skewed it's sickening.

---

The funny thing is that proxy advisory firms and other governance folks trying to reign in executive compensation do not treat options as incentive based, arguing that options over 10 year period will go up in value. Most would agree that time-based vesting stock or RSUs are not performance based, but most companies have performance based vesting of stock or RSUs, such as relative TSR.

---

I don't trust any one or any group who's been charged with 'reigning in' executive compensation. They've probably been paid hundreds of millions of dollars too for having zero impact. Rigged game. I defy anyone to show me evidence otherwise. BTW, I've voted Republican my entire voting life so this isn't coming from some bleeding heart liberal. But even an old righty can only get hit over the head so long. I don't see either side actually addressing this.

---

The proxy advisory firms are a shady organization, but if there is any undue influence, I would say it comes from selling their advisory services to companies to get the right recommendation while also being in bed with activist shareholders on hostile takeovers. The SEC has been very focused on proxy plumbing and getting the proxy advisory firms to have liability corresponding the their proxy solicitation role.

---

I'll admit I don't understand many of the terms you use. Here is what I do know, Randall Stephenson made $30,000,000 per year as AT&'s CEO. Under his watch the stock went nowhere, AT&T was forced to pay 3 billion to T-Mobile for the failed merger, DirecTV was purchased and driven into the ground and is now on the verge of extinction , the iPhone game changer moment did nothing for T, etc., etc., etc. And yet Randy kept getting loads and loads of stock. Now the stock price went nowhere but it didn't go down and so for providing very, very average CEO-ship Randall just retired a fabulously wealthy man. Oh, and T has $150 billion of debt to wrestle with along with five too many tv services and a movie company that the new guy nor Randall have any experience running. Rigged.

---

That sounds like bad oversight. On the break-up fee, I would not blame him for the payment of the break-up fee for the failed merger with T-Mobile. These merger agreements and allocation of risk are extremely dynamic, and it is not easy to get aligned to avoid a more costly hostile takeover if you don't get aligned with the target's board.

Not sure when this was, but it there were that type of misalignment between performance and pay, I would be surprised if the proxy advisory firms recommended a favorable vote on say on pay. If there is less than 70% support (even if 50% is the pass / fail), then there will be recommendation against the compensation committee member re-election. And institutional investors are getting tougher. See Blackrock's action against Qualcomm.

---

I have to stop. I don't know how any of this works. I just see CEOs, even good ones, making insane money while most of the workers' pay has stayed relatively stagnant. That's a problem and there is an easy fix. But everyone views the fix, universal pay scale imposed by government, as socialist. I don't really care what you call it. CEOs would still get rich just not stupid rich. And the leftover money would go straight to the employees who help make it happen.

---

Unit2 mentioned that it's like QB pay in the NFL. Reminds me of college football and basketball coaches. "We need to stay even with (or ahead of) our competitors!" And salaries ratchet upward.

---

Yeah, but at least with quarterbacks there is a rational basis for thinking they are actually that valuable to the team. Not sure you can say the same about CEOs.

Don't get me wrong, I'm sure the great ones are valuable, I'm just not convinced they're THAT much more valuable.

sycasey said:

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Big C said:

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82gradDLSdad said:

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calbear93 said:

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82gradDLSdad said:

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calbear93 said:

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82gradDLSdad said:

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calbear93 said:

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82gradDLSdad said:

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calbear93 said:

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82gradDLSdad said:

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calbear93 said:

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dimitrig said:

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bearister said:

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America's Small Businesses Need a Marshall Plan | Howard Schultz

"With a new coronavirus relief measure stalled in Congress, CEOs of some of the world's biggest companies have banded together to send a message to Washington: Get money to small businesses now!

"By Labor Day, we foresee a wave of permanent closures if the right steps are not taken soon," warns the letter, organized by Howard Schultz and signed by more than 100 CEOs, including the heads of Salesforce, Alphabet, Facebook, Microsoft, Walmart, McDonald's, Disney, Quibi, IBM, Merck, Marriott, the Business Roundtable, the U.S. Chamber of Commerce and more.

Axios Markets editor Dion Rabouin writes that the letter to the top four congressional leaders lays out a recipe for a sizable small-business aid package.

The project, Schultz's first big public push since he suspended his run for president, calls for:

"federally guaranteed loans, at favorable terms, that will enable small businesses to transform and sustain themselves."

"Businesses should have flexibility in how loan funds are used."

"The hardest-hit businesses should be eligible for at least partial loan forgiveness."

"Relief needs to be delivered expeditiously. Building on the existing PPP infrastructure would be one way to quickly stand up a new loan program."

"These funds must flow to all small businesses in need, particularly those run by people of color, who have traditionally had less access to capital."

Between the lines: Neither the House's HEROES Act nor the latest version of Senate Republicans' HEALS Act include significant funding for small businesses besides the PPP extension.

The last word: "Tens of millions of Americans have already lost their jobs in this pandemic. ... By year end, the domino effect of lost jobs as well as the lost services and lost products that small businesses provide could be catastrophic." Axios


https://www.howardschultz.com/lettertocongress/

---

Sounds like these large companies are realizing that without small businesses they may not have very many customers. I doubt they are doing this from the kindness of their hearts.

---

Why is "compassion" and "empathy" limited to us and not to CEOs of companies? Why vilify others? Writing those things do not elevate us or anything we have done, and make our ass sitting behind a computer any more heroic.

I believe there is a lot connecting all of us, and the faster we move on from this culture of dividing and vilifying each other by party, class, and race, the better.

---

Part of the resentment has to be due to extremely bloated CEO compensation. Compensation has skewed during my working lifetime and the magnanimous CEOs can only say, "I've got nothing to do with that. It's all in the hands of the BODs."

---

A big part of that has been from the governance folks who promote alignment of shareholder interest with those of management. When you look at most of the executive compensation, it comes from equity grants. It also came from tax rules before TCJA where performance based compensation was permitted to be deducted even if it exceeds one million. It also came from proxy advisory firms who promote long-term equity compensation and performance based compensation over fixed or cash compensation. With the historic rise in equity, those policies resulted in bloated compensation. Hell is paved with good intentions. Just like the real estate asset bubbles and 2008 financial crisis were created by the good intention of the federal government subsidizing home ownership and mortgages, the rise in executive compensation rose from tax laws intended to limit executive compensation, governance folks trying to limit fixed executive compensation, and the asset bubbles and rise of equity markets.

---

When you give someone stock, not options, that is not incentive based. All you have to do is not cause the stock to crash before you cash out. The two companies I worked for paid their CEOs in huge amounts of stock. The stock did nothing and they sold when they could. Incentive/performance based my ass. On the flip side, I got years of stock Options when Pacbell was bought by SBC. The stock went from 60 to 20 during those years. I made $2500 dollars before they shipped me to IBM. Don't get me started on that company. The compensation game is so skewed it's sickening.

---

The funny thing is that proxy advisory firms and other governance folks trying to reign in executive compensation do not treat options as incentive based, arguing that options over 10 year period will go up in value. Most would agree that time-based vesting stock or RSUs are not performance based, but most companies have performance based vesting of stock or RSUs, such as relative TSR.

---

I don't trust any one or any group who's been charged with 'reigning in' executive compensation. They've probably been paid hundreds of millions of dollars too for having zero impact. Rigged game. I defy anyone to show me evidence otherwise. BTW, I've voted Republican my entire voting life so this isn't coming from some bleeding heart liberal. But even an old righty can only get hit over the head so long. I don't see either side actually addressing this.

---

The proxy advisory firms are a shady organization, but if there is any undue influence, I would say it comes from selling their advisory services to companies to get the right recommendation while also being in bed with activist shareholders on hostile takeovers. The SEC has been very focused on proxy plumbing and getting the proxy advisory firms to have liability corresponding the their proxy solicitation role.

---

I'll admit I don't understand many of the terms you use. Here is what I do know, Randall Stephenson made $30,000,000 per year as AT&'s CEO. Under his watch the stock went nowhere, AT&T was forced to pay 3 billion to T-Mobile for the failed merger, DirecTV was purchased and driven into the ground and is now on the verge of extinction , the iPhone game changer moment did nothing for T, etc., etc., etc. And yet Randy kept getting loads and loads of stock. Now the stock price went nowhere but it didn't go down and so for providing very, very average CEO-ship Randall just retired a fabulously wealthy man. Oh, and T has $150 billion of debt to wrestle with along with five too many tv services and a movie company that the new guy nor Randall have any experience running. Rigged.

---

That sounds like bad oversight. On the break-up fee, I would not blame him for the payment of the break-up fee for the failed merger with T-Mobile. These merger agreements and allocation of risk are extremely dynamic, and it is not easy to get aligned to avoid a more costly hostile takeover if you don't get aligned with the target's board.

Not sure when this was, but it there were that type of misalignment between performance and pay, I would be surprised if the proxy advisory firms recommended a favorable vote on say on pay. If there is less than 70% support (even if 50% is the pass / fail), then there will be recommendation against the compensation committee member re-election. And institutional investors are getting tougher. See Blackrock's action against Qualcomm.

---

I have to stop. I don't know how any of this works. I just see CEOs, even good ones, making insane money while most of the workers' pay has stayed relatively stagnant. That's a problem and there is an easy fix. But everyone views the fix, universal pay scale imposed by government, as socialist. I don't really care what you call it. CEOs would still get rich just not stupid rich. And the leftover money would go straight to the employees who help make it happen.

---

Unit2 mentioned that it's like QB pay in the NFL. Reminds me of college football and basketball coaches. "We need to stay even with (or ahead of) our competitors!" And salaries ratchet upward.

---

Yeah, but at least with quarterbacks there is a rational basis for thinking they are actually that valuable to the team. Not sure you can say the same about CEOs.

Don't get me wrong, I'm sure the great ones are valuable, I'm just not convinced they're THAT much more valuable.

---

When you have worked with some great ones, you know how valuable they are. Anyone who has led a business unit or a significant function knows the difficulty in managing teams, p&l, motivation, culture, risks, etc. Having a crappy one versus having the right ones to come up with and decide/drive the right strategies are critical. For me, when I invest, I look at management. I invested in Apple only after Jobs rejoined because he was such a visionary. iPod and the new Macs were great, but when he introduced the iPhone and one of my friends who is an angel investor and always sees two steps ahead told me this isn't a phone, its a computer and told me to invest and invest big long-term, I have not regretted that decision. Same with Cook and moving from hardware to recurring revenue and services. Apple has gone up over 20 times from when I invested. How much is too much CEO compensation for someone who brought that much value? Look at what Apple was like before and after Jobs rejoined. Look at Larry Culp and what he did with Danaher before he left. Or Howley with TransDigm or Neil Hunn with Roper. Or Bezos with Amazon. How much value did he create for everyone, from his employees, investors, himself, etc. How much is enough? One of the key investment decisions for me is the management team and their history of performance, whether it's driving organic growth or making key acquisitions, driving the right culture, managing expenses, etc.

It is like what I told my team once about engineers. All engineers are getting paid more, but there are about 10% that really are game changers. And you have to pay them a lot to recruit and retain them but they will pay back way more than you will pay. But the winners and losers will be based on those who can recruit the top engineers and keep them, while others, trying to keep up with market rates, pay almost as much for mediocre talent who just check the boxes.

Same with CEOs. So are some CEOs that valuable? Absolutely. And I say this as a heavy equity investors.

calbear93 said:

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sycasey said:

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Big C said:

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82gradDLSdad said:

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calbear93 said:

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82gradDLSdad said:

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calbear93 said:

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82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

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calbear93 said:

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82gradDLSdad said:

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calbear93 said:

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dimitrig said:

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bearister said:

---

America's Small Businesses Need a Marshall Plan | Howard Schultz

"With a new coronavirus relief measure stalled in Congress, CEOs of some of the world's biggest companies have banded together to send a message to Washington: Get money to small businesses now!

"By Labor Day, we foresee a wave of permanent closures if the right steps are not taken soon," warns the letter, organized by Howard Schultz and signed by more than 100 CEOs, including the heads of Salesforce, Alphabet, Facebook, Microsoft, Walmart, McDonald's, Disney, Quibi, IBM, Merck, Marriott, the Business Roundtable, the U.S. Chamber of Commerce and more.

Axios Markets editor Dion Rabouin writes that the letter to the top four congressional leaders lays out a recipe for a sizable small-business aid package.

The project, Schultz's first big public push since he suspended his run for president, calls for:

"federally guaranteed loans, at favorable terms, that will enable small businesses to transform and sustain themselves."

"Businesses should have flexibility in how loan funds are used."

"The hardest-hit businesses should be eligible for at least partial loan forgiveness."

"Relief needs to be delivered expeditiously. Building on the existing PPP infrastructure would be one way to quickly stand up a new loan program."

"These funds must flow to all small businesses in need, particularly those run by people of color, who have traditionally had less access to capital."

Between the lines: Neither the House's HEROES Act nor the latest version of Senate Republicans' HEALS Act include significant funding for small businesses besides the PPP extension.

The last word: "Tens of millions of Americans have already lost their jobs in this pandemic. ... By year end, the domino effect of lost jobs as well as the lost services and lost products that small businesses provide could be catastrophic." Axios


https://www.howardschultz.com/lettertocongress/

---

Sounds like these large companies are realizing that without small businesses they may not have very many customers. I doubt they are doing this from the kindness of their hearts.

---

Why is "compassion" and "empathy" limited to us and not to CEOs of companies? Why vilify others? Writing those things do not elevate us or anything we have done, and make our ass sitting behind a computer any more heroic.

I believe there is a lot connecting all of us, and the faster we move on from this culture of dividing and vilifying each other by party, class, and race, the better.

---

Part of the resentment has to be due to extremely bloated CEO compensation. Compensation has skewed during my working lifetime and the magnanimous CEOs can only say, "I've got nothing to do with that. It's all in the hands of the BODs."

---

A big part of that has been from the governance folks who promote alignment of shareholder interest with those of management. When you look at most of the executive compensation, it comes from equity grants. It also came from tax rules before TCJA where performance based compensation was permitted to be deducted even if it exceeds one million. It also came from proxy advisory firms who promote long-term equity compensation and performance based compensation over fixed or cash compensation. With the historic rise in equity, those policies resulted in bloated compensation. Hell is paved with good intentions. Just like the real estate asset bubbles and 2008 financial crisis were created by the good intention of the federal government subsidizing home ownership and mortgages, the rise in executive compensation rose from tax laws intended to limit executive compensation, governance folks trying to limit fixed executive compensation, and the asset bubbles and rise of equity markets.

---

When you give someone stock, not options, that is not incentive based. All you have to do is not cause the stock to crash before you cash out. The two companies I worked for paid their CEOs in huge amounts of stock. The stock did nothing and they sold when they could. Incentive/performance based my ass. On the flip side, I got years of stock Options when Pacbell was bought by SBC. The stock went from 60 to 20 during those years. I made $2500 dollars before they shipped me to IBM. Don't get me started on that company. The compensation game is so skewed it's sickening.

---

The funny thing is that proxy advisory firms and other governance folks trying to reign in executive compensation do not treat options as incentive based, arguing that options over 10 year period will go up in value. Most would agree that time-based vesting stock or RSUs are not performance based, but most companies have performance based vesting of stock or RSUs, such as relative TSR.

---

I don't trust any one or any group who's been charged with 'reigning in' executive compensation. They've probably been paid hundreds of millions of dollars too for having zero impact. Rigged game. I defy anyone to show me evidence otherwise. BTW, I've voted Republican my entire voting life so this isn't coming from some bleeding heart liberal. But even an old righty can only get hit over the head so long. I don't see either side actually addressing this.

---

The proxy advisory firms are a shady organization, but if there is any undue influence, I would say it comes from selling their advisory services to companies to get the right recommendation while also being in bed with activist shareholders on hostile takeovers. The SEC has been very focused on proxy plumbing and getting the proxy advisory firms to have liability corresponding the their proxy solicitation role.

---

I'll admit I don't understand many of the terms you use. Here is what I do know, Randall Stephenson made $30,000,000 per year as AT&'s CEO. Under his watch the stock went nowhere, AT&T was forced to pay 3 billion to T-Mobile for the failed merger, DirecTV was purchased and driven into the ground and is now on the verge of extinction , the iPhone game changer moment did nothing for T, etc., etc., etc. And yet Randy kept getting loads and loads of stock. Now the stock price went nowhere but it didn't go down and so for providing very, very average CEO-ship Randall just retired a fabulously wealthy man. Oh, and T has $150 billion of debt to wrestle with along with five too many tv services and a movie company that the new guy nor Randall have any experience running. Rigged.

---

That sounds like bad oversight. On the break-up fee, I would not blame him for the payment of the break-up fee for the failed merger with T-Mobile. These merger agreements and allocation of risk are extremely dynamic, and it is not easy to get aligned to avoid a more costly hostile takeover if you don't get aligned with the target's board.

Not sure when this was, but it there were that type of misalignment between performance and pay, I would be surprised if the proxy advisory firms recommended a favorable vote on say on pay. If there is less than 70% support (even if 50% is the pass / fail), then there will be recommendation against the compensation committee member re-election. And institutional investors are getting tougher. See Blackrock's action against Qualcomm.

---

I have to stop. I don't know how any of this works. I just see CEOs, even good ones, making insane money while most of the workers' pay has stayed relatively stagnant. That's a problem and there is an easy fix. But everyone views the fix, universal pay scale imposed by government, as socialist. I don't really care what you call it. CEOs would still get rich just not stupid rich. And the leftover money would go straight to the employees who help make it happen.

---

Unit2 mentioned that it's like QB pay in the NFL. Reminds me of college football and basketball coaches. "We need to stay even with (or ahead of) our competitors!" And salaries ratchet upward.

---

Yeah, but at least with quarterbacks there is a rational basis for thinking they are actually that valuable to the team. Not sure you can say the same about CEOs.

Don't get me wrong, I'm sure the great ones are valuable, I'm just not convinced they're THAT much more valuable.

---

Same with CEOs. So are some CEOs that valuable? Absolutely. And I say this as a heavy equity investors.

---

Also similar to great QBs or coaches, I think that great CEOs can be "underpaid" relative to their value. Like, I would probably be willing to pay Belichik somewhere north of $50M per year to coach my team. He makes $12M per year and Matt Rhule makes $8.5M. Who's getting the better end of that bargain?

But when you look across the thousands of public company CEOs, it's not clear to me that the system is designed to truly reward the best performers or that the system in practice enhances shareholder value.

MSCI produced a report a few years ago that delves into the results and they support the proposition that you can't just incentivize your CEO to a better outcome. I think that you need to pay top CEOs to retain them, but what ends up happening is that companies pay top dollar and then if the results don't work out they find a new CEO to pay top dollar to. If I were an investor, I wouldn't have any faith that you can turn a good CEO into a great one through incentive compensation or that you can simply buy a great CEO.

Quote:

---

EXECUTIVE SUMMARY

Has CEO pay reflected long-term stock performance? In a word, "no." Companies that awarded their Chief Executive Officers (CEOs) higher equity incentives had below-median returns based on a sample of 429 large-cap U.S.companies observed from 2006 to 2015. On a10-year cumulative basis, total shareholder returns of those companies whose total summary pay (the level that must be disclosed in the summary tables of proxy statements) was below their sector median outperformed those companies where pay exceeded the sector median by as much as 39%.

