Don't You Wish You Could Get Paid More for Poor Performance?

If you're a CEO, should you want your company's stock to nosedive?  Probably not.  Will you be paid better if it does?  There's a good shot, says Roger Martin writing in the Harvard Business Review:

As far as CEO compensation goes, under the current stock-based compensation model, it is unambiguously better to have your stock plummet and then partly recover than to have the stock stay steady over the same period. Though they wouldn't want to admit it, the crash of 2008 wasn't all that bad for the vast majority of big-company CEOs. With the exception of those few CEOs who were sacked, most had terrific air cover: "Our stock may be down 50% but so is everybody else. Really, I'm doing well, all things considered."

Even better, CEOs got tranches of options and/or grants at super-low prices — in some cases lots of them to keep the CEO in question from being depressed that his/her existing options were 'so far underwater'. As the market dragged their stock prices up with everyone else's, these CEOs made out like, well, bandits.

Psychology Today on Income Inequality and its Effects

Ray B. Williams, writing for Psychology Today, poses the question "Will Income Inequality Cause Class Warfare."

The article presents some fascinating stats:

Dan Ariely of Duke University and Michael I. Norton of Harvard Business School, showed that across ideological, economic and gender groups, Americans thought the richest 20% of American society controlled about 59% of the country's wealth, while the real number is actually 84%. At the same time, the survey respondents believed that the top 20% should own only 32% of the wealth. In contrast, in Sweden, a country with significantly greater economic equality, 20% of the richest people there control only 36% of the wealth of the country. In the American survey, 92% of the respondents said they'd rather live in a country with Sweden's wealth distribution...

The United States is the most economically stratified society in the western world. As The Wall Street Journal reported, a recent study found that the top .01% or 14,000 American families hold 22.2% of wealth, and the bottom 90%, or over 133 million families, just 4% of the nation's wealth. The U.S. Census Bureau and the World Wealth Report 2010 both report increases for the top 5% of households even during the current recession. Based on Internal Revenue Service figures, the richest 1% have tripled their cut of America's income pie in one generation.

The gap between the wealthiest Americans and middle- and working-class Americans has more than tripled in the past three decades, according to a June 25, 2010 report by the Center on Budget and Policy Priorities. New data shows that the gaps in after-tax income between the richest 1 percent of Americans and the middle and poorest parts of the population in 2007 was the highest it's been in 80 years, while the share of income going to the middle one-fifth of Americans shrank to its lowest level ever.

So will we experience a "class war" over these inequalities? Read the original article for the author's conclusion.




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Who cares if Wall Street 'talent' leaves?

CNN Money asks Who cares if Wall Street 'talent' leaves?

"But maybe the best reason not to fret about talent flight is one familiar to cubicle dwellers everywhere: just because someone has a big, high-paying job doesn't mean they're good at it."

Recession is Over

Good news! The recession is over!

The National Association of Business Economists is declaring that the recession is over. Of course it doesn't mean that jobs are coming back any time soon. In fact, they figure unemployment will keep going up for a little while.

So what does the expression "jobless recovery" mean? The best I can figure it, it means that you don't have a job, but Wall Street sets new compensation records.

Agence France Press (by way of Commondreams.org) is reporting "US banks and securities firms could pay a record 140 billion dollars to its staff this year...Workers at 23 top investment banks, hedge funds, asset managers and stock and commodities exchanges can expect to earn even more than they did at the peak year of 2007, according to an analysis by the Wall Street Journal."

How come I don't feel like throwing a party after this great news?

I'm Changing My Name to AIG

Here's a special tune for all the banks that lobbied to make personal bankrupcy harder with the "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005," who are now asking the government to give them a second chance. If you, like me, are wondering if AIG has to complete a "mandatory debtor education course" before it is relieved of its bad debt, this is the song for you.

Schandenfreude Alert Goes Bonkers

As I've noted here before, I have a Google alert set to the word "Schadenfreude." Usually there are one or two stories featuring the word each day, but yesterday it suddently went crazy. The collapse of Lehman Brothers, and other bank woes, are apparently giving people a sense of... glee.

"Is it me or is Schadenfreude on the march?" wrote Guy Dressler in Reuters.

It's not you, Guy.

The New York Times put "Schadenfreude" in its headline: "As Europe Watches Wall Street Fall, Schadenfreude Gives Way to Worry."

"I only watched the news last night to have a good laugh at the bankers carrying out their belongings," wrote someone basking in the anonymity of the Internet. "Naturally I feel sorry for the admin and IT staff who weren't subject to the bonuses that the bankers get. I'd love to listen in to one of their conversations when they got home. 'Sorry Tarquin, we're going to have to put you in a state school from now on because daddy spent his disgustingly huge bonus on a Ferrari which he can't sell because of the Credit Crunch.' Welcome to our level. Merry Christmas."

This was one of many such items posted in response to a story in The Guardian which posed the question:"Investment banking: one of the most reviled professions?"

Over at DailyComedy.com, Ricardo Aleman of "America's Got Talent" fame, writes: "...they are all out of a job, but need to find a way to pay their next month's bills fast. I eagerly await the Women Of Lehman Bothers Playboy issue."

After describing his intial sensations of Schadenfreude, Will Self of the Evening Standard concludes that it isn't really the right emotion at all:

"No, schadenfreude isn't really called for here, not when people are posting their house keys through the door and going on the run because they can't keep up interest payments. What's required is a far stronger emotion: anger. Anger towards those at the top of the heap who went on gambling with other people's futures, and anger towards those in government who were seriously comfortable with the seriously rich — no matter how they made their money."

Incidentally, September 18 is the anniversary of the "Panic of 1873" when 37 banks and brokerage firm Jay Cooke & Company went under. Shortly afterwards, the New York Stock Exchange temporarily shut down, further damaging faith in the economy. The federal government's efforts to stem the panic were fruitless and the depression lasted through 1879. Happy Anniversary, Baby!

[Cartoon from Geraldgee.]