Gov't needs $133.78 a share to recover GM money (currently trading at 36 cents)

Gov't needs $133.78 a share to recover GM money

Tom Krisher
AP Auto Writer
Sept. 22, 2010

DETROIT – The U.S. government would have to sell its General Motors stock for $133.78 per share to recoup the nearly $50 billion it spent bailing out the Detroit automaker, according to a watchdog of government bailout funds.

Neil Barofsky, the special inspector general for the $700 billion bailout of the financial industry and automakers, revealed the figure in an Aug. 30 letter to Sen. Charles Grassley, R-Iowa. The letter was obtained by The Associated Press on Wednesday.

GM repaid the government $6.7 billion. The remaining money was converted to a 61 percent ownership stake in GM plus $2.1 billion worth of preferred stock. The government plans to start selling its shares as part of a GM initial public stock offering that is tentatively scheduled for mid-November.

The government won't sell all the 304 million common shares it owns all at once. The Treasury Department and GM's new CEO have said it may take a couple of years and several "follow-on" sales for the government to recoup its investment. Also, analysts say the share price could start out low to help fuel demand. The hope is that GM's share price would rise as the company's car sales and finances improve.

Barofsky responded to a request from Grassley to make sure that Treasury is getting the highest possible price for GM's shares. Barofsky says that he will look into the matter.

The $133.78 figure does not cover any legal and investment banking fees for the IPO, nor does it include the government's preferred shares, Barofsky wrote.

To reach Barofsky's per-share number, GM shares would have to sell for $40 above the automaker's peak stock price, which was nearly $93 in April of 2000, according to the Center for Research in Security Prices at the University of Chicago. That year was a good one for GM. It made $4.45 billion mainly by selling high-profit pickups and sport utility vehicles.

Barofsky also wrote that he would look into the banking and legal fees for the GM stock sale, as well as GM's purchase in July of AmeriCredit Inc., a company that specializes in car loans to people with poor credit.

GM itself does not plan to sell any common shares as part of the IPO, but will sell preferred shares, it said in paperwork filed with the U.S. Securities and Exchange Commission. It will use that money to pay off debt and to invest in the company.

In addition to the $6.7 billion payment, GM also has paid the government $719 million in interest and dividends on the preferred shares. Preferred shares behave more like bonds than stock because they pay a set dividend.

Over here, bail out money for the banks was a loan which is already being clawed back. Several banks were nationalised or part nationalised with no plans (yet) to sell the shares back.

Over here, it's unconstitutional for the gov't to take over an industry like it has.

Overall, this article goes to show what a screwing the tax payer is going to take over this bailout on top of what it already got screwed over with.

Despite what the right says, it was not a government takeover. It was a bailout pure and simple. The government loaned GM money and expected (hoped maybe?) that they would do the right thing, which GM didn't. It was the same with the banking industry as well. The money that was loaned was used wrongly. But it was never a government takeover. Ever.

I defintely have a problem with how the bailouts were handled though. If you're going to give out billions of dollars, you might want to keep an eye on how it's being used. But that didn't happen... Not only did that not happen, but I would submit that the Republicans are just playing politics. Given their dislike of oversight, if they'd given the money, you can bet there wouldn't be any trace of how it was used either.

i_luv_miley wrote:Despite what the right says, it was not a government takeover. It was a bailout pure and simple. The government loaned GM money and expected (hoped maybe?) that they would do the right thing, which GM didn't. It was the same with the banking industry as well. The money that was loaned was used wrongly. But it was never a government takeover. Ever.

Bleh. How do you explain the Treasury Dept owning 61% of GM and 10% of Chrysler as a result of the emergency forced loans the car makers received last year? The gov't spent $81 billion bailing out the companies! The UAW owns 17% of the company! Since when did unions get into the business of owning shares?

i_luv_miley wrote:I defintely have a problem with how the bailouts were handled though. If you're going to give out billions of dollars, you might want to keep an eye on how it's being used. But that didn't happen... Not only did that not happen, but I would submit that the Republicans are just playing politics. Given their dislike of oversight, if they'd given the money, you can bet there wouldn't be any trace of how it was used either.

They should've been allowed to file Chapter 11, straight up.