---

Intuitively this matches up with what I've seen anecdotally - great CEOs are worth their weight in platinum but all CEOs get paid their weight in gold.

Unit2Sucks said:

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calbear93 said:

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sycasey said:

---

Big C said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

dimitrig said:

---

bearister said:

---

America's Small Businesses Need a Marshall Plan | Howard Schultz

"With a new coronavirus relief measure stalled in Congress, CEOs of some of the world's biggest companies have banded together to send a message to Washington: Get money to small businesses now!

"By Labor Day, we foresee a wave of permanent closures if the right steps are not taken soon," warns the letter, organized by Howard Schultz and signed by more than 100 CEOs, including the heads of Salesforce, Alphabet, Facebook, Microsoft, Walmart, McDonald's, Disney, Quibi, IBM, Merck, Marriott, the Business Roundtable, the U.S. Chamber of Commerce and more.

Axios Markets editor Dion Rabouin writes that the letter to the top four congressional leaders lays out a recipe for a sizable small-business aid package.

The project, Schultz's first big public push since he suspended his run for president, calls for:

"federally guaranteed loans, at favorable terms, that will enable small businesses to transform and sustain themselves."

"Businesses should have flexibility in how loan funds are used."

"The hardest-hit businesses should be eligible for at least partial loan forgiveness."

"Relief needs to be delivered expeditiously. Building on the existing PPP infrastructure would be one way to quickly stand up a new loan program."

"These funds must flow to all small businesses in need, particularly those run by people of color, who have traditionally had less access to capital."

Between the lines: Neither the House's HEROES Act nor the latest version of Senate Republicans' HEALS Act include significant funding for small businesses besides the PPP extension.

The last word: "Tens of millions of Americans have already lost their jobs in this pandemic. ... By year end, the domino effect of lost jobs as well as the lost services and lost products that small businesses provide could be catastrophic." Axios


https://www.howardschultz.com/lettertocongress/

---

Sounds like these large companies are realizing that without small businesses they may not have very many customers. I doubt they are doing this from the kindness of their hearts.

---

Why is "compassion" and "empathy" limited to us and not to CEOs of companies? Why vilify others? Writing those things do not elevate us or anything we have done, and make our ass sitting behind a computer any more heroic.

I believe there is a lot connecting all of us, and the faster we move on from this culture of dividing and vilifying each other by party, class, and race, the better.

---

Part of the resentment has to be due to extremely bloated CEO compensation. Compensation has skewed during my working lifetime and the magnanimous CEOs can only say, "I've got nothing to do with that. It's all in the hands of the BODs."

---

A big part of that has been from the governance folks who promote alignment of shareholder interest with those of management. When you look at most of the executive compensation, it comes from equity grants. It also came from tax rules before TCJA where performance based compensation was permitted to be deducted even if it exceeds one million. It also came from proxy advisory firms who promote long-term equity compensation and performance based compensation over fixed or cash compensation. With the historic rise in equity, those policies resulted in bloated compensation. Hell is paved with good intentions. Just like the real estate asset bubbles and 2008 financial crisis were created by the good intention of the federal government subsidizing home ownership and mortgages, the rise in executive compensation rose from tax laws intended to limit executive compensation, governance folks trying to limit fixed executive compensation, and the asset bubbles and rise of equity markets.

---

When you give someone stock, not options, that is not incentive based. All you have to do is not cause the stock to crash before you cash out. The two companies I worked for paid their CEOs in huge amounts of stock. The stock did nothing and they sold when they could. Incentive/performance based my ass. On the flip side, I got years of stock Options when Pacbell was bought by SBC. The stock went from 60 to 20 during those years. I made $2500 dollars before they shipped me to IBM. Don't get me started on that company. The compensation game is so skewed it's sickening.

---

The funny thing is that proxy advisory firms and other governance folks trying to reign in executive compensation do not treat options as incentive based, arguing that options over 10 year period will go up in value. Most would agree that time-based vesting stock or RSUs are not performance based, but most companies have performance based vesting of stock or RSUs, such as relative TSR.

---

I don't trust any one or any group who's been charged with 'reigning in' executive compensation. They've probably been paid hundreds of millions of dollars too for having zero impact. Rigged game. I defy anyone to show me evidence otherwise. BTW, I've voted Republican my entire voting life so this isn't coming from some bleeding heart liberal. But even an old righty can only get hit over the head so long. I don't see either side actually addressing this.

---

The proxy advisory firms are a shady organization, but if there is any undue influence, I would say it comes from selling their advisory services to companies to get the right recommendation while also being in bed with activist shareholders on hostile takeovers. The SEC has been very focused on proxy plumbing and getting the proxy advisory firms to have liability corresponding the their proxy solicitation role.

---

I'll admit I don't understand many of the terms you use. Here is what I do know, Randall Stephenson made $30,000,000 per year as AT&'s CEO. Under his watch the stock went nowhere, AT&T was forced to pay 3 billion to T-Mobile for the failed merger, DirecTV was purchased and driven into the ground and is now on the verge of extinction , the iPhone game changer moment did nothing for T, etc., etc., etc. And yet Randy kept getting loads and loads of stock. Now the stock price went nowhere but it didn't go down and so for providing very, very average CEO-ship Randall just retired a fabulously wealthy man. Oh, and T has $150 billion of debt to wrestle with along with five too many tv services and a movie company that the new guy nor Randall have any experience running. Rigged.

---

That sounds like bad oversight. On the break-up fee, I would not blame him for the payment of the break-up fee for the failed merger with T-Mobile. These merger agreements and allocation of risk are extremely dynamic, and it is not easy to get aligned to avoid a more costly hostile takeover if you don't get aligned with the target's board.

Not sure when this was, but it there were that type of misalignment between performance and pay, I would be surprised if the proxy advisory firms recommended a favorable vote on say on pay. If there is less than 70% support (even if 50% is the pass / fail), then there will be recommendation against the compensation committee member re-election. And institutional investors are getting tougher. See Blackrock's action against Qualcomm.

---

I have to stop. I don't know how any of this works. I just see CEOs, even good ones, making insane money while most of the workers' pay has stayed relatively stagnant. That's a problem and there is an easy fix. But everyone views the fix, universal pay scale imposed by government, as socialist. I don't really care what you call it. CEOs would still get rich just not stupid rich. And the leftover money would go straight to the employees who help make it happen.

---

Unit2 mentioned that it's like QB pay in the NFL. Reminds me of college football and basketball coaches. "We need to stay even with (or ahead of) our competitors!" And salaries ratchet upward.

---

Yeah, but at least with quarterbacks there is a rational basis for thinking they are actually that valuable to the team. Not sure you can say the same about CEOs.

Don't get me wrong, I'm sure the great ones are valuable, I'm just not convinced they're THAT much more valuable.

---

Same with CEOs. So are some CEOs that valuable? Absolutely. And I say this as a heavy equity investors.

---

Also similar to great QBs or coaches, I think that great CEOs can be "underpaid" relative to their value. Like, I would probably be willing to pay Belichik somewhere north of $50M per year to coach my team. He makes $12M per year and Matt Rhule makes $8.5M. Who's getting the better end of that bargain?

But when you look across the thousands of public company CEOs, it's not clear to me that the system is designed to truly reward the best performers or that the system in practice enhances shareholder value.

MSCI produced a report a few years ago that delves into the results and they support the proposition that you can't just incentivize your CEO to a better outcome. I think that you need to pay top CEOs to retain them, but what ends up happening is that companies pay top dollar and then if the results don't work out they find a new CEO to pay top dollar to. If I were an investor, I wouldn't have any faith that you can turn a good CEO into a great one through incentive compensation or that you can simply buy a great CEO.

Quote:

---

EXECUTIVE SUMMARY

Has CEO pay reflected long-term stock performance? In a word, "no." Companies that awarded their Chief Executive Officers (CEOs) higher equity incentives had below-median returns based on a sample of 429 large-cap U.S.companies observed from 2006 to 2015. On a10-year cumulative basis, total shareholder returns of those companies whose total summary pay (the level that must be disclosed in the summary tables of proxy statements) was below their sector median outperformed those companies where pay exceeded the sector median by as much as 39%.

---

Intuitively this matches up with what I've seen anecdotally - great CEOs are worth their weight in platinum but all CEOs get paid their weight in gold.

---

I am not disagreeing with you. Like I said, only about 10% of the engineers are game changers who cannot be paid enough. The rest are paid higher because of the rising market value driven by the 10% but they are just mediocre talent that collect checks and do mediocre work.

Same with CEOs. Sycasey asked if any CEO is really worth that much. I say absolutely. What would be the right compensation for someone like Bezos who drove the right strategy, got the right funding, hired the right leaders, took the right risks, and created so much value for investors like me and changed how we live. What would happen to Amazon if he left and there is the next shift in strategy or revenue stream? Think about what he did with AWS when people were still thinking about them as a seller of books and CDs. Think about where MSFT would be if their current CEO didn't take them down enterprise cloud services but instead focused on hardware or selling licenses for word instead of subscriptions.

Yes, CEOs are overpaid like engineers are overpaid, like lawyers are overpaid. But that is because the top ones are such game changers and not having even a decent one is destructive.

calbear93 said:

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Unit2Sucks said:

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calbear93 said:

---

sycasey said:

---

Big C said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

dimitrig said:

---

bearister said:

---

America's Small Businesses Need a Marshall Plan | Howard Schultz

"With a new coronavirus relief measure stalled in Congress, CEOs of some of the world's biggest companies have banded together to send a message to Washington: Get money to small businesses now!

"By Labor Day, we foresee a wave of permanent closures if the right steps are not taken soon," warns the letter, organized by Howard Schultz and signed by more than 100 CEOs, including the heads of Salesforce, Alphabet, Facebook, Microsoft, Walmart, McDonald's, Disney, Quibi, IBM, Merck, Marriott, the Business Roundtable, the U.S. Chamber of Commerce and more.

Axios Markets editor Dion Rabouin writes that the letter to the top four congressional leaders lays out a recipe for a sizable small-business aid package.

The project, Schultz's first big public push since he suspended his run for president, calls for:

"federally guaranteed loans, at favorable terms, that will enable small businesses to transform and sustain themselves."

"Businesses should have flexibility in how loan funds are used."

"The hardest-hit businesses should be eligible for at least partial loan forgiveness."

"Relief needs to be delivered expeditiously. Building on the existing PPP infrastructure would be one way to quickly stand up a new loan program."

"These funds must flow to all small businesses in need, particularly those run by people of color, who have traditionally had less access to capital."

Between the lines: Neither the House's HEROES Act nor the latest version of Senate Republicans' HEALS Act include significant funding for small businesses besides the PPP extension.

The last word: "Tens of millions of Americans have already lost their jobs in this pandemic. ... By year end, the domino effect of lost jobs as well as the lost services and lost products that small businesses provide could be catastrophic." Axios


https://www.howardschultz.com/lettertocongress/

---

Sounds like these large companies are realizing that without small businesses they may not have very many customers. I doubt they are doing this from the kindness of their hearts.

---

Why is "compassion" and "empathy" limited to us and not to CEOs of companies? Why vilify others? Writing those things do not elevate us or anything we have done, and make our ass sitting behind a computer any more heroic.

I believe there is a lot connecting all of us, and the faster we move on from this culture of dividing and vilifying each other by party, class, and race, the better.

---

Part of the resentment has to be due to extremely bloated CEO compensation. Compensation has skewed during my working lifetime and the magnanimous CEOs can only say, "I've got nothing to do with that. It's all in the hands of the BODs."

---

A big part of that has been from the governance folks who promote alignment of shareholder interest with those of management. When you look at most of the executive compensation, it comes from equity grants. It also came from tax rules before TCJA where performance based compensation was permitted to be deducted even if it exceeds one million. It also came from proxy advisory firms who promote long-term equity compensation and performance based compensation over fixed or cash compensation. With the historic rise in equity, those policies resulted in bloated compensation. Hell is paved with good intentions. Just like the real estate asset bubbles and 2008 financial crisis were created by the good intention of the federal government subsidizing home ownership and mortgages, the rise in executive compensation rose from tax laws intended to limit executive compensation, governance folks trying to limit fixed executive compensation, and the asset bubbles and rise of equity markets.

---

When you give someone stock, not options, that is not incentive based. All you have to do is not cause the stock to crash before you cash out. The two companies I worked for paid their CEOs in huge amounts of stock. The stock did nothing and they sold when they could. Incentive/performance based my ass. On the flip side, I got years of stock Options when Pacbell was bought by SBC. The stock went from 60 to 20 during those years. I made $2500 dollars before they shipped me to IBM. Don't get me started on that company. The compensation game is so skewed it's sickening.

---

The funny thing is that proxy advisory firms and other governance folks trying to reign in executive compensation do not treat options as incentive based, arguing that options over 10 year period will go up in value. Most would agree that time-based vesting stock or RSUs are not performance based, but most companies have performance based vesting of stock or RSUs, such as relative TSR.

---

I don't trust any one or any group who's been charged with 'reigning in' executive compensation. They've probably been paid hundreds of millions of dollars too for having zero impact. Rigged game. I defy anyone to show me evidence otherwise. BTW, I've voted Republican my entire voting life so this isn't coming from some bleeding heart liberal. But even an old righty can only get hit over the head so long. I don't see either side actually addressing this.

---

The proxy advisory firms are a shady organization, but if there is any undue influence, I would say it comes from selling their advisory services to companies to get the right recommendation while also being in bed with activist shareholders on hostile takeovers. The SEC has been very focused on proxy plumbing and getting the proxy advisory firms to have liability corresponding the their proxy solicitation role.

---

I'll admit I don't understand many of the terms you use. Here is what I do know, Randall Stephenson made $30,000,000 per year as AT&'s CEO. Under his watch the stock went nowhere, AT&T was forced to pay 3 billion to T-Mobile for the failed merger, DirecTV was purchased and driven into the ground and is now on the verge of extinction , the iPhone game changer moment did nothing for T, etc., etc., etc. And yet Randy kept getting loads and loads of stock. Now the stock price went nowhere but it didn't go down and so for providing very, very average CEO-ship Randall just retired a fabulously wealthy man. Oh, and T has $150 billion of debt to wrestle with along with five too many tv services and a movie company that the new guy nor Randall have any experience running. Rigged.

---

That sounds like bad oversight. On the break-up fee, I would not blame him for the payment of the break-up fee for the failed merger with T-Mobile. These merger agreements and allocation of risk are extremely dynamic, and it is not easy to get aligned to avoid a more costly hostile takeover if you don't get aligned with the target's board.

Not sure when this was, but it there were that type of misalignment between performance and pay, I would be surprised if the proxy advisory firms recommended a favorable vote on say on pay. If there is less than 70% support (even if 50% is the pass / fail), then there will be recommendation against the compensation committee member re-election. And institutional investors are getting tougher. See Blackrock's action against Qualcomm.

---

I have to stop. I don't know how any of this works. I just see CEOs, even good ones, making insane money while most of the workers' pay has stayed relatively stagnant. That's a problem and there is an easy fix. But everyone views the fix, universal pay scale imposed by government, as socialist. I don't really care what you call it. CEOs would still get rich just not stupid rich. And the leftover money would go straight to the employees who help make it happen.

---

Unit2 mentioned that it's like QB pay in the NFL. Reminds me of college football and basketball coaches. "We need to stay even with (or ahead of) our competitors!" And salaries ratchet upward.

---

Yeah, but at least with quarterbacks there is a rational basis for thinking they are actually that valuable to the team. Not sure you can say the same about CEOs.

Don't get me wrong, I'm sure the great ones are valuable, I'm just not convinced they're THAT much more valuable.

---

Same with CEOs. So are some CEOs that valuable? Absolutely. And I say this as a heavy equity investors.

---

Also similar to great QBs or coaches, I think that great CEOs can be "underpaid" relative to their value. Like, I would probably be willing to pay Belichik somewhere north of $50M per year to coach my team. He makes $12M per year and Matt Rhule makes $8.5M. Who's getting the better end of that bargain?

But when you look across the thousands of public company CEOs, it's not clear to me that the system is designed to truly reward the best performers or that the system in practice enhances shareholder value.

MSCI produced a report a few years ago that delves into the results and they support the proposition that you can't just incentivize your CEO to a better outcome. I think that you need to pay top CEOs to retain them, but what ends up happening is that companies pay top dollar and then if the results don't work out they find a new CEO to pay top dollar to. If I were an investor, I wouldn't have any faith that you can turn a good CEO into a great one through incentive compensation or that you can simply buy a great CEO.

Quote:

---

EXECUTIVE SUMMARY

Has CEO pay reflected long-term stock performance? In a word, "no." Companies that awarded their Chief Executive Officers (CEOs) higher equity incentives had below-median returns based on a sample of 429 large-cap U.S.companies observed from 2006 to 2015. On a10-year cumulative basis, total shareholder returns of those companies whose total summary pay (the level that must be disclosed in the summary tables of proxy statements) was below their sector median outperformed those companies where pay exceeded the sector median by as much as 39%.

---

Intuitively this matches up with what I've seen anecdotally - great CEOs are worth their weight in platinum but all CEOs get paid their weight in gold.

---

I am not disagreeing with you. Like I said, only about 10% of the engineers are game changers who cannot be paid enough. The rest are paid higher because of the rising market value driven by the 10% but they are just mediocre talent that collect checks and do mediocre work.

Same with CEOs. Sycasey asked if any CEO is really worth that much. I say absolutely. What would be the right compensation for someone like Bezos who drove the right strategy, got the right funding, hired the right leaders, took the right risks, and created so much value for investors like me and changed how we live. What would happen to Amazon if he left and there is the next shift in strategy or revenue stream? Think about what he did with AWS when people were still thinking about them as a seller of books and CDs. Think about where MSFT would be if their current CEO didn't take them down enterprise cloud services but instead focused on hardware or selling licenses for word instead of subscriptions.

Yes, CEOs are overpaid like engineers are overpaid, like lawyers are overpaid. But that is because the top ones are such game changers and not having even a decent one is destructive.

---

BLEH, BI killed my response.

Trying again:

For a few decades there has been discussion of 10x engineers. They produce 10x or more of regular engineers but they are hard to attract and retain. You can't always figure out you have one until they start to produce - not unlike with special athletes. No one could have known Jerry Rice would be who he is. It turns out that just paying well isn't the best way - you need to give them challenges and provide them with resources. Pay is just one component.

I think it's similar for star executives. Compensation is key, but I think the exec comp system in our country has put the cart before the horse. Exec comp doesn't really serve to attract and retain the best - it's really just a toll that gets paid, with little meaningful connection to finding the highest producers. It's also not the same outside the US.

I think we've basically beaten this dead horse, but I will give one example. I had a small cap public technology client in the US that was acquired by a huge international company (one of the 20 largest companies in the world, 100k+ employees) and the acquiring company CEO made a lot less money than the small cap CEO. Structuring the deal to properly incentivize the US CEO and execs relative to peers was a challenge that caused a lot of friction and ultimately drove the deal structure.

Unit2Sucks said:

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calbear93 said:

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Unit2Sucks said:

---

calbear93 said:

---

sycasey said:

---

Big C said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

dimitrig said:

---

bearister said:

---

America's Small Businesses Need a Marshall Plan | Howard Schultz

"With a new coronavirus relief measure stalled in Congress, CEOs of some of the world's biggest companies have banded together to send a message to Washington: Get money to small businesses now!

