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Wealth inequality and 'explosive compensation processes'

Discussions about the economic and financial ramifications of PEAK OIL

Re: Wealth inequality and 'explosive compensation processes'

Unread postby GHung » Tue 14 Nov 2017, 21:30:38

Wrong again, Cogoid. I'm an Independent, always have been, and want to see both parties starved of big money so votes buy elections; not dollars buying votes. Better yet, give'em enough rope and they'll hang themselves.

Oh,, wait!....
Blessed are the Meek, for they shall inherit nothing but their Souls. - Anonymous Ghung Person
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Re: Wealth inequality and 'explosive compensation processes'

Unread postby onlooker » Wed 15 Nov 2017, 19:13:31

Funny Ghung, Cog defending Corporate personhood. The Plutocracy truly has done one magnificent job of dumbing down and deluding Americans, so they vote against their own interests. A perfect storm of Corruption and Stench as people since Jeffereson warned. The financal interests totally capturing the instruments of power of this country and Americans oblivious to the level of chicanery and deceit right under their nose.
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Re: Wealth inequality and 'explosive compensation processes'

Unread postby evilgenius » Thu 16 Nov 2017, 12:14:10

I think we need to look upon the economy like a layered onion, or a tree. All of the attention is focused upon the outermost layer, the one that is growing. The trouble with the US economy is that since the 70's the outermost layer has become detached from the domestic economy. It takes a great deal of its investment from anyone who can afford, has the surplus, to put their money there. This money is often contributed by foreign investors. This is good for the market capitalization of companies.

The trend toward the so-called investment arena becoming so important began in the 70's because that is when the Fed raised rates in order to combat the two oil shocks which the West was suffering from. By doing this they trimmed the money supply. This not only countered inflation, but boosted the dollar. They, essentially, made the dollar so important that the sources of the oil shocks, the OPEC states, capitulated. They had to crash the US economy in order to do that. It established a new order. From that time forward a sort of whoring began on the part of the US, as a receiver of international and corporate investment.

The trouble with looking upon the situation as investment, why I call it the so-called investment arena, is that type of money, money which purchases shares in companies, is not really investment per se. It is not money which is available to the company which has been purchased so that the company can operate. All that it does is allow the layer of the onion to continue to grow, as a measure of capitalization. Control is based upon the number of shares, not the amount of money invested. The rules of the game ensure that. Those who have a continual income stream, such as those benefiting from the concentration of wealth by receipt of massive dividends or executive scale pay or bonus structures, or those who come from the outside, bringing the benefits gained from siphoning their countries of wealth, or those directing large pools of money, such as insurance payments made to an insurance company can increase their stake by purchasing more shares over time. Diversification is still important, as seen in the host of investment instruments available to allow new money to diversify.

The banking and finance systems have grown to accommodate this way of doing things. The mental energy of the people has grown to accommodate it as well. When you ask a person what they want to do with their lives, or who they want to be, you, more often than not, will hear the reply that they want to get rich. They are thinking so much about what is going on in the outermost layer that their desires are no longer rooted in their own domestic world. They don't think about aligning themselves with purpose. Don't get me wrong, what happens in the domestic US economy is still very important. You have to have actual operations take place within companies for them to exist. But the assessment of what those operations mean is done by the money passing around in the next layer. That's why you can have such income inequality. That's why income can actually go down over time and there is no real impact. All that's necessary is to make certain that the income earned by those who are so relatively poor doesn't collapse to a level so low that the service economy can't actually operate at all. There must be activity to measure so that bidding for the ownership of the capital responsible for allowing that activity can continue to take place.