Tex is right ILM, it was not a bailout, it was a buyout. The government now owns a majority share of what was previously a private-sector company.

Had they simply been allowed to file Chapter 11, they could have renegotiated those union contracts that were so much a part of their hemorrhaging money and have come back leaner, meaner and much more efficient as a company.

Instead, Obama thought it better to buy them out, protect his union buddies by giving them a huge ownership stake in the very company they helped to destroy. Until this wrong is rectified, GM will continue to flounder as Government Motors.

I don't particularly disagree with you Tex, at least in theory. If you go under then you should you pay the (proverbial) price. Unfortunately in the case of both the auto industry and banking industry, letting those companies go under could have made things a lot worse. IMO, if the bailouts hadn't occurred the American auto industry would be completely dead - and I mean no more American-made cars, ever. So given where we were at the time, I agree with the bailout. It may not have done much in the short term, but I do think it saves (American) jobs in the long run. My problem has always been what led up to those companies getting into the mess in the first place. It was CEO greed and a lack of oversight (at every level) that led to the collapse. And all of that began long before Obama. That's not rhetoric. That's a fact. And IMO, that's where the real debate should be.

Filing Chapter 11 would've kept the corporations afloat. The bad part was that the union contracts probably would've been nullified in bankruptcy court.

How is it that auto makers in the south that are NOT unionized seem to be doing ok? Of course, they're foreign car makers... but the question stands.

i_luv_miley wrote:I don't particularly disagree with you Tex, at least in theory. If you go under then you should you pay the (proverbial) price. Unfortunately in the case of both the auto industry and banking industry, letting those companies go under could have made things a lot worse. IMO, if the bailouts hadn't occurred the American auto industry would be completely dead - and I mean no more American-made cars, ever. So given where we were at the time, I agree with the bailout. It may not have done much in the short term, but I do think it saves (American) jobs in the long run.

Actually, you should stick to your first instinct there ILM, it would have been the right way to go. Chapter 11 is not the death of a company, but a means of staving off creditors and giving the company time to restructure and renegotiate things like their union contracts giving the company a chance to cut costs and streamline production, etc. Had they been able to do this, it would not have been the death of the auto industry in the US (there was still Ford and Chrysler), but the rebirth of a much more efficient auto industry. Sadly, the unions and Obama were deadset against letting GM file chapter 11 because they knew this would spell the end of their bloated wages, benefits and retirement packages. No longer would they be allowed to do things like just sit around while collecting nearly full pay.

i_luv_miley wrote:My problem has always been what led up to those companies getting into the mess in the first place. It was CEO greed and a lack of oversight (at every level) that led to the collapse. And all of that began long before Obama. That's not rhetoric. That's a fact. And IMO, that's where the real debate should be.

See above, this was about government and union greed and not executive greed. And it was not a lack of oversight at every level that lead to the collapse. You have no corroborating evidence to say that it was. However, there is a huge body of evidence that it was a result of an all out government assault on the very vehicles that made GM popular and profitable, trucks and SUV's. It was about a decades long all out government assault on cars in general, forcing ever more impossible fuel mileage standards down the industry's throats, forcing other standards that were NOT being demanded by consumers, but by government bureaucrats. This is what happens when you have an imperial federal government climbing up the sphincter of every auto manufacturer and burying them under an avalanche of burdensome regulations and the commensurate paperwork; not to mention the massively expensive R&D and retooling that such regulations forced. It is about stifling corporate taxes that favor our foreign competitors over our domestic producers.

That's not rhetoric... that IS the facts of the matter. And I believe that THIS is what the debate should be about.

dblboggie wrote:See above, this was about government and union greed and not executive greed. And it was not a lack of oversight at every level that lead to the collapse. You have no corroborating evidence to say that it was. However, there is a huge body of evidence that it was a result of an all out government assault on the very vehicles that made GM popular and profitable, trucks and SUV's. It was about a decades long all out government assault on cars in general, forcing ever more impossible fuel mileage standards down the industry's throats, forcing other standards that were NOT being demanded by consumers, but by government bureaucrats. This is what happens when you have an imperial federal government climbing up the sphincter of every auto manufacturer and burying them under an avalanche of burdensome regulations and the commensurate paperwork; not to mention the massively expensive R&D and retooling that such regulations forced. It is about stifling corporate taxes that favor our foreign competitors over our domestic producers.

