Comments on: Failure Is Good http://www.secularconservative.net/fiscal-policy/capitalism-whyfailure-is-good/ Mon, 10 May 2010 01:39:11 +0000 http://wordpress.org/?v=2.9.1 hourly 1 By: Cephus http://www.secularconservative.net/fiscal-policy/capitalism-whyfailure-is-good/#comment-241 Cephus Wed, 03 Dec 2008 18:47:08 +0000 http://www.secularconservative.net/?p=220#comment-241 Actually, I was thinking about this earlier and I think what we need to do is pay CEOs some minimum salary, say $100,000 or something, then tie all of the rest of their compensation to the performance of the company. If the company doesn't make a profit, they get no more money. This makes the CEO actually care for the welfare of their company, currently most have contracts that give them bonuses even if the company is going bankrupt. Further, I think their golden parachutes need to be tied to their overall performance while at the company. For every year that the company turns a profit, a certain percentage of that goes into the retirement fund of the CEO. The CEO needs to remain at their post for at least 5 years to be fully invested. That stops the insanity of CEOs leaving their failing companies after 10 days in office with a multi-million dollar bonus. Not that I think any of this will ever happen but it certainly needs to. Actually, I was thinking about this earlier and I think what we need to do is pay CEOs some minimum salary, say $100,000 or something, then tie all of the rest of their compensation to the performance of the company. If the company doesn’t make a profit, they get no more money. This makes the CEO actually care for the welfare of their company, currently most have contracts that give them bonuses even if the company is going bankrupt.

Further, I think their golden parachutes need to be tied to their overall performance while at the company. For every year that the company turns a profit, a certain percentage of that goes into the retirement fund of the CEO. The CEO needs to remain at their post for at least 5 years to be fully invested. That stops the insanity of CEOs leaving their failing companies after 10 days in office with a multi-million dollar bonus.

Not that I think any of this will ever happen but it certainly needs to.

]]> By: Janus http://www.secularconservative.net/fiscal-policy/capitalism-whyfailure-is-good/#comment-238 Janus Tue, 02 Dec 2008 18:32:49 +0000 http://www.secularconservative.net/?p=220#comment-238 (The following is purely musing, I don't honestly think we could or should do something like this.) I sometimes wonder if we could find a better method of executive compensation. Something akin to requiring all board-level managers to invest a large portion (half? all?) of their personal finances into a company when assuming the mantle of leadership. Upon their retirement they could withdraw that investment over time, say selling off a percentage of stock at certain benchmark intervals (some on leaving.. some after 3 months.. some after 6.. the rest after a year?). If they needed money while in charge of the company, they could always issue a dividend to all stock holders (themselves included.) To encourage lower-class business managers, we could allow some basic form of compensation, such as maybe 10x the wage of the lowest paid person in the company per anum. That way, if you're paying your janitors 20k a year, you could still make 200k a year, plus dividends, plus (if you're a good manager) a windfall stock deal when you leave the company. If you wanted a raise, you could always just better the salary of everyone in the company. There is a semi-precedent for minimum contributions in retirement plans and existing stock incentives for managers. A system like that would be something that runs counter to my free market values, but in a perfect world, maybe with a few tweaks, I think we could make it work. (The following is purely musing, I don’t honestly think we could or should do something like this.)

I sometimes wonder if we could find a better method of executive compensation. Something akin to requiring all board-level managers to invest a large portion (half? all?) of their personal finances into a company when assuming the mantle of leadership. Upon their retirement they could withdraw that investment over time, say selling off a percentage of stock at certain benchmark intervals (some on leaving.. some after 3 months.. some after 6.. the rest after a year?). If they needed money while in charge of the company, they could always issue a dividend to all stock holders (themselves included.) To encourage lower-class business managers, we could allow some basic form of compensation, such as maybe 10x the wage of the lowest paid person in the company per anum. That way, if you’re paying your janitors 20k a year, you could still make 200k a year, plus dividends, plus (if you’re a good manager) a windfall stock deal when you leave the company. If you wanted a raise, you could always just better the salary of everyone in the company. There is a semi-precedent for minimum contributions in retirement plans and existing stock incentives for managers. A system like that would be something that runs counter to my free market values, but in a perfect world, maybe with a few tweaks, I think we could make it work.

]]> By: Cephus http://www.secularconservative.net/fiscal-policy/capitalism-whyfailure-is-good/#comment-236 Cephus Tue, 02 Dec 2008 15:42:33 +0000 http://www.secularconservative.net/?p=220#comment-236 Excellent post, it dovetails into a debate I've been having elsewhere in fact. Unfortunately, we get a lot of liberal whack-a-loons who seem to think that everyone deserves a reward whether they take risks or not, they deserve to get the same slice of the pie just for waking up in the morning. I guess that's enough of a risk these days for some people. Capitalism and the free market works when we allow it to work. Yes, it can be broken and when we let it run without any regulation whatsoever, as we've seen in the financial market recently, it can fall apart entirely, but a rational, well-run, reasonably free market can and does provide sufficient reward to those willing to take risks and it leads to a healthy, growing economy. We could sure use something like that right now. Excellent post, it dovetails into a debate I’ve been having elsewhere in fact. Unfortunately, we get a lot of liberal whack-a-loons who seem to think that everyone deserves a reward whether they take risks or not, they deserve to get the same slice of the pie just for waking up in the morning. I guess that’s enough of a risk these days for some people.

Capitalism and the free market works when we allow it to work. Yes, it can be broken and when we let it run without any regulation whatsoever, as we’ve seen in the financial market recently, it can fall apart entirely, but a rational, well-run, reasonably free market can and does provide sufficient reward to those willing to take risks and it leads to a healthy, growing economy.

We could sure use something like that right now.

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