"By Labor Day, we foresee a wave of permanent closures if the right steps are not taken soon," warns the letter, organized by Howard Schultz and signed by more than 100 CEOs, including the heads of Salesforce, Alphabet, Facebook, Microsoft, Walmart, McDonald's, Disney, Quibi, IBM, Merck, Marriott, the Business Roundtable, the U.S. Chamber of Commerce and more.

Axios Markets editor Dion Rabouin writes that the letter to the top four congressional leaders lays out a recipe for a sizable small-business aid package.

The project, Schultz's first big public push since he suspended his run for president, calls for:

"federally guaranteed loans, at favorable terms, that will enable small businesses to transform and sustain themselves."

"Businesses should have flexibility in how loan funds are used."

"The hardest-hit businesses should be eligible for at least partial loan forgiveness."

"Relief needs to be delivered expeditiously. Building on the existing PPP infrastructure would be one way to quickly stand up a new loan program."

"These funds must flow to all small businesses in need, particularly those run by people of color, who have traditionally had less access to capital."

Between the lines: Neither the House's HEROES Act nor the latest version of Senate Republicans' HEALS Act include significant funding for small businesses besides the PPP extension.

The last word: "Tens of millions of Americans have already lost their jobs in this pandemic. ... By year end, the domino effect of lost jobs as well as the lost services and lost products that small businesses provide could be catastrophic." Axios


https://www.howardschultz.com/lettertocongress/

---

Sounds like these large companies are realizing that without small businesses they may not have very many customers. I doubt they are doing this from the kindness of their hearts.

---

Why is "compassion" and "empathy" limited to us and not to CEOs of companies? Why vilify others? Writing those things do not elevate us or anything we have done, and make our ass sitting behind a computer any more heroic.

I believe there is a lot connecting all of us, and the faster we move on from this culture of dividing and vilifying each other by party, class, and race, the better.

---

Part of the resentment has to be due to extremely bloated CEO compensation. Compensation has skewed during my working lifetime and the magnanimous CEOs can only say, "I've got nothing to do with that. It's all in the hands of the BODs."

---

A big part of that has been from the governance folks who promote alignment of shareholder interest with those of management. When you look at most of the executive compensation, it comes from equity grants. It also came from tax rules before TCJA where performance based compensation was permitted to be deducted even if it exceeds one million. It also came from proxy advisory firms who promote long-term equity compensation and performance based compensation over fixed or cash compensation. With the historic rise in equity, those policies resulted in bloated compensation. Hell is paved with good intentions. Just like the real estate asset bubbles and 2008 financial crisis were created by the good intention of the federal government subsidizing home ownership and mortgages, the rise in executive compensation rose from tax laws intended to limit executive compensation, governance folks trying to limit fixed executive compensation, and the asset bubbles and rise of equity markets.

---

When you give someone stock, not options, that is not incentive based. All you have to do is not cause the stock to crash before you cash out. The two companies I worked for paid their CEOs in huge amounts of stock. The stock did nothing and they sold when they could. Incentive/performance based my ass. On the flip side, I got years of stock Options when Pacbell was bought by SBC. The stock went from 60 to 20 during those years. I made $2500 dollars before they shipped me to IBM. Don't get me started on that company. The compensation game is so skewed it's sickening.

---

The funny thing is that proxy advisory firms and other governance folks trying to reign in executive compensation do not treat options as incentive based, arguing that options over 10 year period will go up in value. Most would agree that time-based vesting stock or RSUs are not performance based, but most companies have performance based vesting of stock or RSUs, such as relative TSR.

---

I don't trust any one or any group who's been charged with 'reigning in' executive compensation. They've probably been paid hundreds of millions of dollars too for having zero impact. Rigged game. I defy anyone to show me evidence otherwise. BTW, I've voted Republican my entire voting life so this isn't coming from some bleeding heart liberal. But even an old righty can only get hit over the head so long. I don't see either side actually addressing this.

---

The proxy advisory firms are a shady organization, but if there is any undue influence, I would say it comes from selling their advisory services to companies to get the right recommendation while also being in bed with activist shareholders on hostile takeovers. The SEC has been very focused on proxy plumbing and getting the proxy advisory firms to have liability corresponding the their proxy solicitation role.

---

I'll admit I don't understand many of the terms you use. Here is what I do know, Randall Stephenson made $30,000,000 per year as AT&'s CEO. Under his watch the stock went nowhere, AT&T was forced to pay 3 billion to T-Mobile for the failed merger, DirecTV was purchased and driven into the ground and is now on the verge of extinction , the iPhone game changer moment did nothing for T, etc., etc., etc. And yet Randy kept getting loads and loads of stock. Now the stock price went nowhere but it didn't go down and so for providing very, very average CEO-ship Randall just retired a fabulously wealthy man. Oh, and T has $150 billion of debt to wrestle with along with five too many tv services and a movie company that the new guy nor Randall have any experience running. Rigged.

---

That sounds like bad oversight. On the break-up fee, I would not blame him for the payment of the break-up fee for the failed merger with T-Mobile. These merger agreements and allocation of risk are extremely dynamic, and it is not easy to get aligned to avoid a more costly hostile takeover if you don't get aligned with the target's board.

Not sure when this was, but it there were that type of misalignment between performance and pay, I would be surprised if the proxy advisory firms recommended a favorable vote on say on pay. If there is less than 70% support (even if 50% is the pass / fail), then there will be recommendation against the compensation committee member re-election. And institutional investors are getting tougher. See Blackrock's action against Qualcomm.

---

I have to stop. I don't know how any of this works. I just see CEOs, even good ones, making insane money while most of the workers' pay has stayed relatively stagnant. That's a problem and there is an easy fix. But everyone views the fix, universal pay scale imposed by government, as socialist. I don't really care what you call it. CEOs would still get rich just not stupid rich. And the leftover money would go straight to the employees who help make it happen.

---

Unit2 mentioned that it's like QB pay in the NFL. Reminds me of college football and basketball coaches. "We need to stay even with (or ahead of) our competitors!" And salaries ratchet upward.

---

Yeah, but at least with quarterbacks there is a rational basis for thinking they are actually that valuable to the team. Not sure you can say the same about CEOs.

Don't get me wrong, I'm sure the great ones are valuable, I'm just not convinced they're THAT much more valuable.

---

Same with CEOs. So are some CEOs that valuable? Absolutely. And I say this as a heavy equity investors.

---

Also similar to great QBs or coaches, I think that great CEOs can be "underpaid" relative to their value. Like, I would probably be willing to pay Belichik somewhere north of $50M per year to coach my team. He makes $12M per year and Matt Rhule makes $8.5M. Who's getting the better end of that bargain?

But when you look across the thousands of public company CEOs, it's not clear to me that the system is designed to truly reward the best performers or that the system in practice enhances shareholder value.

MSCI produced a report a few years ago that delves into the results and they support the proposition that you can't just incentivize your CEO to a better outcome. I think that you need to pay top CEOs to retain them, but what ends up happening is that companies pay top dollar and then if the results don't work out they find a new CEO to pay top dollar to. If I were an investor, I wouldn't have any faith that you can turn a good CEO into a great one through incentive compensation or that you can simply buy a great CEO.

Quote:

---

EXECUTIVE SUMMARY

Has CEO pay reflected long-term stock performance? In a word, "no." Companies that awarded their Chief Executive Officers (CEOs) higher equity incentives had below-median returns based on a sample of 429 large-cap U.S.companies observed from 2006 to 2015. On a10-year cumulative basis, total shareholder returns of those companies whose total summary pay (the level that must be disclosed in the summary tables of proxy statements) was below their sector median outperformed those companies where pay exceeded the sector median by as much as 39%.

---

Intuitively this matches up with what I've seen anecdotally - great CEOs are worth their weight in platinum but all CEOs get paid their weight in gold.

---

I am not disagreeing with you. Like I said, only about 10% of the engineers are game changers who cannot be paid enough. The rest are paid higher because of the rising market value driven by the 10% but they are just mediocre talent that collect checks and do mediocre work.

Same with CEOs. Sycasey asked if any CEO is really worth that much. I say absolutely. What would be the right compensation for someone like Bezos who drove the right strategy, got the right funding, hired the right leaders, took the right risks, and created so much value for investors like me and changed how we live. What would happen to Amazon if he left and there is the next shift in strategy or revenue stream? Think about what he did with AWS when people were still thinking about them as a seller of books and CDs. Think about where MSFT would be if their current CEO didn't take them down enterprise cloud services but instead focused on hardware or selling licenses for word instead of subscriptions.

Yes, CEOs are overpaid like engineers are overpaid, like lawyers are overpaid. But that is because the top ones are such game changers and not having even a decent one is destructive.

---

BLEH, BI killed my response.

Trying again:

For a few decades there has been discussion of 10x engineers. They produce 10x or more of regular engineers but they are hard to attract and retain. You can't always figure out you have one until they start to produce - not unlike with special athletes. No one could have known Jerry Rice would be who he is. It turns out that just paying well isn't the best way - you need to give them challenges and provide them with resources. Pay is just one component.

I think it's similar for star executives. Compensation is key, but I think the exec comp system in our country has put the cart before the horse. Exec comp doesn't really serve to attract and retain the best - it's really just a toll that gets paid, with little meaningful connection to finding the highest producers. It's also not the same outside the US.

I think we've basically beaten this dead horse, but I will give one example. I had a small cap public technology client in the US that was acquired by a huge international company (one of the 20 largest companies in the world, 100k+ employees) and the acquiring company CEO made a lot less money than the small cap CEO. Structuring the deal to properly incentivize the US CEO and execs relative to peers was a challenge that caused a lot of friction and ultimately drove the deal structure.

---

I hate it when I type something that gets erased by a glitch.

I laughed reading your post because, like most of our long discussions, we are saying the same thing.

1. Yes, top CEOs are worth it. They almost cannot be paid enough.

2. The system is structure so that even the average ones get paid a lot. When every compensation committee is targeting paying their CEO above market (If you think your CEO is below market, you probably would want a new CEO) among the peer group companies, the pay just keeps going up irrespective of talent.

calbear93 said:

---

Unit2Sucks said:

---

calbear93 said:

---

Unit2Sucks said:

---

calbear93 said:

---

sycasey said:

---

Big C said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

dimitrig said:

---

bearister said:

---

America's Small Businesses Need a Marshall Plan | Howard Schultz

"With a new coronavirus relief measure stalled in Congress, CEOs of some of the world's biggest companies have banded together to send a message to Washington: Get money to small businesses now!

"By Labor Day, we foresee a wave of permanent closures if the right steps are not taken soon," warns the letter, organized by Howard Schultz and signed by more than 100 CEOs, including the heads of Salesforce, Alphabet, Facebook, Microsoft, Walmart, McDonald's, Disney, Quibi, IBM, Merck, Marriott, the Business Roundtable, the U.S. Chamber of Commerce and more.

Axios Markets editor Dion Rabouin writes that the letter to the top four congressional leaders lays out a recipe for a sizable small-business aid package.

The project, Schultz's first big public push since he suspended his run for president, calls for:

"federally guaranteed loans, at favorable terms, that will enable small businesses to transform and sustain themselves."

"Businesses should have flexibility in how loan funds are used."

"The hardest-hit businesses should be eligible for at least partial loan forgiveness."

"Relief needs to be delivered expeditiously. Building on the existing PPP infrastructure would be one way to quickly stand up a new loan program."

"These funds must flow to all small businesses in need, particularly those run by people of color, who have traditionally had less access to capital."

Between the lines: Neither the House's HEROES Act nor the latest version of Senate Republicans' HEALS Act include significant funding for small businesses besides the PPP extension.

The last word: "Tens of millions of Americans have already lost their jobs in this pandemic. ... By year end, the domino effect of lost jobs as well as the lost services and lost products that small businesses provide could be catastrophic." Axios


https://www.howardschultz.com/lettertocongress/

---

Sounds like these large companies are realizing that without small businesses they may not have very many customers. I doubt they are doing this from the kindness of their hearts.

---

Why is "compassion" and "empathy" limited to us and not to CEOs of companies? Why vilify others? Writing those things do not elevate us or anything we have done, and make our ass sitting behind a computer any more heroic.

I believe there is a lot connecting all of us, and the faster we move on from this culture of dividing and vilifying each other by party, class, and race, the better.

---

Part of the resentment has to be due to extremely bloated CEO compensation. Compensation has skewed during my working lifetime and the magnanimous CEOs can only say, "I've got nothing to do with that. It's all in the hands of the BODs."

---

A big part of that has been from the governance folks who promote alignment of shareholder interest with those of management. When you look at most of the executive compensation, it comes from equity grants. It also came from tax rules before TCJA where performance based compensation was permitted to be deducted even if it exceeds one million. It also came from proxy advisory firms who promote long-term equity compensation and performance based compensation over fixed or cash compensation. With the historic rise in equity, those policies resulted in bloated compensation. Hell is paved with good intentions. Just like the real estate asset bubbles and 2008 financial crisis were created by the good intention of the federal government subsidizing home ownership and mortgages, the rise in executive compensation rose from tax laws intended to limit executive compensation, governance folks trying to limit fixed executive compensation, and the asset bubbles and rise of equity markets.

---

When you give someone stock, not options, that is not incentive based. All you have to do is not cause the stock to crash before you cash out. The two companies I worked for paid their CEOs in huge amounts of stock. The stock did nothing and they sold when they could. Incentive/performance based my ass. On the flip side, I got years of stock Options when Pacbell was bought by SBC. The stock went from 60 to 20 during those years. I made $2500 dollars before they shipped me to IBM. Don't get me started on that company. The compensation game is so skewed it's sickening.

---

The funny thing is that proxy advisory firms and other governance folks trying to reign in executive compensation do not treat options as incentive based, arguing that options over 10 year period will go up in value. Most would agree that time-based vesting stock or RSUs are not performance based, but most companies have performance based vesting of stock or RSUs, such as relative TSR.

---

I don't trust any one or any group who's been charged with 'reigning in' executive compensation. They've probably been paid hundreds of millions of dollars too for having zero impact. Rigged game. I defy anyone to show me evidence otherwise. BTW, I've voted Republican my entire voting life so this isn't coming from some bleeding heart liberal. But even an old righty can only get hit over the head so long. I don't see either side actually addressing this.

---

The proxy advisory firms are a shady organization, but if there is any undue influence, I would say it comes from selling their advisory services to companies to get the right recommendation while also being in bed with activist shareholders on hostile takeovers. The SEC has been very focused on proxy plumbing and getting the proxy advisory firms to have liability corresponding the their proxy solicitation role.

---

I'll admit I don't understand many of the terms you use. Here is what I do know, Randall Stephenson made $30,000,000 per year as AT&'s CEO. Under his watch the stock went nowhere, AT&T was forced to pay 3 billion to T-Mobile for the failed merger, DirecTV was purchased and driven into the ground and is now on the verge of extinction , the iPhone game changer moment did nothing for T, etc., etc., etc. And yet Randy kept getting loads and loads of stock. Now the stock price went nowhere but it didn't go down and so for providing very, very average CEO-ship Randall just retired a fabulously wealthy man. Oh, and T has $150 billion of debt to wrestle with along with five too many tv services and a movie company that the new guy nor Randall have any experience running. Rigged.

---

That sounds like bad oversight. On the break-up fee, I would not blame him for the payment of the break-up fee for the failed merger with T-Mobile. These merger agreements and allocation of risk are extremely dynamic, and it is not easy to get aligned to avoid a more costly hostile takeover if you don't get aligned with the target's board.

Not sure when this was, but it there were that type of misalignment between performance and pay, I would be surprised if the proxy advisory firms recommended a favorable vote on say on pay. If there is less than 70% support (even if 50% is the pass / fail), then there will be recommendation against the compensation committee member re-election. And institutional investors are getting tougher. See Blackrock's action against Qualcomm.

---

I have to stop. I don't know how any of this works. I just see CEOs, even good ones, making insane money while most of the workers' pay has stayed relatively stagnant. That's a problem and there is an easy fix. But everyone views the fix, universal pay scale imposed by government, as socialist. I don't really care what you call it. CEOs would still get rich just not stupid rich. And the leftover money would go straight to the employees who help make it happen.

---

Unit2 mentioned that it's like QB pay in the NFL. Reminds me of college football and basketball coaches. "We need to stay even with (or ahead of) our competitors!" And salaries ratchet upward.

---

Yeah, but at least with quarterbacks there is a rational basis for thinking they are actually that valuable to the team. Not sure you can say the same about CEOs.

Don't get me wrong, I'm sure the great ones are valuable, I'm just not convinced they're THAT much more valuable.

---

Same with CEOs. So are some CEOs that valuable? Absolutely. And I say this as a heavy equity investors.

---

Also similar to great QBs or coaches, I think that great CEOs can be "underpaid" relative to their value. Like, I would probably be willing to pay Belichik somewhere north of $50M per year to coach my team. He makes $12M per year and Matt Rhule makes $8.5M. Who's getting the better end of that bargain?

But when you look across the thousands of public company CEOs, it's not clear to me that the system is designed to truly reward the best performers or that the system in practice enhances shareholder value.

MSCI produced a report a few years ago that delves into the results and they support the proposition that you can't just incentivize your CEO to a better outcome. I think that you need to pay top CEOs to retain them, but what ends up happening is that companies pay top dollar and then if the results don't work out they find a new CEO to pay top dollar to. If I were an investor, I wouldn't have any faith that you can turn a good CEO into a great one through incentive compensation or that you can simply buy a great CEO.

Quote:

---

EXECUTIVE SUMMARY

Has CEO pay reflected long-term stock performance? In a word, "no." Companies that awarded their Chief Executive Officers (CEOs) higher equity incentives had below-median returns based on a sample of 429 large-cap U.S.companies observed from 2006 to 2015. On a10-year cumulative basis, total shareholder returns of those companies whose total summary pay (the level that must be disclosed in the summary tables of proxy statements) was below their sector median outperformed those companies where pay exceeded the sector median by as much as 39%.

---

Intuitively this matches up with what I've seen anecdotally - great CEOs are worth their weight in platinum but all CEOs get paid their weight in gold.

---

I am not disagreeing with you. Like I said, only about 10% of the engineers are game changers who cannot be paid enough. The rest are paid higher because of the rising market value driven by the 10% but they are just mediocre talent that collect checks and do mediocre work.

Same with CEOs. Sycasey asked if any CEO is really worth that much. I say absolutely. What would be the right compensation for someone like Bezos who drove the right strategy, got the right funding, hired the right leaders, took the right risks, and created so much value for investors like me and changed how we live. What would happen to Amazon if he left and there is the next shift in strategy or revenue stream? Think about what he did with AWS when people were still thinking about them as a seller of books and CDs. Think about where MSFT would be if their current CEO didn't take them down enterprise cloud services but instead focused on hardware or selling licenses for word instead of subscriptions.

Yes, CEOs are overpaid like engineers are overpaid, like lawyers are overpaid. But that is because the top ones are such game changers and not having even a decent one is destructive.

---

BLEH, BI killed my response.

Trying again:

For a few decades there has been discussion of 10x engineers. They produce 10x or more of regular engineers but they are hard to attract and retain. You can't always figure out you have one until they start to produce - not unlike with special athletes. No one could have known Jerry Rice would be who he is. It turns out that just paying well isn't the best way - you need to give them challenges and provide them with resources. Pay is just one component.