That's not rhetoric... that IS the facts of the matter. And I believe that THIS is what the debate should be about.

This is one of my fundamental disagreements with you. You seem to think that those who get rich (for example CEO's) deserve to. Of course, some do... But more often than not over the past decade, most of those CEO's who have gotten rich have done so at the expense of their own companies, by way of out-sourcing, cooking the books and downsizing. So in the end, the CEO's make all the money while those who work for them get screwed. That is the kind of greed I'm talking about. It does happen and under Bush it became the way big business was expected to operate. The "bottom line" is why jobs went elsewhere and unemployment skyrockted. That is fact! People should be thankful that unions exist or the problem would be considerably worse than it is. More and more since Reagan, big business hasn't given a damn about its workers. It only cares about itself. That's why trickle-down never worked. The money never trickled down. It stayed at the top. I call that embezzlement. But hey, it's just good ol' capitalism right?

And in fairness, Obama isn't much different. Except that he's a socialist apparently.

i_luv_miley wrote:

dblboggie wrote:See above, this was about government and union greed and not executive greed. And it was not a lack of oversight at every level that lead to the collapse. You have no corroborating evidence to say that it was. However, there is a huge body of evidence that it was a result of an all out government assault on the very vehicles that made GM popular and profitable, trucks and SUV's. It was about a decades long all out government assault on cars in general, forcing ever more impossible fuel mileage standards down the industry's throats, forcing other standards that were NOT being demanded by consumers, but by government bureaucrats. This is what happens when you have an imperial federal government climbing up the sphincter of every auto manufacturer and burying them under an avalanche of burdensome regulations and the commensurate paperwork; not to mention the massively expensive R&D and retooling that such regulations forced. It is about stifling corporate taxes that favor our foreign competitors over our domestic producers.

That's not rhetoric... that IS the facts of the matter. And I believe that THIS is what the debate should be about.

This is one of my fundamental disagreements with you. You seem to think that those who get rich (for example CEO's) deserve to. Of course, some do... But more often than not over the past decade, most of those CEO's who have gotten rich have done so at the expense of their own companies, by way of out-sourcing, cooking the books and downsizing. So in the end, the CEO's make all the money while those who work for them get screwed. That is the kind of greed I'm talking about. It does happen and under Bush it became the way big business was expected to operate. The "bottom line" is why jobs went elsewhere and unemployment skyrockted. That is fact! People should be thankful that unions exist or the problem would be considerably worse than it is. More and more since Reagan, big business hasn't given a damn about its workers. It only cares about itself. That's why trickle-down never worked. The money never trickled down. It stayed at the top. I call that embezzlement. But hey, it's just good ol' capitalism right?

And in fairness, Obama isn't much different. Except that he's a socialist apparently.

Yes, I do believe that a person who is capable of running an organization as vast and complex as GM deserves the pay they get. After all, no one bats an eye when a football, basketball, baseball player, or an actor, director, film maker, studio head, or agent rakes in untold millions of dollars. No one screams about their "greed" or raises a cry about these "filthy rich."

You have to ask yourself why there is such an assault on the corporate executives. These are the people who make things happen, build or maintain huge enterprises that employ thousands and deliver the goods and services the people demand. But these hardworking people are routinely harassed, pilloried, and slandered by the mainstream media and our own government.

Now, with that said, is there a small percentage who fails to live up to the high standards we expect of people in such positions of responsibility? Of course there are. No one is perfect. But when you say things like "more often than not over the past decade, most of those CEO's who have gotten rich have done so at the expense of their own companies, by way of out-sourcing, cooking the books and downsizing" you betray a bias that makes me question the sincerity or accuracy of your actual research into these matters. I'm not trying to be mean here, just honest.

