On eve of bankruptcy, US firms shower executives with bonuses • Hacker News Board

Re: On eve of bankruptcy, US firms shower executives with bonuses

#71

Post by hedora » Sat, Jul 18, 2020, 2:01 AM UTC

lend000 wrote: post #32

gwbrooks wrote: post #30

I have trouble seeing how this is Something That Needs Fixing(tm). It's a shareholder problem because it's shareholder capital being spent on these bonuses. Both pre- and post-bankruptcy, shareholders are in the primary position to fix it.

It isn't shareholder capital; it's almost always creditor capital when a public company is going bankrupt. It's a broken process when creditors don't get a vote in whether a company can apply for Chapter 11 bankruptcy (as opposed to Chapter 7 where the company assets are just liquidated). It incentivizes shareholders to vote for Chapter 11 because they know during a Chapter 7 their shares will be worthless anyway, be…

It’s not just creditors that get screwed. Many of these companies have pension plans that will likely be zeroed out during bankruptcy.

Also, if the company no longer exists (or contracts to cover the bonuses), then it stops serving whatever societal purposes it used to serve.

For retail, all the infrastructure supporting the malls ends up being wasted, suppliers go bankrupt, communities lose jobs, neighboring stores fail once the mall loses its anchor store, etc, etc.

Re: On eve of bankruptcy, US firms shower executives with bonuses

#72

Post by computerphage » Sat, Jul 18, 2020, 2:02 AM UTC

lend000 wrote: post #69

xkcd-sucks wrote: post #64

Earlier quoted context omitted.

So they quit, and someone hungrier + lower on the ladder gets a chance to prove themselves by turning the company around, rewarded by staying in the position when it's cushy again.

>So they quit I doubt most of the executives see themselves as personally responsible for the financial situations of their companies, especially during an unprecedented global economic shutdown. Not because they are any different from you or me or any of these other self righteous commenters, but because they are the same. If American culture were more like ancient samurai culture, perhaps they could commit seppuku…

It wasn't unprecedented.

Re: On eve of bankruptcy, US firms shower executives with bonuses

#73

Post by rectang » Sat, Jul 18, 2020, 2:06 AM UTC

lend000 wrote: post #55

thaumaturgy wrote: post #48

Earlier quoted context omitted.

> Are you going to stick around and try to dig out the company without a retention bonus? No. You have a couple of times framed opposition to executive bonuses in these situations as "simple" and "emotional", while expressing an appreciation for "creative destruction". So, if an executive would rather leave than turn a company around while tightening their own belt -- especially given that some of these executives ca…

What you're describing sounds nice but apparently the incentives don't support it (perhaps because it's better to keep the people who know all about their company than contract execs who know nothing about the company or perhaps even the industry). I agree with part of what you are saying, hence my tirade about how Chapter 11 bankruptcy laws need reform. But what bothers me is that most people just assume the executi…

> Don't hate the players, hate the game.

Who's going to get in the way if we try to change the rules of the game? The players, naturally.

The system produces an immoral result because it is in the interest of immoral actors to keep it that way. I have no confidence whatsoever that any reforms will make it past them.

Re: On eve of bankruptcy, US firms shower executives with bonuses

#74

Post by hedora » Sat, Jul 18, 2020, 2:09 AM UTC

inerte wrote: post #4

amiga_500 wrote: post #2

The execs getting the bonus know that other USA execs won't frown on this. The execs getting the bonus know regulators won't come after them. The execs getting the bonus know the media won't name and shame them. The execs getting the bonus know that nobody in their social circle will shun them. The execs getting the bonus don't even think this is wrong, as the main aim is to grab what you can when you can, and if it'…

Depends what you mean by mainstream, or acknowledged. That's one of main talking points of Bernie Sanders, which was almost there as the Democrat candidate. I feel like everybody had the chance to see it, so it was mainstream. Acknowledged in the sense that we recognize this an as actual, structural and cultural problem? Yeah, not happened. Not in this country, where "the poor see themselves not as an exploited prole…

Wasn’t Trump’s other campaign slogan “Drain the swamp?”