I think it's similar for star executives. Compensation is key, but I think the exec comp system in our country has put the cart before the horse. Exec comp doesn't really serve to attract and retain the best - it's really just a toll that gets paid, with little meaningful connection to finding the highest producers. It's also not the same outside the US.

I think we've basically beaten this dead horse, but I will give one example. I had a small cap public technology client in the US that was acquired by a huge international company (one of the 20 largest companies in the world, 100k+ employees) and the acquiring company CEO made a lot less money than the small cap CEO. Structuring the deal to properly incentivize the US CEO and execs relative to peers was a challenge that caused a lot of friction and ultimately drove the deal structure.

---

I hate it when I type something that gets erased by a glitch.

I laughed reading your post because, like most of our long discussions, we are saying the same thing.

1. Yes, top CEOs are worth it. They almost cannot be paid enough.

2. The system is structure so that even the average ones get paid a lot. When every compensation committee is targeting paying their CEO above market (If you think your CEO is below market, you probably would want a new CEO) among the peer group companies, the pay just keeps going up irrespective of talent.

---

Also not mentioned is that a founder/CEO, while not always competent at running a large company, has more skin in the game. Jobs, Bezos, Musk - these guys would work for peanuts if they had to if it meant their company was growing and accomplishing its goals. That is a completely different breed from some of these guys including many who are actively destroying the company for their own financial gain.
It is important to recognize that a CEO who takes over a 100 year old conglomerate has different skills and goals than a guy like Jeff Bezos that is running the company he founded.

calbear93 said:

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Unit2Sucks said:

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calbear93 said:

---

Unit2Sucks said:

---

calbear93 said:

---

sycasey said:

---

Big C said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

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dimitrig said:

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bearister said:

---

America's Small Businesses Need a Marshall Plan | Howard Schultz

"With a new coronavirus relief measure stalled in Congress, CEOs of some of the world's biggest companies have banded together to send a message to Washington: Get money to small businesses now!

"By Labor Day, we foresee a wave of permanent closures if the right steps are not taken soon," warns the letter, organized by Howard Schultz and signed by more than 100 CEOs, including the heads of Salesforce, Alphabet, Facebook, Microsoft, Walmart, McDonald's, Disney, Quibi, IBM, Merck, Marriott, the Business Roundtable, the U.S. Chamber of Commerce and more.

Axios Markets editor Dion Rabouin writes that the letter to the top four congressional leaders lays out a recipe for a sizable small-business aid package.

The project, Schultz's first big public push since he suspended his run for president, calls for:

"federally guaranteed loans, at favorable terms, that will enable small businesses to transform and sustain themselves."

"Businesses should have flexibility in how loan funds are used."

"The hardest-hit businesses should be eligible for at least partial loan forgiveness."

"Relief needs to be delivered expeditiously. Building on the existing PPP infrastructure would be one way to quickly stand up a new loan program."

"These funds must flow to all small businesses in need, particularly those run by people of color, who have traditionally had less access to capital."

Between the lines: Neither the House's HEROES Act nor the latest version of Senate Republicans' HEALS Act include significant funding for small businesses besides the PPP extension.

The last word: "Tens of millions of Americans have already lost their jobs in this pandemic. ... By year end, the domino effect of lost jobs as well as the lost services and lost products that small businesses provide could be catastrophic." Axios


https://www.howardschultz.com/lettertocongress/

---

Sounds like these large companies are realizing that without small businesses they may not have very many customers. I doubt they are doing this from the kindness of their hearts.

---

Why is "compassion" and "empathy" limited to us and not to CEOs of companies? Why vilify others? Writing those things do not elevate us or anything we have done, and make our ass sitting behind a computer any more heroic.

I believe there is a lot connecting all of us, and the faster we move on from this culture of dividing and vilifying each other by party, class, and race, the better.

---

Part of the resentment has to be due to extremely bloated CEO compensation. Compensation has skewed during my working lifetime and the magnanimous CEOs can only say, "I've got nothing to do with that. It's all in the hands of the BODs."

---

A big part of that has been from the governance folks who promote alignment of shareholder interest with those of management. When you look at most of the executive compensation, it comes from equity grants. It also came from tax rules before TCJA where performance based compensation was permitted to be deducted even if it exceeds one million. It also came from proxy advisory firms who promote long-term equity compensation and performance based compensation over fixed or cash compensation. With the historic rise in equity, those policies resulted in bloated compensation. Hell is paved with good intentions. Just like the real estate asset bubbles and 2008 financial crisis were created by the good intention of the federal government subsidizing home ownership and mortgages, the rise in executive compensation rose from tax laws intended to limit executive compensation, governance folks trying to limit fixed executive compensation, and the asset bubbles and rise of equity markets.

---

When you give someone stock, not options, that is not incentive based. All you have to do is not cause the stock to crash before you cash out. The two companies I worked for paid their CEOs in huge amounts of stock. The stock did nothing and they sold when they could. Incentive/performance based my ass. On the flip side, I got years of stock Options when Pacbell was bought by SBC. The stock went from 60 to 20 during those years. I made $2500 dollars before they shipped me to IBM. Don't get me started on that company. The compensation game is so skewed it's sickening.

---

The funny thing is that proxy advisory firms and other governance folks trying to reign in executive compensation do not treat options as incentive based, arguing that options over 10 year period will go up in value. Most would agree that time-based vesting stock or RSUs are not performance based, but most companies have performance based vesting of stock or RSUs, such as relative TSR.

---

I don't trust any one or any group who's been charged with 'reigning in' executive compensation. They've probably been paid hundreds of millions of dollars too for having zero impact. Rigged game. I defy anyone to show me evidence otherwise. BTW, I've voted Republican my entire voting life so this isn't coming from some bleeding heart liberal. But even an old righty can only get hit over the head so long. I don't see either side actually addressing this.

---

The proxy advisory firms are a shady organization, but if there is any undue influence, I would say it comes from selling their advisory services to companies to get the right recommendation while also being in bed with activist shareholders on hostile takeovers. The SEC has been very focused on proxy plumbing and getting the proxy advisory firms to have liability corresponding the their proxy solicitation role.

---

I'll admit I don't understand many of the terms you use. Here is what I do know, Randall Stephenson made $30,000,000 per year as AT&'s CEO. Under his watch the stock went nowhere, AT&T was forced to pay 3 billion to T-Mobile for the failed merger, DirecTV was purchased and driven into the ground and is now on the verge of extinction , the iPhone game changer moment did nothing for T, etc., etc., etc. And yet Randy kept getting loads and loads of stock. Now the stock price went nowhere but it didn't go down and so for providing very, very average CEO-ship Randall just retired a fabulously wealthy man. Oh, and T has $150 billion of debt to wrestle with along with five too many tv services and a movie company that the new guy nor Randall have any experience running. Rigged.

---

That sounds like bad oversight. On the break-up fee, I would not blame him for the payment of the break-up fee for the failed merger with T-Mobile. These merger agreements and allocation of risk are extremely dynamic, and it is not easy to get aligned to avoid a more costly hostile takeover if you don't get aligned with the target's board.

Not sure when this was, but it there were that type of misalignment between performance and pay, I would be surprised if the proxy advisory firms recommended a favorable vote on say on pay. If there is less than 70% support (even if 50% is the pass / fail), then there will be recommendation against the compensation committee member re-election. And institutional investors are getting tougher. See Blackrock's action against Qualcomm.

---

I have to stop. I don't know how any of this works. I just see CEOs, even good ones, making insane money while most of the workers' pay has stayed relatively stagnant. That's a problem and there is an easy fix. But everyone views the fix, universal pay scale imposed by government, as socialist. I don't really care what you call it. CEOs would still get rich just not stupid rich. And the leftover money would go straight to the employees who help make it happen.

---

Unit2 mentioned that it's like QB pay in the NFL. Reminds me of college football and basketball coaches. "We need to stay even with (or ahead of) our competitors!" And salaries ratchet upward.

---

Yeah, but at least with quarterbacks there is a rational basis for thinking they are actually that valuable to the team. Not sure you can say the same about CEOs.

Don't get me wrong, I'm sure the great ones are valuable, I'm just not convinced they're THAT much more valuable.

---

Same with CEOs. So are some CEOs that valuable? Absolutely. And I say this as a heavy equity investors.

---

Also similar to great QBs or coaches, I think that great CEOs can be "underpaid" relative to their value. Like, I would probably be willing to pay Belichik somewhere north of $50M per year to coach my team. He makes $12M per year and Matt Rhule makes $8.5M. Who's getting the better end of that bargain?

But when you look across the thousands of public company CEOs, it's not clear to me that the system is designed to truly reward the best performers or that the system in practice enhances shareholder value.

MSCI produced a report a few years ago that delves into the results and they support the proposition that you can't just incentivize your CEO to a better outcome. I think that you need to pay top CEOs to retain them, but what ends up happening is that companies pay top dollar and then if the results don't work out they find a new CEO to pay top dollar to. If I were an investor, I wouldn't have any faith that you can turn a good CEO into a great one through incentive compensation or that you can simply buy a great CEO.

Quote:

---

EXECUTIVE SUMMARY

Has CEO pay reflected long-term stock performance? In a word, "no." Companies that awarded their Chief Executive Officers (CEOs) higher equity incentives had below-median returns based on a sample of 429 large-cap U.S.companies observed from 2006 to 2015. On a10-year cumulative basis, total shareholder returns of those companies whose total summary pay (the level that must be disclosed in the summary tables of proxy statements) was below their sector median outperformed those companies where pay exceeded the sector median by as much as 39%.

---

Intuitively this matches up with what I've seen anecdotally - great CEOs are worth their weight in platinum but all CEOs get paid their weight in gold.

---

I am not disagreeing with you. Like I said, only about 10% of the engineers are game changers who cannot be paid enough. The rest are paid higher because of the rising market value driven by the 10% but they are just mediocre talent that collect checks and do mediocre work.

Same with CEOs. Sycasey asked if any CEO is really worth that much. I say absolutely. What would be the right compensation for someone like Bezos who drove the right strategy, got the right funding, hired the right leaders, took the right risks, and created so much value for investors like me and changed how we live. What would happen to Amazon if he left and there is the next shift in strategy or revenue stream? Think about what he did with AWS when people were still thinking about them as a seller of books and CDs. Think about where MSFT would be if their current CEO didn't take them down enterprise cloud services but instead focused on hardware or selling licenses for word instead of subscriptions.

Yes, CEOs are overpaid like engineers are overpaid, like lawyers are overpaid. But that is because the top ones are such game changers and not having even a decent one is destructive.

---

BLEH, BI killed my response.

Trying again:

For a few decades there has been discussion of 10x engineers. They produce 10x or more of regular engineers but they are hard to attract and retain. You can't always figure out you have one until they start to produce - not unlike with special athletes. No one could have known Jerry Rice would be who he is. It turns out that just paying well isn't the best way - you need to give them challenges and provide them with resources. Pay is just one component.

I think it's similar for star executives. Compensation is key, but I think the exec comp system in our country has put the cart before the horse. Exec comp doesn't really serve to attract and retain the best - it's really just a toll that gets paid, with little meaningful connection to finding the highest producers. It's also not the same outside the US.

I think we've basically beaten this dead horse, but I will give one example. I had a small cap public technology client in the US that was acquired by a huge international company (one of the 20 largest companies in the world, 100k+ employees) and the acquiring company CEO made a lot less money than the small cap CEO. Structuring the deal to properly incentivize the US CEO and execs relative to peers was a challenge that caused a lot of friction and ultimately drove the deal structure.

---

I hate it when I type something that gets erased by a glitch.

I laughed reading your post because, like most of our long discussions, we are saying the same thing.

1. Yes, top CEOs are worth it. They almost cannot be paid enough.

2. The system is structure so that even the average ones get paid a lot. When every compensation committee is targeting paying their CEO above market (If you think your CEO is below market, you probably would want a new CEO) among the peer group companies, the pay just keeps going up irrespective of talent.

---

Yup just providing slightly different color/nuance.

Would also note, and I'm sure this is obvious, that some companies are ungovernable and that no CEO can rescue them. This, of course, is true for many different positions. I don't think a lawyer is going to walk in the door at Tesla and succeed unless a bunch of other things happen to make that possible.

dimitrig said:

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calbear93 said:

---

Unit2Sucks said:

---

calbear93 said:

---

Unit2Sucks said:

---

calbear93 said:

---

sycasey said:

---

Big C said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

dimitrig said:

---

bearister said:

---

America's Small Businesses Need a Marshall Plan | Howard Schultz

"With a new coronavirus relief measure stalled in Congress, CEOs of some of the world's biggest companies have banded together to send a message to Washington: Get money to small businesses now!

"By Labor Day, we foresee a wave of permanent closures if the right steps are not taken soon," warns the letter, organized by Howard Schultz and signed by more than 100 CEOs, including the heads of Salesforce, Alphabet, Facebook, Microsoft, Walmart, McDonald's, Disney, Quibi, IBM, Merck, Marriott, the Business Roundtable, the U.S. Chamber of Commerce and more.

Axios Markets editor Dion Rabouin writes that the letter to the top four congressional leaders lays out a recipe for a sizable small-business aid package.

The project, Schultz's first big public push since he suspended his run for president, calls for:

"federally guaranteed loans, at favorable terms, that will enable small businesses to transform and sustain themselves."

"Businesses should have flexibility in how loan funds are used."

"The hardest-hit businesses should be eligible for at least partial loan forgiveness."

"Relief needs to be delivered expeditiously. Building on the existing PPP infrastructure would be one way to quickly stand up a new loan program."

"These funds must flow to all small businesses in need, particularly those run by people of color, who have traditionally had less access to capital."

Between the lines: Neither the House's HEROES Act nor the latest version of Senate Republicans' HEALS Act include significant funding for small businesses besides the PPP extension.

The last word: "Tens of millions of Americans have already lost their jobs in this pandemic. ... By year end, the domino effect of lost jobs as well as the lost services and lost products that small businesses provide could be catastrophic." Axios


https://www.howardschultz.com/lettertocongress/

---

Sounds like these large companies are realizing that without small businesses they may not have very many customers. I doubt they are doing this from the kindness of their hearts.

---

Why is "compassion" and "empathy" limited to us and not to CEOs of companies? Why vilify others? Writing those things do not elevate us or anything we have done, and make our ass sitting behind a computer any more heroic.

I believe there is a lot connecting all of us, and the faster we move on from this culture of dividing and vilifying each other by party, class, and race, the better.

---

Part of the resentment has to be due to extremely bloated CEO compensation. Compensation has skewed during my working lifetime and the magnanimous CEOs can only say, "I've got nothing to do with that. It's all in the hands of the BODs."

---

A big part of that has been from the governance folks who promote alignment of shareholder interest with those of management. When you look at most of the executive compensation, it comes from equity grants. It also came from tax rules before TCJA where performance based compensation was permitted to be deducted even if it exceeds one million. It also came from proxy advisory firms who promote long-term equity compensation and performance based compensation over fixed or cash compensation. With the historic rise in equity, those policies resulted in bloated compensation. Hell is paved with good intentions. Just like the real estate asset bubbles and 2008 financial crisis were created by the good intention of the federal government subsidizing home ownership and mortgages, the rise in executive compensation rose from tax laws intended to limit executive compensation, governance folks trying to limit fixed executive compensation, and the asset bubbles and rise of equity markets.

---

When you give someone stock, not options, that is not incentive based. All you have to do is not cause the stock to crash before you cash out. The two companies I worked for paid their CEOs in huge amounts of stock. The stock did nothing and they sold when they could. Incentive/performance based my ass. On the flip side, I got years of stock Options when Pacbell was bought by SBC. The stock went from 60 to 20 during those years. I made $2500 dollars before they shipped me to IBM. Don't get me started on that company. The compensation game is so skewed it's sickening.

---

The funny thing is that proxy advisory firms and other governance folks trying to reign in executive compensation do not treat options as incentive based, arguing that options over 10 year period will go up in value. Most would agree that time-based vesting stock or RSUs are not performance based, but most companies have performance based vesting of stock or RSUs, such as relative TSR.

---

I don't trust any one or any group who's been charged with 'reigning in' executive compensation. They've probably been paid hundreds of millions of dollars too for having zero impact. Rigged game. I defy anyone to show me evidence otherwise. BTW, I've voted Republican my entire voting life so this isn't coming from some bleeding heart liberal. But even an old righty can only get hit over the head so long. I don't see either side actually addressing this.

---

The proxy advisory firms are a shady organization, but if there is any undue influence, I would say it comes from selling their advisory services to companies to get the right recommendation while also being in bed with activist shareholders on hostile takeovers. The SEC has been very focused on proxy plumbing and getting the proxy advisory firms to have liability corresponding the their proxy solicitation role.

---

I'll admit I don't understand many of the terms you use. Here is what I do know, Randall Stephenson made $30,000,000 per year as AT&'s CEO. Under his watch the stock went nowhere, AT&T was forced to pay 3 billion to T-Mobile for the failed merger, DirecTV was purchased and driven into the ground and is now on the verge of extinction , the iPhone game changer moment did nothing for T, etc., etc., etc. And yet Randy kept getting loads and loads of stock. Now the stock price went nowhere but it didn't go down and so for providing very, very average CEO-ship Randall just retired a fabulously wealthy man. Oh, and T has $150 billion of debt to wrestle with along with five too many tv services and a movie company that the new guy nor Randall have any experience running. Rigged.

---

That sounds like bad oversight. On the break-up fee, I would not blame him for the payment of the break-up fee for the failed merger with T-Mobile. These merger agreements and allocation of risk are extremely dynamic, and it is not easy to get aligned to avoid a more costly hostile takeover if you don't get aligned with the target's board.

Not sure when this was, but it there were that type of misalignment between performance and pay, I would be surprised if the proxy advisory firms recommended a favorable vote on say on pay. If there is less than 70% support (even if 50% is the pass / fail), then there will be recommendation against the compensation committee member re-election. And institutional investors are getting tougher. See Blackrock's action against Qualcomm.

---

I have to stop. I don't know how any of this works. I just see CEOs, even good ones, making insane money while most of the workers' pay has stayed relatively stagnant. That's a problem and there is an easy fix. But everyone views the fix, universal pay scale imposed by government, as socialist. I don't really care what you call it. CEOs would still get rich just not stupid rich. And the leftover money would go straight to the employees who help make it happen.

---

Unit2 mentioned that it's like QB pay in the NFL. Reminds me of college football and basketball coaches. "We need to stay even with (or ahead of) our competitors!" And salaries ratchet upward.

---

Yeah, but at least with quarterbacks there is a rational basis for thinking they are actually that valuable to the team. Not sure you can say the same about CEOs.

Don't get me wrong, I'm sure the great ones are valuable, I'm just not convinced they're THAT much more valuable.

---

Same with CEOs. So are some CEOs that valuable? Absolutely. And I say this as a heavy equity investors.

---

Also similar to great QBs or coaches, I think that great CEOs can be "underpaid" relative to their value. Like, I would probably be willing to pay Belichik somewhere north of $50M per year to coach my team. He makes $12M per year and Matt Rhule makes $8.5M. Who's getting the better end of that bargain?

But when you look across the thousands of public company CEOs, it's not clear to me that the system is designed to truly reward the best performers or that the system in practice enhances shareholder value.