You see, it appears that you are unaware of the enormous pressures government intrusions into these private sector companies creates, the nightmarish administrative barriers and hurdles and their associated costs, the constantly shifting regulatory landscape that makes fixing costs (a huge part of a CEO's job) over time all but impossible, the crippling tax burdens placed on these businesses (ours is the second highest corporate tax rate in the developed world, just under Japan), the enormous stain on finances that constant battles with labor unions create (GM workers made nearly double in pay and benefits what their non-union counter parts make), the constant threat (as under Obama) of even more regulatory burdens of unknown costs. If you were aware of these things, you might actually appreciate just how difficult it is for anyone in a high executive position in any large corporation, and just how much they earn those big salaries. It is not a world for the weak. It is a 24/7 job being a top exec. These are guys who punch a clock, come in, do their 8 hours, and go home to watch TV. You would know this if you were researching this subject carefully. I have done that research. I don’t buy into the popular class-warfare propaganda propagated by the mainstream media, the intelligentsia in higher education, and our own elected representatives, on the left and far too often on the right.

When all is said and done, we no longer have free-market capitalism in America; and we haven’t had it in a very long time. Thanks to government interference, and our impossibly complex and abusive tax code, smart corporations have learned (encouraged by our elected representatives) how to game the system, giving rise to K-Street and the countless lobbyists who ply their trade with those in government power. What we now have is CRONY CAPITALISM, a form of capitalism that is a natural outgrowth of our tax and regulatory systems and human nature. This is further exacerbated by the more egregious socialist aspects of our government.

I guess what I’m saying is the whole scene is far more complex and far more nuanced, than a simplistic statement of corporate CEO’s feasting on the blood of the exploited proletariat. Both sides are gaming the system, but only one side has the legal right to use force, and lethal force at that, to get their way, and that is our federal government.

Now I hope that you take this in the spirit in which it was intended. I am just making a forthright case for my position. I hope I have not come off as divisive or argumentative, I just want to debate the actual issues. I like everyone here, and I'd like to keep things on a friendly footing.

dblboggie wrote:

i_luv_miley wrote:

dblboggie wrote:See above, this was about government and union greed and not executive greed. And it was not a lack of oversight at every level that lead to the collapse. You have no corroborating evidence to say that it was. However, there is a huge body of evidence that it was a result of an all out government assault on the very vehicles that made GM popular and profitable, trucks and SUV's. It was about a decades long all out government assault on cars in general, forcing ever more impossible fuel mileage standards down the industry's throats, forcing other standards that were NOT being demanded by consumers, but by government bureaucrats. This is what happens when you have an imperial federal government climbing up the sphincter of every auto manufacturer and burying them under an avalanche of burdensome regulations and the commensurate paperwork; not to mention the massively expensive R&D and retooling that such regulations forced. It is about stifling corporate taxes that favor our foreign competitors over our domestic producers.

That's not rhetoric... that IS the facts of the matter. And I believe that THIS is what the debate should be about.

This is one of my fundamental disagreements with you. You seem to think that those who get rich (for example CEO's) deserve to. Of course, some do... But more often than not over the past decade, most of those CEO's who have gotten rich have done so at the expense of their own companies, by way of out-sourcing, cooking the books and downsizing. So in the end, the CEO's make all the money while those who work for them get screwed. That is the kind of greed I'm talking about. It does happen and under Bush it became the way big business was expected to operate. The "bottom line" is why jobs went elsewhere and unemployment skyrockted. That is fact! People should be thankful that unions exist or the problem would be considerably worse than it is. More and more since Reagan, big business hasn't given a damn about its workers. It only cares about itself. That's why trickle-down never worked. The money never trickled down. It stayed at the top. I call that embezzlement. But hey, it's just good ol' capitalism right?

And in fairness, Obama isn't much different. Except that he's a socialist apparently.

Yes, I do believe that a person who is capable of running an organization as vast and complex as GM deserves the pay they get. After all, no one bats an eye when a football, basketball, baseball player, or an actor, director, film maker, studio head, or agent rakes in untold millions of dollars. No one screams about their "greed" or raises a cry about these "filthy rich."

You have to ask yourself why there is such an assault on the corporate executives. These are the people who make things happen, build or maintain huge enterprises that employ thousands and deliver the goods and services the people demand. But these hardworking people are routinely harassed, pilloried, and slandered by the mainstream media and our own government.

