AT&T CEO says hard to find skilled U.S. workers

Therefore I will not read your post.

Don't --- it's your loss. My job was to throw the pearls. It is if course your prerogative to decide whether to be a swine.

Write to me again when you are successfully graduated from high school.

Check also posts #241 and #264 this thread for substantive rebuttals of your earlier post #100.

As it is, I like to lighten things up in contentious threads by posting humor.

Cheers!

How do you know when a CEO does and does not perform? Actually, you never do for two main reasons. Firstly, what constitutes performance of a company and/or its management is a very difficult problem, which is far from being resolved. And, secondly, to judge management's performance you need a full set of data, which even employees of the company do not have.

This cuts both ways. Look at the company performance of Microsoft and of GE over the past 10 years. Then look at the performance of the stock price of each company over that time frame.

Look at free cash flow, top-line revenue growth, profitability growth, return on equity, return on investment.

Do you reward the CEO for stock price appreciation or for the company's financials?

If the former, do you award the CEO even though the stock price went up with everyone else's stock during a bubble?

If the latter, what do you do when the stock price is stagnant -- the CEO is not 'rewarding shareholders' as the saying goes.

Speaking of that, what is the business value of the $2 million annual pension paid to Jack Welch now that he is no longer working for GE?

Were it so, this would indeed be infuriating: a CEO is fired for poor performance but receives "severance" in millions of dollars. This is not the case, however. This compensation is received when the CEO begins his job and properly viewed as insurance. Just as Tiger Woods or a ballerina insures their limbs, the "parachute" is insurance received as part of compensation.

Yep, what in hell was being 'insured' when Cayne of Bear Stears was playing bridge and smoking pot last summer?

What was being 'insured' when Charles Prince of Citigroup led the company to an $8 billion annual loss, dwarfing prior profits?

The same goes even more strongly for executives in the airline industry, and for Ross Perot, paid off to leave GM alone.

...or for that matter the Disney exec who cashed out for over $100 million for 14 months' tenure -- more for just over a year than most neurosurgeons *earn* in a lifetime.

Where is the value created for anyone else other than the other members of their own exclusive circle-jerk club?

Note: you *could* have referenced Goizueta and Coca-Cola; the company's performance *and* stock fell apart after he left -- although that may have been 'time bombs' related to decisions which went sour after his tenure.

And those are off the top of my head -- you could also google the performances of the executives for Countrywide, Enron, Toll Brothers, Cendant, Global Crossing, and Tyco, to give a few examples.

Cheers!

I meant that what you call “short-term” compensation should’ve been 3-5 times greater. It appears quite correct, then.

Total estimated compensation was almost $22 million

THanks. This seems an appropriate figure.

This cuts both ways. Look at the company performance of Microsoft and of GE over the past 10 years. As I already mentioned, nobody knows what performance is.

Then look at the performance of the stock price of each company over that time frame. Ok.

Look at free cash flow, top-line revenue growth, profitability growth, return on equity, return on investment.

And, having looked at this, what do we learn? You have focused solely on financial performance of the company. This is just one aspect of performance --- maintenance of strategic fit with the environment is an instance of another --- and even this one is difficult to measure. Over a long period of time, response to management's actions is washed out by noise.

Do you reward the CEO for stock price appreciation or for the company's financials?

Stock price appreciation is one of the financials.

I never claimed to have known precisely what CEO must be rewarded on. On the contrary, I keep emphasizing that this issue is an open question and subject of ongoing debate.

If the former, do you award the CEO even though the stock price went up with everyone else's stock during a bubble?

If the former, you reward the CEO for the growth above and beyond the average (which you associate with a bubble).

If the latter, what do you do when the stock price is stagnant -- the CEO is not 'rewarding shareholders' as the saying goes.

There you go --- you have identified one the difficulties in measuring performance.

Incidentally, I am not sure why people find it surprising or believe otherwise. What's the performance of an engineer? That something he produced does not break is too low of a standard. How do you measure performance of an architect? workshop organizer? college professor?

The point is, of course, that there are many professions where measurement of performance is difficult --- even individual performance, let alone that of an organization.

Speaking of that, what is the business value of the $2 million annual pension paid to Jack Welch now that he is no longer working for GE? The business value has been realized before Welch retired. As I mentioned in an earlier post, compensation of any sort that is recived after departure but granted before a person is hired is a form of insurance. To see the parallel fully, as yourself: what is the value of the home 2007 home insurance now that 2007 is over? THe answer is quite clear: the value was realized during 2007 by allowing you to function better as a result of having peace of mind. Various aspects of "golden parachutes" serve the same purpose.

Finally, you are being unfair here: what is the business value of the 10,000/year pension given to a janitor or an engineer? If you see value in one, you must see it in the other.

Too late at night to reply in detail; but I must have done something right for a change, for you brought up almost *all* of the points I was broadly hinting at.

Also, I think I sprained my ankle due to pure stupidity today, so I am running behind on household chores -- less time to FReep 'till I've recovered.

Stay tuned...

Cheers!

I am really sorry to hear about your ankle. Don’t worry about a reply -— get well soon!
Best,
TQ>

yeah at what .50 an hour?

Finally getting a chance to catch up -- I also had something blow up at work yesterday (Excel crashed on me and I had to restart a long process -- twice!) and I am fairly mobile except for stairs.

You might also look at replies I made to you and cowtowney on the La-Z-Boy/Whirlpool thread...

First, a high-level response, then details.

You are raising these issues (it appears) as a means of confusing things -- as if to say, "Look, *nobody* knows what metrics to use when evaluating a company's performance, so we don't have any idea what to pay a CEO." The actual quote was:

Over a long period of time, response to management's actions is washed out by noise.

If that's the case, then it cuts both ways: why do they get paid so damn *much* -- if we don't know how to measure value, then how do we know that they've delivered value in order to justify their salary, bonuses, stock options, and severance?

I think the actual substantive answer to that is that a company's fitness in the environment should end up being reflected first in the financial metrics (even the worst-run computer company makes money for awhile) and then in the stock price and existence of the company (even the best-run buggywhip maker is bankrupt; but Berkshire Hathaway started out as a textile company. Rather than "offshoring" the CEO divesified. ;-) )

However, since as Buffet said, "In the short term, the market is a popularity contest; in the long term, it is a weighing machine" it makes it harder to reward executives for ecosystem fit, because the time scales are not only different, but also unpredictabley different. (Hence the remark about Microsoft stock being flat, or GE; also, stock prices can zoom upwards due to fads or manipulation without regard either to financials or to ecosystem fit: witness the dot-bomb era). So the easiest way to gauge performance is via the financials.

And my point here is no matter what metric you use (market share; top-line profits; return on equity; return on invested capital; stock price; etc.), one could find a company which claimed that particular metric as its yardstick, and yet paid the executives obscenely despite their failure to deliver on that metric; and even in some cases find companies (Washington Mutual for a recent example) that *change the yardstick* to pay the executives when they Mongolian Fluster Cluck^TM TM the company's short-term performance AND long-term value, explicitly in order to keep paying the executives. The employees, who fulfilled their directives from the CEOs, are dumped without pity: no excuses or chicanery for them.

"Privatize the profits, socialize (across the company, then society) the losses."

Cheers!