MSCI produced a report a few years ago that delves into the results and they support the proposition that you can't just incentivize your CEO to a better outcome. I think that you need to pay top CEOs to retain them, but what ends up happening is that companies pay top dollar and then if the results don't work out they find a new CEO to pay top dollar to. If I were an investor, I wouldn't have any faith that you can turn a good CEO into a great one through incentive compensation or that you can simply buy a great CEO.

Quote:

---

EXECUTIVE SUMMARY

Has CEO pay reflected long-term stock performance? In a word, "no." Companies that awarded their Chief Executive Officers (CEOs) higher equity incentives had below-median returns based on a sample of 429 large-cap U.S.companies observed from 2006 to 2015. On a10-year cumulative basis, total shareholder returns of those companies whose total summary pay (the level that must be disclosed in the summary tables of proxy statements) was below their sector median outperformed those companies where pay exceeded the sector median by as much as 39%.

---

Intuitively this matches up with what I've seen anecdotally - great CEOs are worth their weight in platinum but all CEOs get paid their weight in gold.

---

I am not disagreeing with you. Like I said, only about 10% of the engineers are game changers who cannot be paid enough. The rest are paid higher because of the rising market value driven by the 10% but they are just mediocre talent that collect checks and do mediocre work.

Same with CEOs. Sycasey asked if any CEO is really worth that much. I say absolutely. What would be the right compensation for someone like Bezos who drove the right strategy, got the right funding, hired the right leaders, took the right risks, and created so much value for investors like me and changed how we live. What would happen to Amazon if he left and there is the next shift in strategy or revenue stream? Think about what he did with AWS when people were still thinking about them as a seller of books and CDs. Think about where MSFT would be if their current CEO didn't take them down enterprise cloud services but instead focused on hardware or selling licenses for word instead of subscriptions.

Yes, CEOs are overpaid like engineers are overpaid, like lawyers are overpaid. But that is because the top ones are such game changers and not having even a decent one is destructive.

---

BLEH, BI killed my response.

Trying again:

For a few decades there has been discussion of 10x engineers. They produce 10x or more of regular engineers but they are hard to attract and retain. You can't always figure out you have one until they start to produce - not unlike with special athletes. No one could have known Jerry Rice would be who he is. It turns out that just paying well isn't the best way - you need to give them challenges and provide them with resources. Pay is just one component.

I think it's similar for star executives. Compensation is key, but I think the exec comp system in our country has put the cart before the horse. Exec comp doesn't really serve to attract and retain the best - it's really just a toll that gets paid, with little meaningful connection to finding the highest producers. It's also not the same outside the US.

I think we've basically beaten this dead horse, but I will give one example. I had a small cap public technology client in the US that was acquired by a huge international company (one of the 20 largest companies in the world, 100k+ employees) and the acquiring company CEO made a lot less money than the small cap CEO. Structuring the deal to properly incentivize the US CEO and execs relative to peers was a challenge that caused a lot of friction and ultimately drove the deal structure.

---

I hate it when I type something that gets erased by a glitch.

I laughed reading your post because, like most of our long discussions, we are saying the same thing.

1. Yes, top CEOs are worth it. They almost cannot be paid enough.

2. The system is structure so that even the average ones get paid a lot. When every compensation committee is targeting paying their CEO above market (If you think your CEO is below market, you probably would want a new CEO) among the peer group companies, the pay just keeps going up irrespective of talent.

---

Also not mentioned is that a founder/CEO, while not always competent at running a large company, has more skin in the game. Jobs, Bezos, Musk - these guys would work for peanuts if they had to if it meant their company was growing and accomplishing its goals. That is a completely different breed from some of these guys including many who are actively destroying the company for their own financial gain.
It is important to recognize that a CEO who takes over a 100 year old conglomerate has different skills and goals than a guy like Jeff Bezos that is running the company he founded.

---

Yes, that was my thought when reading that list of examples. CEOs who built their companies from the ground up have clearly demonstrated their talent. Those who got hired to an already successful company, maybe not.

sycasey said:

---

dimitrig said:

---

calbear93 said:

---

Unit2Sucks said:

---

calbear93 said:

---

Unit2Sucks said:

---

calbear93 said:

---

sycasey said:

---

Big C said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

82gradDLSdad said:

---

calbear93 said:

---

dimitrig said:

---

bearister said:

---

America's Small Businesses Need a Marshall Plan | Howard Schultz

"With a new coronavirus relief measure stalled in Congress, CEOs of some of the world's biggest companies have banded together to send a message to Washington: Get money to small businesses now!

"By Labor Day, we foresee a wave of permanent closures if the right steps are not taken soon," warns the letter, organized by Howard Schultz and signed by more than 100 CEOs, including the heads of Salesforce, Alphabet, Facebook, Microsoft, Walmart, McDonald's, Disney, Quibi, IBM, Merck, Marriott, the Business Roundtable, the U.S. Chamber of Commerce and more.

Axios Markets editor Dion Rabouin writes that the letter to the top four congressional leaders lays out a recipe for a sizable small-business aid package.

The project, Schultz's first big public push since he suspended his run for president, calls for:

"federally guaranteed loans, at favorable terms, that will enable small businesses to transform and sustain themselves."

"Businesses should have flexibility in how loan funds are used."

"The hardest-hit businesses should be eligible for at least partial loan forgiveness."

"Relief needs to be delivered expeditiously. Building on the existing PPP infrastructure would be one way to quickly stand up a new loan program."

"These funds must flow to all small businesses in need, particularly those run by people of color, who have traditionally had less access to capital."

Between the lines: Neither the House's HEROES Act nor the latest version of Senate Republicans' HEALS Act include significant funding for small businesses besides the PPP extension.

The last word: "Tens of millions of Americans have already lost their jobs in this pandemic. ... By year end, the domino effect of lost jobs as well as the lost services and lost products that small businesses provide could be catastrophic." Axios


https://www.howardschultz.com/lettertocongress/

---

Sounds like these large companies are realizing that without small businesses they may not have very many customers. I doubt they are doing this from the kindness of their hearts.

---

Why is "compassion" and "empathy" limited to us and not to CEOs of companies? Why vilify others? Writing those things do not elevate us or anything we have done, and make our ass sitting behind a computer any more heroic.

I believe there is a lot connecting all of us, and the faster we move on from this culture of dividing and vilifying each other by party, class, and race, the better.

---

Part of the resentment has to be due to extremely bloated CEO compensation. Compensation has skewed during my working lifetime and the magnanimous CEOs can only say, "I've got nothing to do with that. It's all in the hands of the BODs."

---

A big part of that has been from the governance folks who promote alignment of shareholder interest with those of management. When you look at most of the executive compensation, it comes from equity grants. It also came from tax rules before TCJA where performance based compensation was permitted to be deducted even if it exceeds one million. It also came from proxy advisory firms who promote long-term equity compensation and performance based compensation over fixed or cash compensation. With the historic rise in equity, those policies resulted in bloated compensation. Hell is paved with good intentions. Just like the real estate asset bubbles and 2008 financial crisis were created by the good intention of the federal government subsidizing home ownership and mortgages, the rise in executive compensation rose from tax laws intended to limit executive compensation, governance folks trying to limit fixed executive compensation, and the asset bubbles and rise of equity markets.

---

When you give someone stock, not options, that is not incentive based. All you have to do is not cause the stock to crash before you cash out. The two companies I worked for paid their CEOs in huge amounts of stock. The stock did nothing and they sold when they could. Incentive/performance based my ass. On the flip side, I got years of stock Options when Pacbell was bought by SBC. The stock went from 60 to 20 during those years. I made $2500 dollars before they shipped me to IBM. Don't get me started on that company. The compensation game is so skewed it's sickening.

---

The funny thing is that proxy advisory firms and other governance folks trying to reign in executive compensation do not treat options as incentive based, arguing that options over 10 year period will go up in value. Most would agree that time-based vesting stock or RSUs are not performance based, but most companies have performance based vesting of stock or RSUs, such as relative TSR.

---

I don't trust any one or any group who's been charged with 'reigning in' executive compensation. They've probably been paid hundreds of millions of dollars too for having zero impact. Rigged game. I defy anyone to show me evidence otherwise. BTW, I've voted Republican my entire voting life so this isn't coming from some bleeding heart liberal. But even an old righty can only get hit over the head so long. I don't see either side actually addressing this.

---

The proxy advisory firms are a shady organization, but if there is any undue influence, I would say it comes from selling their advisory services to companies to get the right recommendation while also being in bed with activist shareholders on hostile takeovers. The SEC has been very focused on proxy plumbing and getting the proxy advisory firms to have liability corresponding the their proxy solicitation role.

---

I'll admit I don't understand many of the terms you use. Here is what I do know, Randall Stephenson made $30,000,000 per year as AT&'s CEO. Under his watch the stock went nowhere, AT&T was forced to pay 3 billion to T-Mobile for the failed merger, DirecTV was purchased and driven into the ground and is now on the verge of extinction , the iPhone game changer moment did nothing for T, etc., etc., etc. And yet Randy kept getting loads and loads of stock. Now the stock price went nowhere but it didn't go down and so for providing very, very average CEO-ship Randall just retired a fabulously wealthy man. Oh, and T has $150 billion of debt to wrestle with along with five too many tv services and a movie company that the new guy nor Randall have any experience running. Rigged.

---

That sounds like bad oversight. On the break-up fee, I would not blame him for the payment of the break-up fee for the failed merger with T-Mobile. These merger agreements and allocation of risk are extremely dynamic, and it is not easy to get aligned to avoid a more costly hostile takeover if you don't get aligned with the target's board.

Not sure when this was, but it there were that type of misalignment between performance and pay, I would be surprised if the proxy advisory firms recommended a favorable vote on say on pay. If there is less than 70% support (even if 50% is the pass / fail), then there will be recommendation against the compensation committee member re-election. And institutional investors are getting tougher. See Blackrock's action against Qualcomm.

---

I have to stop. I don't know how any of this works. I just see CEOs, even good ones, making insane money while most of the workers' pay has stayed relatively stagnant. That's a problem and there is an easy fix. But everyone views the fix, universal pay scale imposed by government, as socialist. I don't really care what you call it. CEOs would still get rich just not stupid rich. And the leftover money would go straight to the employees who help make it happen.

---

Unit2 mentioned that it's like QB pay in the NFL. Reminds me of college football and basketball coaches. "We need to stay even with (or ahead of) our competitors!" And salaries ratchet upward.

---

Yeah, but at least with quarterbacks there is a rational basis for thinking they are actually that valuable to the team. Not sure you can say the same about CEOs.

Don't get me wrong, I'm sure the great ones are valuable, I'm just not convinced they're THAT much more valuable.

---

Same with CEOs. So are some CEOs that valuable? Absolutely. And I say this as a heavy equity investors.

---

Also similar to great QBs or coaches, I think that great CEOs can be "underpaid" relative to their value. Like, I would probably be willing to pay Belichik somewhere north of $50M per year to coach my team. He makes $12M per year and Matt Rhule makes $8.5M. Who's getting the better end of that bargain?

But when you look across the thousands of public company CEOs, it's not clear to me that the system is designed to truly reward the best performers or that the system in practice enhances shareholder value.

MSCI produced a report a few years ago that delves into the results and they support the proposition that you can't just incentivize your CEO to a better outcome. I think that you need to pay top CEOs to retain them, but what ends up happening is that companies pay top dollar and then if the results don't work out they find a new CEO to pay top dollar to. If I were an investor, I wouldn't have any faith that you can turn a good CEO into a great one through incentive compensation or that you can simply buy a great CEO.

Quote:

---

EXECUTIVE SUMMARY

Has CEO pay reflected long-term stock performance? In a word, "no." Companies that awarded their Chief Executive Officers (CEOs) higher equity incentives had below-median returns based on a sample of 429 large-cap U.S.companies observed from 2006 to 2015. On a10-year cumulative basis, total shareholder returns of those companies whose total summary pay (the level that must be disclosed in the summary tables of proxy statements) was below their sector median outperformed those companies where pay exceeded the sector median by as much as 39%.

---

Intuitively this matches up with what I've seen anecdotally - great CEOs are worth their weight in platinum but all CEOs get paid their weight in gold.

---

I am not disagreeing with you. Like I said, only about 10% of the engineers are game changers who cannot be paid enough. The rest are paid higher because of the rising market value driven by the 10% but they are just mediocre talent that collect checks and do mediocre work.

Same with CEOs. Sycasey asked if any CEO is really worth that much. I say absolutely. What would be the right compensation for someone like Bezos who drove the right strategy, got the right funding, hired the right leaders, took the right risks, and created so much value for investors like me and changed how we live. What would happen to Amazon if he left and there is the next shift in strategy or revenue stream? Think about what he did with AWS when people were still thinking about them as a seller of books and CDs. Think about where MSFT would be if their current CEO didn't take them down enterprise cloud services but instead focused on hardware or selling licenses for word instead of subscriptions.

Yes, CEOs are overpaid like engineers are overpaid, like lawyers are overpaid. But that is because the top ones are such game changers and not having even a decent one is destructive.

---

BLEH, BI killed my response.

Trying again:

For a few decades there has been discussion of 10x engineers. They produce 10x or more of regular engineers but they are hard to attract and retain. You can't always figure out you have one until they start to produce - not unlike with special athletes. No one could have known Jerry Rice would be who he is. It turns out that just paying well isn't the best way - you need to give them challenges and provide them with resources. Pay is just one component.

I think it's similar for star executives. Compensation is key, but I think the exec comp system in our country has put the cart before the horse. Exec comp doesn't really serve to attract and retain the best - it's really just a toll that gets paid, with little meaningful connection to finding the highest producers. It's also not the same outside the US.

I think we've basically beaten this dead horse, but I will give one example. I had a small cap public technology client in the US that was acquired by a huge international company (one of the 20 largest companies in the world, 100k+ employees) and the acquiring company CEO made a lot less money than the small cap CEO. Structuring the deal to properly incentivize the US CEO and execs relative to peers was a challenge that caused a lot of friction and ultimately drove the deal structure.

---

I hate it when I type something that gets erased by a glitch.

I laughed reading your post because, like most of our long discussions, we are saying the same thing.

1. Yes, top CEOs are worth it. They almost cannot be paid enough.

2. The system is structure so that even the average ones get paid a lot. When every compensation committee is targeting paying their CEO above market (If you think your CEO is below market, you probably would want a new CEO) among the peer group companies, the pay just keeps going up irrespective of talent.

---

Also not mentioned is that a founder/CEO, while not always competent at running a large company, has more skin in the game. Jobs, Bezos, Musk - these guys would work for peanuts if they had to if it meant their company was growing and accomplishing its goals. That is a completely different breed from some of these guys including many who are actively destroying the company for their own financial gain.
It is important to recognize that a CEO who takes over a 100 year old conglomerate has different skills and goals than a guy like Jeff Bezos that is running the company he founded.

---

Yes, that was my thought when reading that list of examples. CEOs who built their companies from the ground up have clearly demonstrated their talent. Those who got hired to an already successful company, maybe not.

---

Larry Culp at Danaher, Nick Howley at TransDigm, Brian Jellison and Neil Hunn at Roper, Nadella at Microsoft - none of them founders and all of them amazing leaders and all of them in my portfolio for a long time (most over 12 years) because of management (even if a few are not there any more as CEOs). Let's not forget Cook. Not the marketing genius or visionary like Jobs but awesome steward.

Unit2Sucks said:

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calbear93 said:

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Unit2Sucks said:

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calbear93 said:

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Unit2Sucks said:

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calbear93 said:

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sycasey said:

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Big C said:

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82gradDLSdad said:

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calbear93 said:

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82gradDLSdad said:

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calbear93 said:

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82gradDLSdad said:

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calbear93 said:

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82gradDLSdad said:

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calbear93 said:

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82gradDLSdad said:

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calbear93 said:

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dimitrig said:

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bearister said:

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America's Small Businesses Need a Marshall Plan | Howard Schultz

"With a new coronavirus relief measure stalled in Congress, CEOs of some of the world's biggest companies have banded together to send a message to Washington: Get money to small businesses now!

"By Labor Day, we foresee a wave of permanent closures if the right steps are not taken soon," warns the letter, organized by Howard Schultz and signed by more than 100 CEOs, including the heads of Salesforce, Alphabet, Facebook, Microsoft, Walmart, McDonald's, Disney, Quibi, IBM, Merck, Marriott, the Business Roundtable, the U.S. Chamber of Commerce and more.

Axios Markets editor Dion Rabouin writes that the letter to the top four congressional leaders lays out a recipe for a sizable small-business aid package.

The project, Schultz's first big public push since he suspended his run for president, calls for:

"federally guaranteed loans, at favorable terms, that will enable small businesses to transform and sustain themselves."

"Businesses should have flexibility in how loan funds are used."

"The hardest-hit businesses should be eligible for at least partial loan forgiveness."

"Relief needs to be delivered expeditiously. Building on the existing PPP infrastructure would be one way to quickly stand up a new loan program."

"These funds must flow to all small businesses in need, particularly those run by people of color, who have traditionally had less access to capital."

Between the lines: Neither the House's HEROES Act nor the latest version of Senate Republicans' HEALS Act include significant funding for small businesses besides the PPP extension.

The last word: "Tens of millions of Americans have already lost their jobs in this pandemic. ... By year end, the domino effect of lost jobs as well as the lost services and lost products that small businesses provide could be catastrophic." Axios


https://www.howardschultz.com/lettertocongress/

---

Sounds like these large companies are realizing that without small businesses they may not have very many customers. I doubt they are doing this from the kindness of their hearts.

---

Why is "compassion" and "empathy" limited to us and not to CEOs of companies? Why vilify others? Writing those things do not elevate us or anything we have done, and make our ass sitting behind a computer any more heroic.

I believe there is a lot connecting all of us, and the faster we move on from this culture of dividing and vilifying each other by party, class, and race, the better.

---

Part of the resentment has to be due to extremely bloated CEO compensation. Compensation has skewed during my working lifetime and the magnanimous CEOs can only say, "I've got nothing to do with that. It's all in the hands of the BODs."

---

A big part of that has been from the governance folks who promote alignment of shareholder interest with those of management. When you look at most of the executive compensation, it comes from equity grants. It also came from tax rules before TCJA where performance based compensation was permitted to be deducted even if it exceeds one million. It also came from proxy advisory firms who promote long-term equity compensation and performance based compensation over fixed or cash compensation. With the historic rise in equity, those policies resulted in bloated compensation. Hell is paved with good intentions. Just like the real estate asset bubbles and 2008 financial crisis were created by the good intention of the federal government subsidizing home ownership and mortgages, the rise in executive compensation rose from tax laws intended to limit executive compensation, governance folks trying to limit fixed executive compensation, and the asset bubbles and rise of equity markets.

---

When you give someone stock, not options, that is not incentive based. All you have to do is not cause the stock to crash before you cash out. The two companies I worked for paid their CEOs in huge amounts of stock. The stock did nothing and they sold when they could. Incentive/performance based my ass. On the flip side, I got years of stock Options when Pacbell was bought by SBC. The stock went from 60 to 20 during those years. I made $2500 dollars before they shipped me to IBM. Don't get me started on that company. The compensation game is so skewed it's sickening.

---

The funny thing is that proxy advisory firms and other governance folks trying to reign in executive compensation do not treat options as incentive based, arguing that options over 10 year period will go up in value. Most would agree that time-based vesting stock or RSUs are not performance based, but most companies have performance based vesting of stock or RSUs, such as relative TSR.