Now, with that said, is there a small percentage who fails to live up to the high standards we expect of people in such positions of responsibility? Of course there are. No one is perfect. But when you say things like "more often than not over the past decade, most of those CEO's who have gotten rich have done so at the expense of their own companies, by way of out-sourcing, cooking the books and downsizing" you betray a bias that makes me question the sincerity or accuracy of your actual research into these matters. I'm not trying to be mean here, just honest.

You see, it appears that you are unaware of the enormous pressures government intrusions into these private sector companies creates, the nightmarish administrative barriers and hurdles and their associated costs, the constantly shifting regulatory landscape that makes fixing costs (a huge part of a CEO's job) over time all but impossible, the crippling tax burdens placed on these businesses (ours is the second highest corporate tax rate in the developed world, just under Japan), the enormous stain on finances that constant battles with labor unions create (GM workers made nearly double in pay and benefits what their non-union counter parts make), the constant threat (as under Obama) of even more regulatory burdens of unknown costs. If you were aware of these things, you might actually appreciate just how difficult it is for anyone in a high executive position in any large corporation, and just how much they earn those big salaries. It is not a world for the weak. It is a 24/7 job being a top exec. These are guys who punch a clock, come in, do their 8 hours, and go home to watch TV. You would know this if you were researching this subject carefully. I have done that research. I don’t buy into the popular class-warfare propaganda propagated by the mainstream media, the intelligentsia in higher education, and our own elected representatives, on the left and far too often on the right.

When all is said and done, we no longer have free-market capitalism in America; and we haven’t had it in a very long time. Thanks to government interference, and our impossibly complex and abusive tax code, smart corporations have learned (encouraged by our elected representatives) how to game the system, giving rise to K-Street and the countless lobbyists who ply their trade with those in government power. What we now have is CRONY CAPITALISM, a form of capitalism that is a natural outgrowth of our tax and regulatory systems and human nature. This is further exacerbated by the more egregious socialist aspects of our government.

I guess what I’m saying is the whole scene is far more complex and far more nuanced, than a simplistic statement of corporate CEO’s feasting on the blood of the exploited proletariat. Both sides are gaming the system, but only one side has the legal right to use force, and lethal force at that, to get their way, and that is our federal government.

Now I hope that you take this in the spirit in which it was intended. I am just making a forthright case for my position. I hope I have not come off as divisive or argumentative, I just want to debate the actual issues. I like everyone here, and I'd like to keep things on a friendly footing.

That was a very reasonable response. Of course, I happen to disagree with just about all of it... The fact is, people are greedy. If you don't watch what they're doing, they will screw you over - especially when money is involved. Of course, I know that there are "nuances". But I also know that a lot of times those "nuances" are intentionally put in (as loopholes) so that people who know how to play "the game" can get away with stuff. I mean come on, when it comes to things like oil and airlines and autos and financial interests, there has to be oversight. The "rub" (Shakespeare - ed) is, how much oversight should there be? The Republicans want little as they support those already with money, and us Democrats want more oversight so that the Republicans don't screw us over. Again, it's politics. It's not about capitalism versus socialism. It's about doing the right thing for everyone.

i_luv_miley wrote:That was a very reasonable response.

Well thank you. I am trying.

i_luv_miley wrote:Of course, I happen to disagree with just about all of it...

I expected no less. But, I would ask just one thing of you here. I would ask that you try rereading my post, but before you do so, try to put yourself in the position of one who is doing serious academic research in an effort to get at the truth. Try to put out of mind your political leanings, and read it from an objective point of view. It is not an easy exercise by any means, but it might be worth the effort. Just a suggestion.

i_luv_miley wrote:The fact is, people are greedy. If you don't watch what they're doing, they will screw you over - especially when money is involved.

You are quite right. There are many foibles inherent in human nature. This is the whole reason for the formation of governments and laws. The harnessing of human nature is the object of all governments, and the reason for all laws. But you also need to remember that the very “people” you condemn for being “greedy” are the very same people who also form the world’s governments. And these government officials can be every bit as “greedy” as those in the private sector. Just because one is in the employ of the government does not mean that they are immune to the very same human foibles that afflict those in the private sector; especially when money is involved.

i_luv_miley wrote:Of course, I know that there are "nuances". But I also know that a lot of times those "nuances" are intentionally put in (as loopholes) so that people who know how to play "the game" can get away with stuff.