Tech has actually become a sort of savior in this circumstance. It has allowed the thing to go on in places where it might have faltered. It's done this by allowing people who aren't making enough money to seek lowest price across a greater number of markets. Along the way it has given companies a means, by peering into personal information, to find those who have something they could spend with them and give them an edge in understanding how to get them to spend it with them.
Last edited by evilgenius on Thu 16 Nov 2017, 12:55:59, edited 1 time in total.
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Re: Wealth inequality and 'explosive compensation processes'

Unread postby evilgenius » Thu 16 Nov 2017, 12:53:30

The reason why incomes for the bottom so many percent of the population have been shrinking ought to be obvious. Their incomes are dependent upon what they receive in pay. The executives who run the corporations which the outermost layer seeks to invest in are allowed to participate. Largely, they do this through stock options, but that isn't the only means. Because the value of any one asset in the outermost layer is volatile, can go up and down, executives can seek to time actions to influence trends in order to benefit themselves, when their options are exercised. They probably have about as much luck with that as you would trying to pick stocks. The problem for people who make wages, and for those who earn from corporations in any way that can be classified as an expense (as independent contractors), is that executives will try. In doing so, they will seek after certain actions. Essentially, it's cost cutting. The simplest of these is to cut either worker's pay, or the workers themselves. It gets more creative from there. The best executives manage to 'return value to shareholders' in these and other ways. Returning value to shareholders does not mean increasing pay to employees. It means cyclically increasing the share price so that only marginally interested investors (not usually those seeking to hold long term and earn through dividends), themselves included, can appreciate gain.
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Re: Wealth inequality and 'explosive compensation processes'

Unread postby rockdoc123 » Thu 16 Nov 2017, 13:23:53

Returning value to shareholders does not mean increasing pay to employees. It means cyclically increasing the share price so that only marginally interested investors (not usually those seeking to hold long term and earn through dividends), themselves included, can appreciate gain.


If you work for a public company your ultimate boss is the shareholder. As an executive in a public company, your only goal is to serve the shareholder. Independent Boards ensure this happens (i.e. decisions made by the executive are in the best interest of the shareholder). This is not a socialist economy where the interest of the worker is considered other than what has to be done in order to incentivize said worker to deliver on their particular job at a high enough level that the shareholder ultimately benefits. If the worker doesn't like that arrangement then he is free to quit and go somewhere else or start his own company. IF the general public doesn't like that arrangement then they are also free to move to Russia or China or a similar jurisdiction. In some companies you see share options delivered down to the average worker level but at most, they are awarded at higher levels in the organization in order to tie performance to compensation. If the shareholder (the ultimate boss) benefits then so do those who delivered on the bottom line such that share price could increase. Company executives and especially Boards generally understand their investors quite well (believe me I've taken more phone calls from irate/interested shareholders than I care to remember) and they realize that if the majority are interested in steady cash flow from dividends they don't want to see you running around doing business that can jeopardize that lower risk cash flow. IF you do they vote with their feet which will eventually get you fired. This has happened to a few oil and gas companies I've watched over the past few years. This system works well for the vast majority of companies. It doesn't when compensation gets out of hand or where the Board is not independent and those are the cases everyone hears about in the press. The fix for this is activist shareholders who hold enough shares to force actions at the Board level.
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Re: Wealth inequality and 'explosive compensation processes'

Unread postby Cog » Thu 16 Nov 2017, 14:03:05

Well said rockdoc123. A public corporation is not a charity in which you can access the wealth at your leisure. As a stockholder, I care about profits and not whether Sally soccer mom can pay for a baby-sitter or not.
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Re: Wealth inequality and 'explosive compensation processes'

Unread postby evilgenius » Thu 16 Nov 2017, 17:34:04

rockdoc123 wrote:
Returning value to shareholders does not mean increasing pay to employees. It means cyclically increasing the share price so that only marginally interested investors (not usually those seeking to hold long term and earn through dividends), themselves included, can appreciate gain.