---

I don't trust any one or any group who's been charged with 'reigning in' executive compensation. They've probably been paid hundreds of millions of dollars too for having zero impact. Rigged game. I defy anyone to show me evidence otherwise. BTW, I've voted Republican my entire voting life so this isn't coming from some bleeding heart liberal. But even an old righty can only get hit over the head so long. I don't see either side actually addressing this.

---

The proxy advisory firms are a shady organization, but if there is any undue influence, I would say it comes from selling their advisory services to companies to get the right recommendation while also being in bed with activist shareholders on hostile takeovers. The SEC has been very focused on proxy plumbing and getting the proxy advisory firms to have liability corresponding the their proxy solicitation role.

---

I'll admit I don't understand many of the terms you use. Here is what I do know, Randall Stephenson made $30,000,000 per year as AT&'s CEO. Under his watch the stock went nowhere, AT&T was forced to pay 3 billion to T-Mobile for the failed merger, DirecTV was purchased and driven into the ground and is now on the verge of extinction , the iPhone game changer moment did nothing for T, etc., etc., etc. And yet Randy kept getting loads and loads of stock. Now the stock price went nowhere but it didn't go down and so for providing very, very average CEO-ship Randall just retired a fabulously wealthy man. Oh, and T has $150 billion of debt to wrestle with along with five too many tv services and a movie company that the new guy nor Randall have any experience running. Rigged.

---

That sounds like bad oversight. On the break-up fee, I would not blame him for the payment of the break-up fee for the failed merger with T-Mobile. These merger agreements and allocation of risk are extremely dynamic, and it is not easy to get aligned to avoid a more costly hostile takeover if you don't get aligned with the target's board.

Not sure when this was, but it there were that type of misalignment between performance and pay, I would be surprised if the proxy advisory firms recommended a favorable vote on say on pay. If there is less than 70% support (even if 50% is the pass / fail), then there will be recommendation against the compensation committee member re-election. And institutional investors are getting tougher. See Blackrock's action against Qualcomm.

---

I have to stop. I don't know how any of this works. I just see CEOs, even good ones, making insane money while most of the workers' pay has stayed relatively stagnant. That's a problem and there is an easy fix. But everyone views the fix, universal pay scale imposed by government, as socialist. I don't really care what you call it. CEOs would still get rich just not stupid rich. And the leftover money would go straight to the employees who help make it happen.

---

Unit2 mentioned that it's like QB pay in the NFL. Reminds me of college football and basketball coaches. "We need to stay even with (or ahead of) our competitors!" And salaries ratchet upward.

---

Yeah, but at least with quarterbacks there is a rational basis for thinking they are actually that valuable to the team. Not sure you can say the same about CEOs.

Don't get me wrong, I'm sure the great ones are valuable, I'm just not convinced they're THAT much more valuable.

---

Same with CEOs. So are some CEOs that valuable? Absolutely. And I say this as a heavy equity investors.

---

Also similar to great QBs or coaches, I think that great CEOs can be "underpaid" relative to their value. Like, I would probably be willing to pay Belichik somewhere north of $50M per year to coach my team. He makes $12M per year and Matt Rhule makes $8.5M. Who's getting the better end of that bargain?

But when you look across the thousands of public company CEOs, it's not clear to me that the system is designed to truly reward the best performers or that the system in practice enhances shareholder value.

MSCI produced a report a few years ago that delves into the results and they support the proposition that you can't just incentivize your CEO to a better outcome. I think that you need to pay top CEOs to retain them, but what ends up happening is that companies pay top dollar and then if the results don't work out they find a new CEO to pay top dollar to. If I were an investor, I wouldn't have any faith that you can turn a good CEO into a great one through incentive compensation or that you can simply buy a great CEO.

Quote:

---

EXECUTIVE SUMMARY

Has CEO pay reflected long-term stock performance? In a word, "no." Companies that awarded their Chief Executive Officers (CEOs) higher equity incentives had below-median returns based on a sample of 429 large-cap U.S.companies observed from 2006 to 2015. On a10-year cumulative basis, total shareholder returns of those companies whose total summary pay (the level that must be disclosed in the summary tables of proxy statements) was below their sector median outperformed those companies where pay exceeded the sector median by as much as 39%.

---

Intuitively this matches up with what I've seen anecdotally - great CEOs are worth their weight in platinum but all CEOs get paid their weight in gold.

---

I am not disagreeing with you. Like I said, only about 10% of the engineers are game changers who cannot be paid enough. The rest are paid higher because of the rising market value driven by the 10% but they are just mediocre talent that collect checks and do mediocre work.

Same with CEOs. Sycasey asked if any CEO is really worth that much. I say absolutely. What would be the right compensation for someone like Bezos who drove the right strategy, got the right funding, hired the right leaders, took the right risks, and created so much value for investors like me and changed how we live. What would happen to Amazon if he left and there is the next shift in strategy or revenue stream? Think about what he did with AWS when people were still thinking about them as a seller of books and CDs. Think about where MSFT would be if their current CEO didn't take them down enterprise cloud services but instead focused on hardware or selling licenses for word instead of subscriptions.

Yes, CEOs are overpaid like engineers are overpaid, like lawyers are overpaid. But that is because the top ones are such game changers and not having even a decent one is destructive.

---

BLEH, BI killed my response.

Trying again:

For a few decades there has been discussion of 10x engineers. They produce 10x or more of regular engineers but they are hard to attract and retain. You can't always figure out you have one until they start to produce - not unlike with special athletes. No one could have known Jerry Rice would be who he is. It turns out that just paying well isn't the best way - you need to give them challenges and provide them with resources. Pay is just one component.

I think it's similar for star executives. Compensation is key, but I think the exec comp system in our country has put the cart before the horse. Exec comp doesn't really serve to attract and retain the best - it's really just a toll that gets paid, with little meaningful connection to finding the highest producers. It's also not the same outside the US.

I think we've basically beaten this dead horse, but I will give one example. I had a small cap public technology client in the US that was acquired by a huge international company (one of the 20 largest companies in the world, 100k+ employees) and the acquiring company CEO made a lot less money than the small cap CEO. Structuring the deal to properly incentivize the US CEO and execs relative to peers was a challenge that caused a lot of friction and ultimately drove the deal structure.

---

I hate it when I type something that gets erased by a glitch.

I laughed reading your post because, like most of our long discussions, we are saying the same thing.

1. Yes, top CEOs are worth it. They almost cannot be paid enough.

2. The system is structure so that even the average ones get paid a lot. When every compensation committee is targeting paying their CEO above market (If you think your CEO is below market, you probably would want a new CEO) among the peer group companies, the pay just keeps going up irrespective of talent.

---

Yup just providing slightly different color/nuance.

Would also note, and I'm sure this is obvious, that some companies are ungovernable and that no CEO can rescue them. This, of course, is true for many different positions. I don't think a lawyer is going to walk in the door at Tesla and succeed unless a bunch of other things happen to make that possible.

---

One of the longest holdings in my portfolio is Priceline (now Booking). Went through a horrendous drop during early 2000, the GC took over and monetized their IP and did smart acquisitions and, even with the recent drop, has returned an amazing amount (after almost going to zero in 2000). So a lawyer can go in an turn it around but Tesla is so much Musk, I would not want to invest. Cannot imagine what their CEO succession planning looks like.

calbear93 said:

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sycasey said:

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dimitrig said:

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calbear93 said:

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Unit2Sucks said:

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calbear93 said:

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Unit2Sucks said:

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calbear93 said:

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sycasey said:

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Big C said:

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82gradDLSdad said:

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calbear93 said:

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82gradDLSdad said:

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calbear93 said:

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82gradDLSdad said:

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calbear93 said:

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82gradDLSdad said:

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calbear93 said:

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82gradDLSdad said:

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calbear93 said:

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dimitrig said:

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bearister said:

---

America's Small Businesses Need a Marshall Plan | Howard Schultz

"With a new coronavirus relief measure stalled in Congress, CEOs of some of the world's biggest companies have banded together to send a message to Washington: Get money to small businesses now!

"By Labor Day, we foresee a wave of permanent closures if the right steps are not taken soon," warns the letter, organized by Howard Schultz and signed by more than 100 CEOs, including the heads of Salesforce, Alphabet, Facebook, Microsoft, Walmart, McDonald's, Disney, Quibi, IBM, Merck, Marriott, the Business Roundtable, the U.S. Chamber of Commerce and more.

Axios Markets editor Dion Rabouin writes that the letter to the top four congressional leaders lays out a recipe for a sizable small-business aid package.

The project, Schultz's first big public push since he suspended his run for president, calls for:

"federally guaranteed loans, at favorable terms, that will enable small businesses to transform and sustain themselves."

"Businesses should have flexibility in how loan funds are used."

"The hardest-hit businesses should be eligible for at least partial loan forgiveness."

"Relief needs to be delivered expeditiously. Building on the existing PPP infrastructure would be one way to quickly stand up a new loan program."

"These funds must flow to all small businesses in need, particularly those run by people of color, who have traditionally had less access to capital."

Between the lines: Neither the House's HEROES Act nor the latest version of Senate Republicans' HEALS Act include significant funding for small businesses besides the PPP extension.

The last word: "Tens of millions of Americans have already lost their jobs in this pandemic. ... By year end, the domino effect of lost jobs as well as the lost services and lost products that small businesses provide could be catastrophic." Axios


https://www.howardschultz.com/lettertocongress/

---

Sounds like these large companies are realizing that without small businesses they may not have very many customers. I doubt they are doing this from the kindness of their hearts.

---

Why is "compassion" and "empathy" limited to us and not to CEOs of companies? Why vilify others? Writing those things do not elevate us or anything we have done, and make our ass sitting behind a computer any more heroic.

I believe there is a lot connecting all of us, and the faster we move on from this culture of dividing and vilifying each other by party, class, and race, the better.

---

Part of the resentment has to be due to extremely bloated CEO compensation. Compensation has skewed during my working lifetime and the magnanimous CEOs can only say, "I've got nothing to do with that. It's all in the hands of the BODs."

---

A big part of that has been from the governance folks who promote alignment of shareholder interest with those of management. When you look at most of the executive compensation, it comes from equity grants. It also came from tax rules before TCJA where performance based compensation was permitted to be deducted even if it exceeds one million. It also came from proxy advisory firms who promote long-term equity compensation and performance based compensation over fixed or cash compensation. With the historic rise in equity, those policies resulted in bloated compensation. Hell is paved with good intentions. Just like the real estate asset bubbles and 2008 financial crisis were created by the good intention of the federal government subsidizing home ownership and mortgages, the rise in executive compensation rose from tax laws intended to limit executive compensation, governance folks trying to limit fixed executive compensation, and the asset bubbles and rise of equity markets.

---

When you give someone stock, not options, that is not incentive based. All you have to do is not cause the stock to crash before you cash out. The two companies I worked for paid their CEOs in huge amounts of stock. The stock did nothing and they sold when they could. Incentive/performance based my ass. On the flip side, I got years of stock Options when Pacbell was bought by SBC. The stock went from 60 to 20 during those years. I made $2500 dollars before they shipped me to IBM. Don't get me started on that company. The compensation game is so skewed it's sickening.

---

The funny thing is that proxy advisory firms and other governance folks trying to reign in executive compensation do not treat options as incentive based, arguing that options over 10 year period will go up in value. Most would agree that time-based vesting stock or RSUs are not performance based, but most companies have performance based vesting of stock or RSUs, such as relative TSR.

---

I don't trust any one or any group who's been charged with 'reigning in' executive compensation. They've probably been paid hundreds of millions of dollars too for having zero impact. Rigged game. I defy anyone to show me evidence otherwise. BTW, I've voted Republican my entire voting life so this isn't coming from some bleeding heart liberal. But even an old righty can only get hit over the head so long. I don't see either side actually addressing this.

---

The proxy advisory firms are a shady organization, but if there is any undue influence, I would say it comes from selling their advisory services to companies to get the right recommendation while also being in bed with activist shareholders on hostile takeovers. The SEC has been very focused on proxy plumbing and getting the proxy advisory firms to have liability corresponding the their proxy solicitation role.

---

I'll admit I don't understand many of the terms you use. Here is what I do know, Randall Stephenson made $30,000,000 per year as AT&'s CEO. Under his watch the stock went nowhere, AT&T was forced to pay 3 billion to T-Mobile for the failed merger, DirecTV was purchased and driven into the ground and is now on the verge of extinction , the iPhone game changer moment did nothing for T, etc., etc., etc. And yet Randy kept getting loads and loads of stock. Now the stock price went nowhere but it didn't go down and so for providing very, very average CEO-ship Randall just retired a fabulously wealthy man. Oh, and T has $150 billion of debt to wrestle with along with five too many tv services and a movie company that the new guy nor Randall have any experience running. Rigged.

---

That sounds like bad oversight. On the break-up fee, I would not blame him for the payment of the break-up fee for the failed merger with T-Mobile. These merger agreements and allocation of risk are extremely dynamic, and it is not easy to get aligned to avoid a more costly hostile takeover if you don't get aligned with the target's board.

Not sure when this was, but it there were that type of misalignment between performance and pay, I would be surprised if the proxy advisory firms recommended a favorable vote on say on pay. If there is less than 70% support (even if 50% is the pass / fail), then there will be recommendation against the compensation committee member re-election. And institutional investors are getting tougher. See Blackrock's action against Qualcomm.

---

I have to stop. I don't know how any of this works. I just see CEOs, even good ones, making insane money while most of the workers' pay has stayed relatively stagnant. That's a problem and there is an easy fix. But everyone views the fix, universal pay scale imposed by government, as socialist. I don't really care what you call it. CEOs would still get rich just not stupid rich. And the leftover money would go straight to the employees who help make it happen.

---

Unit2 mentioned that it's like QB pay in the NFL. Reminds me of college football and basketball coaches. "We need to stay even with (or ahead of) our competitors!" And salaries ratchet upward.

---

Yeah, but at least with quarterbacks there is a rational basis for thinking they are actually that valuable to the team. Not sure you can say the same about CEOs.

Don't get me wrong, I'm sure the great ones are valuable, I'm just not convinced they're THAT much more valuable.

---

Same with CEOs. So are some CEOs that valuable? Absolutely. And I say this as a heavy equity investors.

---

Also similar to great QBs or coaches, I think that great CEOs can be "underpaid" relative to their value. Like, I would probably be willing to pay Belichik somewhere north of $50M per year to coach my team. He makes $12M per year and Matt Rhule makes $8.5M. Who's getting the better end of that bargain?

But when you look across the thousands of public company CEOs, it's not clear to me that the system is designed to truly reward the best performers or that the system in practice enhances shareholder value.

MSCI produced a report a few years ago that delves into the results and they support the proposition that you can't just incentivize your CEO to a better outcome. I think that you need to pay top CEOs to retain them, but what ends up happening is that companies pay top dollar and then if the results don't work out they find a new CEO to pay top dollar to. If I were an investor, I wouldn't have any faith that you can turn a good CEO into a great one through incentive compensation or that you can simply buy a great CEO.

Quote:

---

EXECUTIVE SUMMARY

Has CEO pay reflected long-term stock performance? In a word, "no." Companies that awarded their Chief Executive Officers (CEOs) higher equity incentives had below-median returns based on a sample of 429 large-cap U.S.companies observed from 2006 to 2015. On a10-year cumulative basis, total shareholder returns of those companies whose total summary pay (the level that must be disclosed in the summary tables of proxy statements) was below their sector median outperformed those companies where pay exceeded the sector median by as much as 39%.

---

Intuitively this matches up with what I've seen anecdotally - great CEOs are worth their weight in platinum but all CEOs get paid their weight in gold.

---

I am not disagreeing with you. Like I said, only about 10% of the engineers are game changers who cannot be paid enough. The rest are paid higher because of the rising market value driven by the 10% but they are just mediocre talent that collect checks and do mediocre work.

Same with CEOs. Sycasey asked if any CEO is really worth that much. I say absolutely. What would be the right compensation for someone like Bezos who drove the right strategy, got the right funding, hired the right leaders, took the right risks, and created so much value for investors like me and changed how we live. What would happen to Amazon if he left and there is the next shift in strategy or revenue stream? Think about what he did with AWS when people were still thinking about them as a seller of books and CDs. Think about where MSFT would be if their current CEO didn't take them down enterprise cloud services but instead focused on hardware or selling licenses for word instead of subscriptions.

Yes, CEOs are overpaid like engineers are overpaid, like lawyers are overpaid. But that is because the top ones are such game changers and not having even a decent one is destructive.

---

BLEH, BI killed my response.

Trying again:

For a few decades there has been discussion of 10x engineers. They produce 10x or more of regular engineers but they are hard to attract and retain. You can't always figure out you have one until they start to produce - not unlike with special athletes. No one could have known Jerry Rice would be who he is. It turns out that just paying well isn't the best way - you need to give them challenges and provide them with resources. Pay is just one component.

I think it's similar for star executives. Compensation is key, but I think the exec comp system in our country has put the cart before the horse. Exec comp doesn't really serve to attract and retain the best - it's really just a toll that gets paid, with little meaningful connection to finding the highest producers. It's also not the same outside the US.

I think we've basically beaten this dead horse, but I will give one example. I had a small cap public technology client in the US that was acquired by a huge international company (one of the 20 largest companies in the world, 100k+ employees) and the acquiring company CEO made a lot less money than the small cap CEO. Structuring the deal to properly incentivize the US CEO and execs relative to peers was a challenge that caused a lot of friction and ultimately drove the deal structure.

---

I hate it when I type something that gets erased by a glitch.

I laughed reading your post because, like most of our long discussions, we are saying the same thing.

1. Yes, top CEOs are worth it. They almost cannot be paid enough.

2. The system is structure so that even the average ones get paid a lot. When every compensation committee is targeting paying their CEO above market (If you think your CEO is below market, you probably would want a new CEO) among the peer group companies, the pay just keeps going up irrespective of talent.

---

Also not mentioned is that a founder/CEO, while not always competent at running a large company, has more skin in the game. Jobs, Bezos, Musk - these guys would work for peanuts if they had to if it meant their company was growing and accomplishing its goals. That is a completely different breed from some of these guys including many who are actively destroying the company for their own financial gain.
It is important to recognize that a CEO who takes over a 100 year old conglomerate has different skills and goals than a guy like Jeff Bezos that is running the company he founded.

---

Yes, that was my thought when reading that list of examples. CEOs who built their companies from the ground up have clearly demonstrated their talent. Those who got hired to an already successful company, maybe not.

---

Larry Culp at Danaher, Nick Howley at TransDigm, Brian Jellison and Neil Hunn at Roper, Nadella at Microsoft - none of them founders and all of them amazing leaders and all of them in my portfolio for a long time (most over 12 years) because of management (even if a few are not there any more as CEOs). Let's not forget Cook. Not the marketing genius or visionary like Jobs but awesome steward

---

Regarding Culp, you must be backing up the truck and buying copious amounts of GE now that he's taken over for one of the most grossly overpaid human beings of all times, Jeff Imelt. Even Marvin Bernard disses Jeff on the amount he was overpaid.*

*Shameless Giants jab.