But you have to ask yourself, who put’s in those loopholes? It MUST be done with the cooperation of those in government. No corruption can occur in this country for very long without the sanction of the government. Those people who know how to “play the game” can only play that game if it is sanctioned by the government. Those in government, left and right, are the ones who make the game possible. In fact, it is they who define the game and set the rules.

i_luv_miley wrote:I mean come on, when it comes to things like oil and airlines and autos and financial interests, there has to be oversight.

You are quite right, there has to be oversight. The sad fact is that our government has moved far beyond constitutionally allowable oversight and has erected a tax and regulatory system that it has given rise to crony capitalism on a massive scale. And this is ONLY possible with the blessing of those in power within the government. Take, for instance, the case of Fannie Mae and Freddie Mac. Republican’s were calling for more stringent oversight of these companies which was staunchly opposed and filibustered by the Democrats. And in the recently passed “financial reform” bill, Freddie and Fannie were completely exempt from any added regulation whatsoever.

i_luv_miley wrote:The "rub" (Shakespeare - ed) is, how much oversight should there be? The Republicans want little as they support those already with money, and us Democrats want more oversight so that the Republicans don't screw us over. Again, it's politics. It's not about capitalism versus socialism. It's about doing the right thing for everyone.

Yes, that is indeed the rub... just how much oversight should there be. But this question is not about Republican’s versus Democrats. It is about what role our Constitution gives to the federal government in respect to these matters. We have more than enough laws on the books to prevent the abuses so many rail against – if only they were enforced by those in power.

You need to start looking more critically at the government’s role in the corruption that you seek to pin only on those in the private sector, or those in government who lean to the right.

Those on the left in government are seeking to consolidate their power through regulations and the tax system. And the tax system we have today is the most certain guarantee of government corruption in using it to forward political and social agendas.

I would just ask that you look critically at the issues I raise and not just react in a political sense. I have been extremely critical of those on the right for their perversions of the laws. I would love to see you be as critical of those on the left, and to examine their motives more closely.

dblboggie wrote:After all, no one bats an eye when a football, basketball, baseball player, or an actor, director, film maker, studio head, or agent rakes in untold millions of dollars. No one screams about their "greed" or raises a cry about these "filthy rich."

Actually, in my experience most people have a problem with rewards for failure rather than simply high earnings.

dblboggie wrote:You have to ask yourself why there is such an assault on the corporate executives. These are the people who make things happen, build or maintain huge enterprises that employ thousands and deliver the goods and services the people demand. But these hardworking people are routinely harassed, pilloried, and slandered by the mainstream media and our own government.

Because in the last few years, companies are quoting money shortages and loss of profits (or a straight loss) for laying off staff and still giving enormous bonuses to their executives. Surely if a company director does a bad job and still earns more money than most of us do in a lifetime, and gets 6 figure bonuses, how can that be right? Where is the incentive to work hard to turn a company around if you are going to get a very high wage and a bonus to boot?

Let me give you an example. Some five years ago, "Mini" cars (once produced by Rover now by BMW) went tits up and posted a loss of profit ending in the closure of the British production plant. The CEO still received an enormous bonus and when it all came to light there was public outrage that people had lost their jobs and this man had received a bonus that they supposedly couldn't afford. When questioned by the press he whined "Why are people complaining?! I only got the industry standard level of bonus for this year". Well, I don't doubt that is the case for one minute for a company turning over a profit. Is it right that man should receive a bonus for running that company into the ground? We also have the same problem now with banks that pleaded with the government for taxpayers bail out money. Now turning over a small profit and holding back the economy in refusing to lend (which is what banks are supposed to do btw), they are giving enormous bonuses to the CEOs that drove them to the brink of collapse in the first place.

Interesting reading......