If you work for a public company your ultimate boss is the shareholder. As an executive in a public company, your only goal is to serve the shareholder. Independent Boards ensure this happens (i.e. decisions made by the executive are in the best interest of the shareholder). This is not a socialist economy where the interest of the worker is considered other than what has to be done in order to incentivize said worker to deliver on their particular job at a high enough level that the shareholder ultimately benefits. If the worker doesn't like that arrangement then he is free to quit and go somewhere else or start his own company. IF the general public doesn't like that arrangement then they are also free to move to Russia or China or a similar jurisdiction. In some companies you see share options delivered down to the average worker level but at most, they are awarded at higher levels in the organization in order to tie performance to compensation. If the shareholder (the ultimate boss) benefits then so do those who delivered on the bottom line such that share price could increase. Company executives and especially Boards generally understand their investors quite well (believe me I've taken more phone calls from irate/interested shareholders than I care to remember) and they realize that if the majority are interested in steady cash flow from dividends they don't want to see you running around doing business that can jeopardize that lower risk cash flow. IF you do they vote with their feet which will eventually get you fired. This has happened to a few oil and gas companies I've watched over the past few years. This system works well for the vast majority of companies. It doesn't when compensation gets out of hand or where the Board is not independent and those are the cases everyone hears about in the press. The fix for this is activist shareholders who hold enough shares to force actions at the Board level.


You flew right past the point I was making, and latched onto that part. I'm not advocating socialism in my post. I'm talking about how the people who manage corporations are paid way outside of the actual job they do. They are paid as if they were the owners. They, in actual fact, act as if they were, when they manage the company to provide only to please those who are not into owning the company for what that means, but only to make a quick profit. That fact that their compensation is built in parallel to those interests kind of gives it away. Board oversight or no, the disjunction in American capitalism is taking place at the level of the philosophy of what it means to return value to shareholders. Does that only mean to raise the stock price by any means necessary, or does it mean to raise it while maintaining the concept of a going concern that has a purpose to exist? If the purpose is going to be left out of the concept, or the actions that manage the company are going to act against the idea of it being a going concern, then incorporation itself possibly ought not to be extended to the company as a means to protect its acting members, or its ownership.
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Re: Wealth inequality and 'explosive compensation processes'

Unread postby rockdoc123 » Thu 16 Nov 2017, 18:11:51

They are paid as if they were the owners. They, in actual fact, act as if they were when they manage the company to provide only to please those who are not into owning the company for what that means, but only to make a quick profit.


I don’t think so. When you look at Executive base level compensation there is a wide range and public companies will pay higher for what they perceive as someone who can deliver better, faster, etc. Of course they provide to those who own the company, they are the shareholders. If they don’t then their job is in jeopardy. As I said before an Executive can’t manipulate a companies activities to get more money for himself if it is not in the best interest of the shareholders. If it is in the best interest of shareholders then what is the problem? If you don’t like the way the company is run buy some shares and attend annual meetings and make a pest of yourself, happens all the time.

Board oversight or no, the disjunction in American capitalism is taking place at the level of the philosophy of what it means to return value to shareholders. Does that only mean to raise the stock price by any means necessary, or does it mean to raise it while maintaining the concept of a going concern that has a purpose to exist? If the purpose is going to be left out of the concept, or the actions that manage the company are going to act against the idea of it being a going concern, then incorporation itself possibly ought not to be extended to the company as a means to protect its acting members, or its ownership.


You didn’t read what I wrote. The actions of the Executive are always aligned with that of the majority of shareholders. If they are there for dividends and long term and Executive try something that flys in the face of that goal they will face shareholder wrath and lose their jobs. Happens quite frequently when the Board misaligns with a particular CEO. The way it works with public companies is that company A formulates a plan and then goes to potential shareholders to raise capital. That plan is very detailed and includes a “use of proceeds” statement. Shareholders who buy shares are correct to assume that plan will be executed. If something else happens they either kick up a fuss with the Board or they sell their shares and move on. Executives have far less leeway that you seem to imagine.
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Re: Wealth inequality and 'explosive compensation processes'

Unread postby evilgenius » Fri 17 Nov 2017, 12:46:23

There is the way things are supposed to be, and the way things are. The way things are supposed to be assumes oversight. The way things are understands that there is plenty of room for excess. When excesses develop as part of the culture of a thing, part of the way of doing that thing, sometimes we refer to that as privilege.