City streets drain of life in Australia's toughest lockdown


https://apnews.com/1587622775452a3036c1141998984033

82gradDLSdad said:

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calbear93 said:

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sycasey said:

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dimitrig said:

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calbear93 said:

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Unit2Sucks said:

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calbear93 said:

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Unit2Sucks said:

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calbear93 said:

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sycasey said:

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Big C said:

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82gradDLSdad said:

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calbear93 said:

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82gradDLSdad said:

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calbear93 said:

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82gradDLSdad said:

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calbear93 said:

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82gradDLSdad said:

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calbear93 said:

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82gradDLSdad said:

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calbear93 said:

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dimitrig said:

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bearister said:

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America's Small Businesses Need a Marshall Plan | Howard Schultz

"With a new coronavirus relief measure stalled in Congress, CEOs of some of the world's biggest companies have banded together to send a message to Washington: Get money to small businesses now!

"By Labor Day, we foresee a wave of permanent closures if the right steps are not taken soon," warns the letter, organized by Howard Schultz and signed by more than 100 CEOs, including the heads of Salesforce, Alphabet, Facebook, Microsoft, Walmart, McDonald's, Disney, Quibi, IBM, Merck, Marriott, the Business Roundtable, the U.S. Chamber of Commerce and more.

Axios Markets editor Dion Rabouin writes that the letter to the top four congressional leaders lays out a recipe for a sizable small-business aid package.

The project, Schultz's first big public push since he suspended his run for president, calls for:

"federally guaranteed loans, at favorable terms, that will enable small businesses to transform and sustain themselves."

"Businesses should have flexibility in how loan funds are used."

"The hardest-hit businesses should be eligible for at least partial loan forgiveness."

"Relief needs to be delivered expeditiously. Building on the existing PPP infrastructure would be one way to quickly stand up a new loan program."

"These funds must flow to all small businesses in need, particularly those run by people of color, who have traditionally had less access to capital."

Between the lines: Neither the House's HEROES Act nor the latest version of Senate Republicans' HEALS Act include significant funding for small businesses besides the PPP extension.

The last word: "Tens of millions of Americans have already lost their jobs in this pandemic. ... By year end, the domino effect of lost jobs as well as the lost services and lost products that small businesses provide could be catastrophic." Axios


https://www.howardschultz.com/lettertocongress/

---

Sounds like these large companies are realizing that without small businesses they may not have very many customers. I doubt they are doing this from the kindness of their hearts.

---

Why is "compassion" and "empathy" limited to us and not to CEOs of companies? Why vilify others? Writing those things do not elevate us or anything we have done, and make our ass sitting behind a computer any more heroic.

I believe there is a lot connecting all of us, and the faster we move on from this culture of dividing and vilifying each other by party, class, and race, the better.

---

Part of the resentment has to be due to extremely bloated CEO compensation. Compensation has skewed during my working lifetime and the magnanimous CEOs can only say, "I've got nothing to do with that. It's all in the hands of the BODs."

---

A big part of that has been from the governance folks who promote alignment of shareholder interest with those of management. When you look at most of the executive compensation, it comes from equity grants. It also came from tax rules before TCJA where performance based compensation was permitted to be deducted even if it exceeds one million. It also came from proxy advisory firms who promote long-term equity compensation and performance based compensation over fixed or cash compensation. With the historic rise in equity, those policies resulted in bloated compensation. Hell is paved with good intentions. Just like the real estate asset bubbles and 2008 financial crisis were created by the good intention of the federal government subsidizing home ownership and mortgages, the rise in executive compensation rose from tax laws intended to limit executive compensation, governance folks trying to limit fixed executive compensation, and the asset bubbles and rise of equity markets.

---

When you give someone stock, not options, that is not incentive based. All you have to do is not cause the stock to crash before you cash out. The two companies I worked for paid their CEOs in huge amounts of stock. The stock did nothing and they sold when they could. Incentive/performance based my ass. On the flip side, I got years of stock Options when Pacbell was bought by SBC. The stock went from 60 to 20 during those years. I made $2500 dollars before they shipped me to IBM. Don't get me started on that company. The compensation game is so skewed it's sickening.

---

The funny thing is that proxy advisory firms and other governance folks trying to reign in executive compensation do not treat options as incentive based, arguing that options over 10 year period will go up in value. Most would agree that time-based vesting stock or RSUs are not performance based, but most companies have performance based vesting of stock or RSUs, such as relative TSR.

---

I don't trust any one or any group who's been charged with 'reigning in' executive compensation. They've probably been paid hundreds of millions of dollars too for having zero impact. Rigged game. I defy anyone to show me evidence otherwise. BTW, I've voted Republican my entire voting life so this isn't coming from some bleeding heart liberal. But even an old righty can only get hit over the head so long. I don't see either side actually addressing this.

---

The proxy advisory firms are a shady organization, but if there is any undue influence, I would say it comes from selling their advisory services to companies to get the right recommendation while also being in bed with activist shareholders on hostile takeovers. The SEC has been very focused on proxy plumbing and getting the proxy advisory firms to have liability corresponding the their proxy solicitation role.

---

I'll admit I don't understand many of the terms you use. Here is what I do know, Randall Stephenson made $30,000,000 per year as AT&'s CEO. Under his watch the stock went nowhere, AT&T was forced to pay 3 billion to T-Mobile for the failed merger, DirecTV was purchased and driven into the ground and is now on the verge of extinction , the iPhone game changer moment did nothing for T, etc., etc., etc. And yet Randy kept getting loads and loads of stock. Now the stock price went nowhere but it didn't go down and so for providing very, very average CEO-ship Randall just retired a fabulously wealthy man. Oh, and T has $150 billion of debt to wrestle with along with five too many tv services and a movie company that the new guy nor Randall have any experience running. Rigged.

---

That sounds like bad oversight. On the break-up fee, I would not blame him for the payment of the break-up fee for the failed merger with T-Mobile. These merger agreements and allocation of risk are extremely dynamic, and it is not easy to get aligned to avoid a more costly hostile takeover if you don't get aligned with the target's board.

Not sure when this was, but it there were that type of misalignment between performance and pay, I would be surprised if the proxy advisory firms recommended a favorable vote on say on pay. If there is less than 70% support (even if 50% is the pass / fail), then there will be recommendation against the compensation committee member re-election. And institutional investors are getting tougher. See Blackrock's action against Qualcomm.

---

I have to stop. I don't know how any of this works. I just see CEOs, even good ones, making insane money while most of the workers' pay has stayed relatively stagnant. That's a problem and there is an easy fix. But everyone views the fix, universal pay scale imposed by government, as socialist. I don't really care what you call it. CEOs would still get rich just not stupid rich. And the leftover money would go straight to the employees who help make it happen.

---

Unit2 mentioned that it's like QB pay in the NFL. Reminds me of college football and basketball coaches. "We need to stay even with (or ahead of) our competitors!" And salaries ratchet upward.

---

Yeah, but at least with quarterbacks there is a rational basis for thinking they are actually that valuable to the team. Not sure you can say the same about CEOs.

Don't get me wrong, I'm sure the great ones are valuable, I'm just not convinced they're THAT much more valuable.

---

Same with CEOs. So are some CEOs that valuable? Absolutely. And I say this as a heavy equity investors.

---

Also similar to great QBs or coaches, I think that great CEOs can be "underpaid" relative to their value. Like, I would probably be willing to pay Belichik somewhere north of $50M per year to coach my team. He makes $12M per year and Matt Rhule makes $8.5M. Who's getting the better end of that bargain?

But when you look across the thousands of public company CEOs, it's not clear to me that the system is designed to truly reward the best performers or that the system in practice enhances shareholder value.

MSCI produced a report a few years ago that delves into the results and they support the proposition that you can't just incentivize your CEO to a better outcome. I think that you need to pay top CEOs to retain them, but what ends up happening is that companies pay top dollar and then if the results don't work out they find a new CEO to pay top dollar to. If I were an investor, I wouldn't have any faith that you can turn a good CEO into a great one through incentive compensation or that you can simply buy a great CEO.

Quote:

---

EXECUTIVE SUMMARY

Has CEO pay reflected long-term stock performance? In a word, "no." Companies that awarded their Chief Executive Officers (CEOs) higher equity incentives had below-median returns based on a sample of 429 large-cap U.S.companies observed from 2006 to 2015. On a10-year cumulative basis, total shareholder returns of those companies whose total summary pay (the level that must be disclosed in the summary tables of proxy statements) was below their sector median outperformed those companies where pay exceeded the sector median by as much as 39%.

---

Intuitively this matches up with what I've seen anecdotally - great CEOs are worth their weight in platinum but all CEOs get paid their weight in gold.

---

I am not disagreeing with you. Like I said, only about 10% of the engineers are game changers who cannot be paid enough. The rest are paid higher because of the rising market value driven by the 10% but they are just mediocre talent that collect checks and do mediocre work.

Same with CEOs. Sycasey asked if any CEO is really worth that much. I say absolutely. What would be the right compensation for someone like Bezos who drove the right strategy, got the right funding, hired the right leaders, took the right risks, and created so much value for investors like me and changed how we live. What would happen to Amazon if he left and there is the next shift in strategy or revenue stream? Think about what he did with AWS when people were still thinking about them as a seller of books and CDs. Think about where MSFT would be if their current CEO didn't take them down enterprise cloud services but instead focused on hardware or selling licenses for word instead of subscriptions.

Yes, CEOs are overpaid like engineers are overpaid, like lawyers are overpaid. But that is because the top ones are such game changers and not having even a decent one is destructive.

---

BLEH, BI killed my response.

Trying again:

For a few decades there has been discussion of 10x engineers. They produce 10x or more of regular engineers but they are hard to attract and retain. You can't always figure out you have one until they start to produce - not unlike with special athletes. No one could have known Jerry Rice would be who he is. It turns out that just paying well isn't the best way - you need to give them challenges and provide them with resources. Pay is just one component.

I think it's similar for star executives. Compensation is key, but I think the exec comp system in our country has put the cart before the horse. Exec comp doesn't really serve to attract and retain the best - it's really just a toll that gets paid, with little meaningful connection to finding the highest producers. It's also not the same outside the US.

I think we've basically beaten this dead horse, but I will give one example. I had a small cap public technology client in the US that was acquired by a huge international company (one of the 20 largest companies in the world, 100k+ employees) and the acquiring company CEO made a lot less money than the small cap CEO. Structuring the deal to properly incentivize the US CEO and execs relative to peers was a challenge that caused a lot of friction and ultimately drove the deal structure.

---

I hate it when I type something that gets erased by a glitch.

I laughed reading your post because, like most of our long discussions, we are saying the same thing.

1. Yes, top CEOs are worth it. They almost cannot be paid enough.

2. The system is structure so that even the average ones get paid a lot. When every compensation committee is targeting paying their CEO above market (If you think your CEO is below market, you probably would want a new CEO) among the peer group companies, the pay just keeps going up irrespective of talent.

---

Also not mentioned is that a founder/CEO, while not always competent at running a large company, has more skin in the game. Jobs, Bezos, Musk - these guys would work for peanuts if they had to if it meant their company was growing and accomplishing its goals. That is a completely different breed from some of these guys including many who are actively destroying the company for their own financial gain.
It is important to recognize that a CEO who takes over a 100 year old conglomerate has different skills and goals than a guy like Jeff Bezos that is running the company he founded.

---

Yes, that was my thought when reading that list of examples. CEOs who built their companies from the ground up have clearly demonstrated their talent. Those who got hired to an already successful company, maybe not.

---

Larry Culp at Danaher, Nick Howley at TransDigm, Brian Jellison and Neil Hunn at Roper, Nadella at Microsoft - none of them founders and all of them amazing leaders and all of them in my portfolio for a long time (most over 12 years) because of management (even if a few are not there any more as CEOs). Let's not forget Cook. Not the marketing genius or visionary like Jobs but awesome steward

---

Regarding Culp, you must be backing up the truck and buying copious amounts of GE now that he's taken over for one of the most grossly overpaid human beings of all times, Jeff Imelt. Even Marvin Bernard disses Jeff on the amount he was overpaid.*

*Shameless Giants jab.

---

Let me ask you this. Look at GE's balance sheet before Culp and after Culp. Would GE even be solvent without what Culp did in the last year? I won't invest because GE has horrendous balance sheet and too much exposure to aerospace, but, if they survive, it will only be because Culp wanted part of his legacy to be the rescue of GE from bankruptcy caused by decades of bad investments and GE Capital.

calbear93 said:

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82gradDLSdad said:

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calbear93 said:

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sycasey said:

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dimitrig said:

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calbear93 said:

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Unit2Sucks said:

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calbear93 said:

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Unit2Sucks said:

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calbear93 said:

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sycasey said:

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Big C said:

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82gradDLSdad said:

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calbear93 said:

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82gradDLSdad said:

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calbear93 said:

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82gradDLSdad said:

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calbear93 said:

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82gradDLSdad said:

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calbear93 said:

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82gradDLSdad said:

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calbear93 said:

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dimitrig said:

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bearister said:

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America's Small Businesses Need a Marshall Plan | Howard Schultz

"With a new coronavirus relief measure stalled in Congress, CEOs of some of the world's biggest companies have banded together to send a message to Washington: Get money to small businesses now!

"By Labor Day, we foresee a wave of permanent closures if the right steps are not taken soon," warns the letter, organized by Howard Schultz and signed by more than 100 CEOs, including the heads of Salesforce, Alphabet, Facebook, Microsoft, Walmart, McDonald's, Disney, Quibi, IBM, Merck, Marriott, the Business Roundtable, the U.S. Chamber of Commerce and more.

Axios Markets editor Dion Rabouin writes that the letter to the top four congressional leaders lays out a recipe for a sizable small-business aid package.

The project, Schultz's first big public push since he suspended his run for president, calls for:

"federally guaranteed loans, at favorable terms, that will enable small businesses to transform and sustain themselves."

"Businesses should have flexibility in how loan funds are used."

"The hardest-hit businesses should be eligible for at least partial loan forgiveness."

"Relief needs to be delivered expeditiously. Building on the existing PPP infrastructure would be one way to quickly stand up a new loan program."

"These funds must flow to all small businesses in need, particularly those run by people of color, who have traditionally had less access to capital."

Between the lines: Neither the House's HEROES Act nor the latest version of Senate Republicans' HEALS Act include significant funding for small businesses besides the PPP extension.

The last word: "Tens of millions of Americans have already lost their jobs in this pandemic. ... By year end, the domino effect of lost jobs as well as the lost services and lost products that small businesses provide could be catastrophic." Axios


https://www.howardschultz.com/lettertocongress/

---

Sounds like these large companies are realizing that without small businesses they may not have very many customers. I doubt they are doing this from the kindness of their hearts.

---

Why is "compassion" and "empathy" limited to us and not to CEOs of companies? Why vilify others? Writing those things do not elevate us or anything we have done, and make our ass sitting behind a computer any more heroic.

I believe there is a lot connecting all of us, and the faster we move on from this culture of dividing and vilifying each other by party, class, and race, the better.

---

Part of the resentment has to be due to extremely bloated CEO compensation. Compensation has skewed during my working lifetime and the magnanimous CEOs can only say, "I've got nothing to do with that. It's all in the hands of the BODs."

---

A big part of that has been from the governance folks who promote alignment of shareholder interest with those of management. When you look at most of the executive compensation, it comes from equity grants. It also came from tax rules before TCJA where performance based compensation was permitted to be deducted even if it exceeds one million. It also came from proxy advisory firms who promote long-term equity compensation and performance based compensation over fixed or cash compensation. With the historic rise in equity, those policies resulted in bloated compensation. Hell is paved with good intentions. Just like the real estate asset bubbles and 2008 financial crisis were created by the good intention of the federal government subsidizing home ownership and mortgages, the rise in executive compensation rose from tax laws intended to limit executive compensation, governance folks trying to limit fixed executive compensation, and the asset bubbles and rise of equity markets.

---

When you give someone stock, not options, that is not incentive based. All you have to do is not cause the stock to crash before you cash out. The two companies I worked for paid their CEOs in huge amounts of stock. The stock did nothing and they sold when they could. Incentive/performance based my ass. On the flip side, I got years of stock Options when Pacbell was bought by SBC. The stock went from 60 to 20 during those years. I made $2500 dollars before they shipped me to IBM. Don't get me started on that company. The compensation game is so skewed it's sickening.

---

The funny thing is that proxy advisory firms and other governance folks trying to reign in executive compensation do not treat options as incentive based, arguing that options over 10 year period will go up in value. Most would agree that time-based vesting stock or RSUs are not performance based, but most companies have performance based vesting of stock or RSUs, such as relative TSR.

---

I don't trust any one or any group who's been charged with 'reigning in' executive compensation. They've probably been paid hundreds of millions of dollars too for having zero impact. Rigged game. I defy anyone to show me evidence otherwise. BTW, I've voted Republican my entire voting life so this isn't coming from some bleeding heart liberal. But even an old righty can only get hit over the head so long. I don't see either side actually addressing this.

---

The proxy advisory firms are a shady organization, but if there is any undue influence, I would say it comes from selling their advisory services to companies to get the right recommendation while also being in bed with activist shareholders on hostile takeovers. The SEC has been very focused on proxy plumbing and getting the proxy advisory firms to have liability corresponding the their proxy solicitation role.

---

I'll admit I don't understand many of the terms you use. Here is what I do know, Randall Stephenson made $30,000,000 per year as AT&'s CEO. Under his watch the stock went nowhere, AT&T was forced to pay 3 billion to T-Mobile for the failed merger, DirecTV was purchased and driven into the ground and is now on the verge of extinction , the iPhone game changer moment did nothing for T, etc., etc., etc. And yet Randy kept getting loads and loads of stock. Now the stock price went nowhere but it didn't go down and so for providing very, very average CEO-ship Randall just retired a fabulously wealthy man. Oh, and T has $150 billion of debt to wrestle with along with five too many tv services and a movie company that the new guy nor Randall have any experience running. Rigged.

---

That sounds like bad oversight. On the break-up fee, I would not blame him for the payment of the break-up fee for the failed merger with T-Mobile. These merger agreements and allocation of risk are extremely dynamic, and it is not easy to get aligned to avoid a more costly hostile takeover if you don't get aligned with the target's board.

Not sure when this was, but it there were that type of misalignment between performance and pay, I would be surprised if the proxy advisory firms recommended a favorable vote on say on pay. If there is less than 70% support (even if 50% is the pass / fail), then there will be recommendation against the compensation committee member re-election. And institutional investors are getting tougher. See Blackrock's action against Qualcomm.

---

I have to stop. I don't know how any of this works. I just see CEOs, even good ones, making insane money while most of the workers' pay has stayed relatively stagnant. That's a problem and there is an easy fix. But everyone views the fix, universal pay scale imposed by government, as socialist. I don't really care what you call it. CEOs would still get rich just not stupid rich. And the leftover money would go straight to the employees who help make it happen.

---

Unit2 mentioned that it's like QB pay in the NFL. Reminds me of college football and basketball coaches. "We need to stay even with (or ahead of) our competitors!" And salaries ratchet upward.

---

Yeah, but at least with quarterbacks there is a rational basis for thinking they are actually that valuable to the team. Not sure you can say the same about CEOs.

Don't get me wrong, I'm sure the great ones are valuable, I'm just not convinced they're THAT much more valuable.

---

Same with CEOs. So are some CEOs that valuable? Absolutely. And I say this as a heavy equity investors.