Defenders of high executive pay say that the global war for talent and the rise of private equity firms can explain much of the increase in executive pay. For example, while in conservative Japan a senior executive has few alternatives to his current employer, in the United States it is acceptable and even admirable for a senior executive to jump to a competitor, to a private equity firm, or to a private equity portfolio company. Portfolio company executives take a pay cut but are routinely granted stock options for ownership of ten percent of the portfolio company, contingent on a successful tenure. Rather than signaling a conspiracy, defenders argue, the increase in executive pay is a mere byproduct of supply and demand for executive talent. However, U.S. executives make substantially more than their European and Asian counterparts.

Shareholders, often members of the Council of Institutional Investors or the Interfaith Center on Corporate Responsibility have often filed shareholder resolutions in protest. 21 such resolutions were filed in 2003. About a dozen were voted on in 2007, with two coming very close to passing (at Verizon, a recount is currently in progress). The U.S. Congress is currently debating mandating shareholder approval of executive pay packages at publicly traded U.S. companies.

The U.S. stood first in the world in 2005 with a ratio of 39:1 CEO's compensation to pay of manufacturing production workers. Britain second with 31.8:1; Italy third with 25.9:1, New Zealand fourth with 24.9:1.

http://en.wikipedia.org/wiki/Executive_pay#Criticism

The_Amber_Spyglass wrote:

dblboggie wrote:After all, no one bats an eye when a football, basketball, baseball player, or an actor, director, film maker, studio head, or agent rakes in untold millions of dollars. No one screams about their "greed" or raises a cry about these "filthy rich."

Actually, in my experience most people have a problem with rewards for failure rather than simply high earnings.

dblboggie wrote:You have to ask yourself why there is such an assault on the corporate executives. These are the people who make things happen, build or maintain huge enterprises that employ thousands and deliver the goods and services the people demand. But these hardworking people are routinely harassed, pilloried, and slandered by the mainstream media and our own government.

Because in the last few years, companies are quoting money shortages and loss of profits (or a straight loss) for laying off staff and still giving enormous bonuses to their executives. Surely if a company director does a bad job and still earns more money than most of us do in a lifetime, and gets 6 figure bonuses, how can that be right? Where is the incentive to work hard to turn a company around if you are going to get a very high wage and a bonus to boot?

Let me give you an example. Some five years ago, "Mini" cars (once produced by Rover now by BMW) went tits up and posted a loss of profit ending in the closure of the British production plant. The CEO still received an enormous bonus and when it all came to light there was public outrage that people had lost their jobs and this man had received a bonus that they supposedly couldn't afford. When questioned by the press he whined "Why are people complaining?! I only got the industry standard level of bonus for this year". Well, I don't doubt that is the case for one minute for a company turning over a profit. Is it right that man should receive a bonus for running that company into the ground? We also have the same problem now with banks that pleaded with the government for taxpayers bail out money. Now turning over a small profit and holding back the economy in refusing to lend (which is what banks are supposed to do btw), they are giving enormous bonuses to the CEOs that drove them to the brink of collapse in the first place.

The last few years have been extremely hard on many businesses, at least here in America. And the domination of both Houses of Congress and the White House by the Democrats and their subsequent assault on the private sector has done nothing to ameliorate the effects of the recession. Among the many jobs of senior executives at large corporations is the determining and fixing of costs related to the production and distribution of their products and services. The last two years have been especially bad with respect to this. The hidden costs of the “health care reform” bill and the “finance reform” bill are still not fully understood and corporate executives are scrambling to anticipate these costs, sitting on countless billions out of fear and/or prudence, until the full costs of these measures are fully determined. But it does not stop there, there is still an impending “cap-and-trade” bill which was passed by the House and has yet to be taken up by the Senate, and if that bill passed, this would have a massive impact on corporate costs, and it is not yet known just how drastic those costs will be. When you add to this a little discussed bill that is in the hopper, the so-called “card check” bill, which would eliminate the secret ballot for workers voting whether to unionize or not (allowing union reps and pro-union workers to intimidate those voting against, as their vote would not be secret), and all bets are off on fixing labor costs for these corporate executives. Their labor costs could easily skyrocket overnight. All in the all, the job of determining and fixing costs today is a nearly impossible task.