It's like when a person tailgates the car in front of them in traffic. They see other people who also tailgate. They feel like their behavior is justified, not by reasoning out the distance they should be following cars by, but because they see so many others doing it too. When an accident happens those people often blame the car they hit for slowing or stopping in front of them, they are so convinced that they are right. They were blinded by privilege.

Again, it's like the local comedy club I read about the other day. Its owner was under fire for allowing a sexist culture to run amok at his club. Every time a female comic complained about what was going on he told her to put up with it. He would say, "That's just how that guy is." It would take him a long time to enforce any rules about behavior, to ban someone who went too far too often. Sometimes he seemed supportive of the situation. Then, along comes the metoo hashtag, and he may go out of business. He was blinded by privilege.

I maintain that many of the efforts to cut the workforce or reduce pay by executives have been maneuvers to increase the stock price because they come with the appearance of cutting costs. The actual effect may be negligible. Yes, there are times when it is the right thing to do. I say it happens often enough simply because there is an extravagance of money seeking capital which is disinterested enough that it will not examine the situation more closely. They will be lured by the news alone.

Of course shareholders are happy about that. They aren't going to complain if it makes the price go up. What do they care if employees suffer when their suffering is of no consequence to them? If the result was direct, like a stoppage caused by industrial action, they might care. Yeah, they might care enough to contact their congressman rather than think about adequate pay. That's happened too. I guess it's a cheaper response than getting involved over pay because those arguments take actual work rather than disinterested work, such as the one time passing of a law that takes the notion of industrial action off of the table. The simple answer prefers it when employees can be gotten to work for the company for the lowest cost. Never mind arguments about what empowered employees can do for your company, or about enhanced productivity. Those take too much effort, and further demands upon management than those commensurate with an owner's stock price boosting mindset. The stock price will go up without them.

In the right sort of economy it does not hurt the idea of the company being a going concern. When everybody does it, though, eventually there will be a price to pay. At first, that price is the indebtedness of your customers, for across the board people employed by companies that operate the same way as yours are your customers. That still won't make you notice what you are doing, though. Business won't be harmed. Then, when that indebtedness becomes onerous, that results in customers who will prefer lowest price as the marketing device they will gravitate toward. Suddenly, your company is vulnerable. Like the driver who rearends another and blames them, those executives will not often blame themselves, nor will their boards blame their lack of oversight. "Everybody was doing it." They were all blinded by privilege.
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Re: Wealth inequality and 'explosive compensation processes'

Unread postby rockdoc123 » Fri 17 Nov 2017, 20:41:31

In the right sort of economy it does not hurt the idea of the company being a going concern. When everybody does it, though, eventually there will be a price to pay. At first, that price is the indebtedness of your customers, for across the board people employed by companies that operate the same way as yours are your customers. That still won't make you notice what you are doing, though. Business won't be harmed. Then, when that indebtedness becomes onerous, that results in customers who will prefer lowest price as the marketing device they will gravitate toward. Suddenly, your company is vulnerable. Like the driver who rearends another and blames them, those executives will not often blame themselves, nor will their boards blame their lack of oversight. "Everybody was doing it." They were all blinded by privilege.


basically, this is what a capitalist system does. It competes with itself to the lowest point where producers are making profits and consumers are happy. If consumers want lower prices and nobody can provide them economically they are out of luck, if producers want higher profits and nobody is willing to pay a higher price point then they are out of luck. There is always a balancing point where it is impossible to cut costs any further to make a profit at a price that undercuts competitors. The companies that can live close to that margin happily have a long-term business, those who can't are doomed to an existence of good periods and bad periods.

I'm not sure I see the problem you are seeing here. For the most part, this has worked fairly well for a number of decades. There are, of course, examples where a CEO has gone off the reservation and not been reigned in by his Board but I believe those are only a small percentage of everything going on out there.
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Re: Wealth inequality and 'explosive compensation processes'

Unread postby mmasters » Fri 17 Nov 2017, 20:44:30

Best make something of yourself to be one of the haves instead of the have nots.
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