---

Also similar to great QBs or coaches, I think that great CEOs can be "underpaid" relative to their value. Like, I would probably be willing to pay Belichik somewhere north of $50M per year to coach my team. He makes $12M per year and Matt Rhule makes $8.5M. Who's getting the better end of that bargain?

But when you look across the thousands of public company CEOs, it's not clear to me that the system is designed to truly reward the best performers or that the system in practice enhances shareholder value.

MSCI produced a report a few years ago that delves into the results and they support the proposition that you can't just incentivize your CEO to a better outcome. I think that you need to pay top CEOs to retain them, but what ends up happening is that companies pay top dollar and then if the results don't work out they find a new CEO to pay top dollar to. If I were an investor, I wouldn't have any faith that you can turn a good CEO into a great one through incentive compensation or that you can simply buy a great CEO.

Quote:

---

EXECUTIVE SUMMARY

Has CEO pay reflected long-term stock performance? In a word, "no." Companies that awarded their Chief Executive Officers (CEOs) higher equity incentives had below-median returns based on a sample of 429 large-cap U.S.companies observed from 2006 to 2015. On a10-year cumulative basis, total shareholder returns of those companies whose total summary pay (the level that must be disclosed in the summary tables of proxy statements) was below their sector median outperformed those companies where pay exceeded the sector median by as much as 39%.

---

Intuitively this matches up with what I've seen anecdotally - great CEOs are worth their weight in platinum but all CEOs get paid their weight in gold.

---

I am not disagreeing with you. Like I said, only about 10% of the engineers are game changers who cannot be paid enough. The rest are paid higher because of the rising market value driven by the 10% but they are just mediocre talent that collect checks and do mediocre work.

Same with CEOs. Sycasey asked if any CEO is really worth that much. I say absolutely. What would be the right compensation for someone like Bezos who drove the right strategy, got the right funding, hired the right leaders, took the right risks, and created so much value for investors like me and changed how we live. What would happen to Amazon if he left and there is the next shift in strategy or revenue stream? Think about what he did with AWS when people were still thinking about them as a seller of books and CDs. Think about where MSFT would be if their current CEO didn't take them down enterprise cloud services but instead focused on hardware or selling licenses for word instead of subscriptions.

Yes, CEOs are overpaid like engineers are overpaid, like lawyers are overpaid. But that is because the top ones are such game changers and not having even a decent one is destructive.

---

BLEH, BI killed my response.

Trying again:

For a few decades there has been discussion of 10x engineers. They produce 10x or more of regular engineers but they are hard to attract and retain. You can't always figure out you have one until they start to produce - not unlike with special athletes. No one could have known Jerry Rice would be who he is. It turns out that just paying well isn't the best way - you need to give them challenges and provide them with resources. Pay is just one component.

I think it's similar for star executives. Compensation is key, but I think the exec comp system in our country has put the cart before the horse. Exec comp doesn't really serve to attract and retain the best - it's really just a toll that gets paid, with little meaningful connection to finding the highest producers. It's also not the same outside the US.

I think we've basically beaten this dead horse, but I will give one example. I had a small cap public technology client in the US that was acquired by a huge international company (one of the 20 largest companies in the world, 100k+ employees) and the acquiring company CEO made a lot less money than the small cap CEO. Structuring the deal to properly incentivize the US CEO and execs relative to peers was a challenge that caused a lot of friction and ultimately drove the deal structure.

---

I hate it when I type something that gets erased by a glitch.

I laughed reading your post because, like most of our long discussions, we are saying the same thing.

1. Yes, top CEOs are worth it. They almost cannot be paid enough.

2. The system is structure so that even the average ones get paid a lot. When every compensation committee is targeting paying their CEO above market (If you think your CEO is below market, you probably would want a new CEO) among the peer group companies, the pay just keeps going up irrespective of talent.

---

Also not mentioned is that a founder/CEO, while not always competent at running a large company, has more skin in the game. Jobs, Bezos, Musk - these guys would work for peanuts if they had to if it meant their company was growing and accomplishing its goals. That is a completely different breed from some of these guys including many who are actively destroying the company for their own financial gain.
It is important to recognize that a CEO who takes over a 100 year old conglomerate has different skills and goals than a guy like Jeff Bezos that is running the company he founded.

---

Yes, that was my thought when reading that list of examples. CEOs who built their companies from the ground up have clearly demonstrated their talent. Those who got hired to an already successful company, maybe not.

---

Larry Culp at Danaher, Nick Howley at TransDigm, Brian Jellison and Neil Hunn at Roper, Nadella at Microsoft - none of them founders and all of them amazing leaders and all of them in my portfolio for a long time (most over 12 years) because of management (even if a few are not there any more as CEOs). Let's not forget Cook. Not the marketing genius or visionary like Jobs but awesome steward

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Regarding Culp, you must be backing up the truck and buying copious amounts of GE now that he's taken over for one of the most grossly overpaid human beings of all times, Jeff Imelt. Even Marvin Bernard disses Jeff on the amount he was overpaid.*

*Shameless Giants jab.

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Let me ask you this. Look at GE's balance sheet before Culp and after Culp. Would GE even be solvent without what Culp did in the last year? I won't invest because GE has horrendous balance sheet and too much exposure to aerospace, but, if they survive, it will only be because Culp wanted part of his legacy to be the rescue of GE from bankruptcy caused by decades of bad investments and GE Capital.

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I too have heard good things about Culp. My issues around stupidly high CEO pay relate directly to this situation. There are a lot of factors involved in a successful company. If it was just the CEO we will see Culp turn GE around, no doubt. Since they can't seem to do it on their own force companies to share the profits more equitably with the employees. I'd rather see this than just taxing the hell out of the upper management and corporations and having that money get filtered through the cesspool of government. My way, the CEO makes great money and many others start making good money. I know a lot of people hate this idea.

82gradDLSdad said:

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Unit2Sucks said:

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calbear93 said:

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calbear93 said:

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82gradDLSdad said:

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calbear93 said:

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82gradDLSdad said:

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America's Small Businesses Need a Marshall Plan | Howard Schultz

"With a new coronavirus relief measure stalled in Congress, CEOs of some of the world's biggest companies have banded together to send a message to Washington: Get money to small businesses now!

"By Labor Day, we foresee a wave of permanent closures if the right steps are not taken soon," warns the letter, organized by Howard Schultz and signed by more than 100 CEOs, including the heads of Salesforce, Alphabet, Facebook, Microsoft, Walmart, McDonald's, Disney, Quibi, IBM, Merck, Marriott, the Business Roundtable, the U.S. Chamber of Commerce and more.

Axios Markets editor Dion Rabouin writes that the letter to the top four congressional leaders lays out a recipe for a sizable small-business aid package.

The project, Schultz's first big public push since he suspended his run for president, calls for:

"federally guaranteed loans, at favorable terms, that will enable small businesses to transform and sustain themselves."

"Businesses should have flexibility in how loan funds are used."

"The hardest-hit businesses should be eligible for at least partial loan forgiveness."

"Relief needs to be delivered expeditiously. Building on the existing PPP infrastructure would be one way to quickly stand up a new loan program."

"These funds must flow to all small businesses in need, particularly those run by people of color, who have traditionally had less access to capital."

Between the lines: Neither the House's HEROES Act nor the latest version of Senate Republicans' HEALS Act include significant funding for small businesses besides the PPP extension.

The last word: "Tens of millions of Americans have already lost their jobs in this pandemic. ... By year end, the domino effect of lost jobs as well as the lost services and lost products that small businesses provide could be catastrophic." Axios


https://www.howardschultz.com/lettertocongress/

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Sounds like these large companies are realizing that without small businesses they may not have very many customers. I doubt they are doing this from the kindness of their hearts.

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Why is "compassion" and "empathy" limited to us and not to CEOs of companies? Why vilify others? Writing those things do not elevate us or anything we have done, and make our ass sitting behind a computer any more heroic.

I believe there is a lot connecting all of us, and the faster we move on from this culture of dividing and vilifying each other by party, class, and race, the better.

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Part of the resentment has to be due to extremely bloated CEO compensation. Compensation has skewed during my working lifetime and the magnanimous CEOs can only say, "I've got nothing to do with that. It's all in the hands of the BODs."

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A big part of that has been from the governance folks who promote alignment of shareholder interest with those of management. When you look at most of the executive compensation, it comes from equity grants. It also came from tax rules before TCJA where performance based compensation was permitted to be deducted even if it exceeds one million. It also came from proxy advisory firms who promote long-term equity compensation and performance based compensation over fixed or cash compensation. With the historic rise in equity, those policies resulted in bloated compensation. Hell is paved with good intentions. Just like the real estate asset bubbles and 2008 financial crisis were created by the good intention of the federal government subsidizing home ownership and mortgages, the rise in executive compensation rose from tax laws intended to limit executive compensation, governance folks trying to limit fixed executive compensation, and the asset bubbles and rise of equity markets.

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When you give someone stock, not options, that is not incentive based. All you have to do is not cause the stock to crash before you cash out. The two companies I worked for paid their CEOs in huge amounts of stock. The stock did nothing and they sold when they could. Incentive/performance based my ass. On the flip side, I got years of stock Options when Pacbell was bought by SBC. The stock went from 60 to 20 during those years. I made $2500 dollars before they shipped me to IBM. Don't get me started on that company. The compensation game is so skewed it's sickening.

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The funny thing is that proxy advisory firms and other governance folks trying to reign in executive compensation do not treat options as incentive based, arguing that options over 10 year period will go up in value. Most would agree that time-based vesting stock or RSUs are not performance based, but most companies have performance based vesting of stock or RSUs, such as relative TSR.

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I don't trust any one or any group who's been charged with 'reigning in' executive compensation. They've probably been paid hundreds of millions of dollars too for having zero impact. Rigged game. I defy anyone to show me evidence otherwise. BTW, I've voted Republican my entire voting life so this isn't coming from some bleeding heart liberal. But even an old righty can only get hit over the head so long. I don't see either side actually addressing this.

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The proxy advisory firms are a shady organization, but if there is any undue influence, I would say it comes from selling their advisory services to companies to get the right recommendation while also being in bed with activist shareholders on hostile takeovers. The SEC has been very focused on proxy plumbing and getting the proxy advisory firms to have liability corresponding the their proxy solicitation role.

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I'll admit I don't understand many of the terms you use. Here is what I do know, Randall Stephenson made $30,000,000 per year as AT&'s CEO. Under his watch the stock went nowhere, AT&T was forced to pay 3 billion to T-Mobile for the failed merger, DirecTV was purchased and driven into the ground and is now on the verge of extinction , the iPhone game changer moment did nothing for T, etc., etc., etc. And yet Randy kept getting loads and loads of stock. Now the stock price went nowhere but it didn't go down and so for providing very, very average CEO-ship Randall just retired a fabulously wealthy man. Oh, and T has $150 billion of debt to wrestle with along with five too many tv services and a movie company that the new guy nor Randall have any experience running. Rigged.

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That sounds like bad oversight. On the break-up fee, I would not blame him for the payment of the break-up fee for the failed merger with T-Mobile. These merger agreements and allocation of risk are extremely dynamic, and it is not easy to get aligned to avoid a more costly hostile takeover if you don't get aligned with the target's board.

Not sure when this was, but it there were that type of misalignment between performance and pay, I would be surprised if the proxy advisory firms recommended a favorable vote on say on pay. If there is less than 70% support (even if 50% is the pass / fail), then there will be recommendation against the compensation committee member re-election. And institutional investors are getting tougher. See Blackrock's action against Qualcomm.

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I have to stop. I don't know how any of this works. I just see CEOs, even good ones, making insane money while most of the workers' pay has stayed relatively stagnant. That's a problem and there is an easy fix. But everyone views the fix, universal pay scale imposed by government, as socialist. I don't really care what you call it. CEOs would still get rich just not stupid rich. And the leftover money would go straight to the employees who help make it happen.

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Unit2 mentioned that it's like QB pay in the NFL. Reminds me of college football and basketball coaches. "We need to stay even with (or ahead of) our competitors!" And salaries ratchet upward.

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Yeah, but at least with quarterbacks there is a rational basis for thinking they are actually that valuable to the team. Not sure you can say the same about CEOs.

Don't get me wrong, I'm sure the great ones are valuable, I'm just not convinced they're THAT much more valuable.

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Same with CEOs. So are some CEOs that valuable? Absolutely. And I say this as a heavy equity investors.

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Also similar to great QBs or coaches, I think that great CEOs can be "underpaid" relative to their value. Like, I would probably be willing to pay Belichik somewhere north of $50M per year to coach my team. He makes $12M per year and Matt Rhule makes $8.5M. Who's getting the better end of that bargain?

But when you look across the thousands of public company CEOs, it's not clear to me that the system is designed to truly reward the best performers or that the system in practice enhances shareholder value.

MSCI produced a report a few years ago that delves into the results and they support the proposition that you can't just incentivize your CEO to a better outcome. I think that you need to pay top CEOs to retain them, but what ends up happening is that companies pay top dollar and then if the results don't work out they find a new CEO to pay top dollar to. If I were an investor, I wouldn't have any faith that you can turn a good CEO into a great one through incentive compensation or that you can simply buy a great CEO.

Quote:

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EXECUTIVE SUMMARY

Has CEO pay reflected long-term stock performance? In a word, "no." Companies that awarded their Chief Executive Officers (CEOs) higher equity incentives had below-median returns based on a sample of 429 large-cap U.S.companies observed from 2006 to 2015. On a10-year cumulative basis, total shareholder returns of those companies whose total summary pay (the level that must be disclosed in the summary tables of proxy statements) was below their sector median outperformed those companies where pay exceeded the sector median by as much as 39%.

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Intuitively this matches up with what I've seen anecdotally - great CEOs are worth their weight in platinum but all CEOs get paid their weight in gold.

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I am not disagreeing with you. Like I said, only about 10% of the engineers are game changers who cannot be paid enough. The rest are paid higher because of the rising market value driven by the 10% but they are just mediocre talent that collect checks and do mediocre work.

Same with CEOs. Sycasey asked if any CEO is really worth that much. I say absolutely. What would be the right compensation for someone like Bezos who drove the right strategy, got the right funding, hired the right leaders, took the right risks, and created so much value for investors like me and changed how we live. What would happen to Amazon if he left and there is the next shift in strategy or revenue stream? Think about what he did with AWS when people were still thinking about them as a seller of books and CDs. Think about where MSFT would be if their current CEO didn't take them down enterprise cloud services but instead focused on hardware or selling licenses for word instead of subscriptions.

Yes, CEOs are overpaid like engineers are overpaid, like lawyers are overpaid. But that is because the top ones are such game changers and not having even a decent one is destructive.

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BLEH, BI killed my response.

Trying again:

For a few decades there has been discussion of 10x engineers. They produce 10x or more of regular engineers but they are hard to attract and retain. You can't always figure out you have one until they start to produce - not unlike with special athletes. No one could have known Jerry Rice would be who he is. It turns out that just paying well isn't the best way - you need to give them challenges and provide them with resources. Pay is just one component.

I think it's similar for star executives. Compensation is key, but I think the exec comp system in our country has put the cart before the horse. Exec comp doesn't really serve to attract and retain the best - it's really just a toll that gets paid, with little meaningful connection to finding the highest producers. It's also not the same outside the US.

I think we've basically beaten this dead horse, but I will give one example. I had a small cap public technology client in the US that was acquired by a huge international company (one of the 20 largest companies in the world, 100k+ employees) and the acquiring company CEO made a lot less money than the small cap CEO. Structuring the deal to properly incentivize the US CEO and execs relative to peers was a challenge that caused a lot of friction and ultimately drove the deal structure.

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I hate it when I type something that gets erased by a glitch.

I laughed reading your post because, like most of our long discussions, we are saying the same thing.

1. Yes, top CEOs are worth it. They almost cannot be paid enough.

2. The system is structure so that even the average ones get paid a lot. When every compensation committee is targeting paying their CEO above market (If you think your CEO is below market, you probably would want a new CEO) among the peer group companies, the pay just keeps going up irrespective of talent.

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Also not mentioned is that a founder/CEO, while not always competent at running a large company, has more skin in the game. Jobs, Bezos, Musk - these guys would work for peanuts if they had to if it meant their company was growing and accomplishing its goals. That is a completely different breed from some of these guys including many who are actively destroying the company for their own financial gain.
It is important to recognize that a CEO who takes over a 100 year old conglomerate has different skills and goals than a guy like Jeff Bezos that is running the company he founded.

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Yes, that was my thought when reading that list of examples. CEOs who built their companies from the ground up have clearly demonstrated their talent. Those who got hired to an already successful company, maybe not.

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Larry Culp at Danaher, Nick Howley at TransDigm, Brian Jellison and Neil Hunn at Roper, Nadella at Microsoft - none of them founders and all of them amazing leaders and all of them in my portfolio for a long time (most over 12 years) because of management (even if a few are not there any more as CEOs). Let's not forget Cook. Not the marketing genius or visionary like Jobs but awesome steward

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Regarding Culp, you must be backing up the truck and buying copious amounts of GE now that he's taken over for one of the most grossly overpaid human beings of all times, Jeff Imelt. Even Marvin Bernard disses Jeff on the amount he was overpaid.*

*Shameless Giants jab.

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Let me ask you this. Look at GE's balance sheet before Culp and after Culp. Would GE even be solvent without what Culp did in the last year? I won't invest because GE has horrendous balance sheet and too much exposure to aerospace, but, if they survive, it will only be because Culp wanted part of his legacy to be the rescue of GE from bankruptcy caused by decades of bad investments and GE Capital.

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I too have heard good things about Culp. My issues around stupidly high CEO pay relate directly to this situation. There are a lot of factors involved in a successful company. If it was just the CEO we will see Culp turn GE around, no doubt. Since they can't seem to do it on their own force companies to share the profits more equitably with the employees. I'd rather see this than just taxing the hell out of the upper management and corporations and having that money get filtered through the cesspool of government. My way, the CEO makes great money and many others start making good money. I know a lot of people hate this idea.

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After GE, I suspect he will go back to teaching at Harvard Business School and serve on boards for fun.

TCJA did do a lot to tax corporations for executive pay. Any amount paid over a million to the CEO, CFO and any person who was ever a top 5 most highly compensated officer at the company at any time after 2017 is no tax deductible as an expense. Before then, anything that fell within the scope of performance pay (and strangely CFO was not automatically included) such as stock and short term incentive pay were deductible.

Coronavirus cases begin to fall in Arizona, California, Florida - Axios


https://www.axios.com/coronavirus-cases-hotspots-arizona-california-florida-18ef6a94-4065-4859-b6d0-8bcdf0c439f5.html?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosam&stream=top

"serve on boards for fun". GE board members get a minimum of $275,000 per year. What fun. And you can serve on many because the work is so hard. Rigged.

82gradDLSdad said:

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"serve on boards for fun". GE board members get a minimum of $275,000 per year. What fun. And you can serve on many because the work is so hard. Rigged.

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Sorry, but being a director is not easy. And if you think someone who has made as much as Culp is motivated by $275k, you are not dealing with how these people think. And you really won't serve on that many boards because of overboarding policies at most company's corporate governance guidelines and voting guidelines by institutional investors.

I have to say, it seems like many people who really don't know how these things work make assumptions and just hate. Having worked with many excellent leaders, I don't envy what they get. No one is stopping anyone else from accomplishing enough that companies want to pay them the same.