Given this information, is any wonder that profits are slim, or non-existent, or that those companies are cutting the work force in favor of streamlining efficiencies? I think people have too simplistic an idea of just how hard a corporate executive works, how difficult the many decisions they have to make are, or the long hours that they have to put in. The rank and file employee gets to put in their 8 hours of work and then go home and relax, leaving the job behind. A senior executive (and even a small business owner) does not have that luxury; I have known more than a couple, and it can be a 24/7/365 job. And to cap it all off, very few in the work force, or the media, have any appreciation for this fact, and the executive is frequently scapegoated, pilloried, defamed, and painted with the broad brush of a relatively few bad apples. The sensational coverage in the mainstream media of the few cases of those executives who clearly fell down on the job and reaped benefits that could be said to be undeserved are used to paint all corporate executives as greedy, heartless, undeserving corporate thieves. But this is just not the case.

Now then, let’s discuss those executives who are given very generous salaries and compensation packages, even as they headed out the door after failing to turn a company around, or even causing it’s demise or near demise.

The first and most important thing you have to know is that senior corporate executives, CEO’s, COO’s, CFO,s, CIO's and even presidents and some senior vice presidents among others, all negotiate contracts that designate what they will get paid, and what bonuses or other compensation packages they will receive and under what conditions. This negotiation is a two-way street between the executive and the corporation’s board of directors. Once accepted, the corporation has little recourse in altering that contract (unless this is specified in that instrument). So when you see executives making off with huge pay and bonuses despite apparent failure, this is simply a matter of a corporation being held to the letter of the law. It is not that the Board of Directors has a death wish and is willy-nilly giving huge cash bonuses because these senior executives are a part of the old-boys club. It is a legal obligation that must be met for better or worse. It is never as simple or black and white as the media portrays it, but it does make good fodder for demagoguery to an audience largely ignorant of the inner workings of complex corporations.

As I’ve said before, there is no doubt that senior executives are no more immune to the foibles of human nature than anyone else, and that there are those who will abuse their positions. But, media protestations to the contrary, these are the exception and not the rule.

dblboggie wrote:When you add to this a little discussed bill that is in the hopper, the so-called “card check” bill, which would eliminate the secret ballot for workers voting whether to unionize or not (allowing union reps and pro-union workers to intimidate those voting against, as their vote would not be secret), and all bets are off on fixing labor costs for these corporate executives. Their labor costs could easily skyrocket overnight. All in the all, the job of determining and fixing costs today is a nearly impossible task.

(underline is mine)

My landlord, who is the mayor of the town i live in and a Democrat, told me that there is this guy who owns a trucking company 30 minutes from here. This owner told my landlord that if this "Card Check" is passed, he's selling off all of his tractors (but keeping his trailers) and hiring nothing but owner-operators.

So, there's always a cause and effect for dumb legislation. But Card Check won't see the light of day. Dems spent too much time on the health care bill instead of jobs and other legislation they wanted.

Yep. This is what I've been saying for years. It is those unforeseen (and sometimes foreseen) consequences of legislation that bites one in the ass. The CRA is the granddaddy of them all in the last 40 years.

dblboggie wrote:The CRA is the granddaddy of them all in the last 40 years.

One could equate that thing as this; I make (fictitiously) only $35,000 a year. Visa gives me a brand new credit card with a credit line of $30,000. What's going to happen?

Yep. The passage of the CRA was monumentally irresponsible... and our current economic woes can be traced directly back to that act.

dblboggie wrote:Yep. The passage of the CRA was monumentally irresponsible... and our current economic woes can be traced directly back to that act.

One can also pin it on greedy bastards like Bubbles said, but that was more of an after affect, imo.

TexasBlue wrote:

dblboggie wrote:Yep. The passage of the CRA was monumentally irresponsible... and our current economic woes can be traced directly back to that act.

One can also pin it on greedy bastards like Bubbles said, but that was more of an after affect, imo.

I disagree with this premise. There will always be "greedy bastards" in life, that is human nature, and no laws have ever been devised that could eliminate it from the human species.

Rather, I fault the implementation of the CRA coupled with a lack of enforcing extant laws (because enforcing these laws would have thwarted the desired outcome of the CRA - poor people in their own homes) for giving rise to the multitude of opportunities for those whose scruples were less than pristine to engage in activities which could easily be foreseen from something like giving loans to people who could not afford them.