Re: On eve of bankruptcy, US firms shower executives with bonuses

#75

Post by mcrae » Sat, Jul 18, 2020, 2:20 AM UTC

daniel-cussen wrote: post #65

mcrae wrote: post #59

Earlier quoted context omitted.

You’re assuming that there is a pool of hypothetical executives who are a) familiar with the industry, b) familiar with the company, c) available, and d) willing to earn an amount less than what the existing executives are offered here, and e) willing to take a very risky job that will likely end fairly shortly. I’m not an expert but it seems like these people may not exist and that keeping the existing management on…

Promote internally. That's what generally happens in the military under similar conditions. Xenophon wrote about the march of the 10,000 Greek mercenaries whose officers were murdered by the Persians, inside Persia. They elected new officers, swearing to obey their orders, and fought their way out of Persia, returning the survivors to Greece.

Yes but... and I'm sorry to point out the obvious, but these executives haven't been murdered by Persians. They've just been paid a relatively trivial amount to do their jobs for a few months.

And who's to stay the internally-promoted folks will demand any less payment?

Anyways, sounds like you're just opposed to these payments fundamentally despite all of the rational arguments that have been elucidated in this thread in support of them.

Re: On eve of bankruptcy, US firms shower executives with bonuses

#76

Post by lend000 » Sat, Jul 18, 2020, 2:21 AM UTC

rectang wrote: post #73

lend000 wrote: post #55

Earlier quoted context omitted.

What you're describing sounds nice but apparently the incentives don't support it (perhaps because it's better to keep the people who know all about their company than contract execs who know nothing about the company or perhaps even the industry). I agree with part of what you are saying, hence my tirade about how Chapter 11 bankruptcy laws need reform. But what bothers me is that most people just assume the executi…

> Don't hate the players, hate the game. Who's going to get in the way if we try to change the rules of the game? The players, naturally. The system produces an immoral result because it is in the interest of immoral actors to keep it that way. I have no confidence whatsoever that any reforms will make it past them.

Which players are going to aggressively lobby for this? Only ones who are in the early stages of declaring bankruptcy (not the deepest pockets). Whereas creditors (big banks) probably have more sway, and would benefit from chapter 11 to be weaker.

What you're saying is intellectually lazy and bordering on /r/conspiracy. You shouldn't stop identifying, understanding, and petitioning to fix the problem simply because you think you might get some pushback.

Re: On eve of bankruptcy, US firms shower executives with bonuses

#77

Post by bpodgursky » Sat, Jul 18, 2020, 2:23 AM UTC

lend000 wrote: post #27

While it looks immoral if you don't understand the mechanics, people are simply responding to incentives around bankruptcy laws. Nobody wants to try to turn around a bankrupt company at their old salary (with their old RSU's and options now worthless). The real question is, should Chapter 11's even be allowed for corporations (as opposed to Chapter 7)? Shareholders vote for these because they know that in a Chapter 7…

That's... insane.

The point of chapter 11 is that the company does NOT liquidate. Most employees DO NOT LOSE THEIR JOBS. Liquidating a functioning but indebted company destroys any remaining value (there is huge value in the structure of a business -- it's not the sum of inventory and real estate). And most importantly...

EVERY SINGLE EMPLOYEE LOSES THEIR JOB

There is absolutely no societal value in forcing companies to sell themselves off piece by piece, and sending every employee onto the street. Let the shareholders get wiped out. But don't force the company to fold and collapse unless it's unavoidable!

Re: On eve of bankruptcy, US firms shower executives with bonuses

#78

Post by sgt-serverless » Sat, Jul 18, 2020, 2:23 AM UTC

computerphage wrote: post #72

lend000 wrote: post #69

Earlier quoted context omitted.

>So they quit I doubt most of the executives see themselves as personally responsible for the financial situations of their companies, especially during an unprecedented global economic shutdown. Not because they are any different from you or me or any of these other self righteous commenters, but because they are the same. If American culture were more like ancient samurai culture, perhaps they could commit seppuku…

It wasn't unprecedented.

the pandemic may not have been, but the scale to which businesses were shutdown was.

Re: On eve of bankruptcy, US firms shower executives with bonuses

#79

Post by jbc1 » Sat, Jul 18, 2020, 2:34 AM UTC

ashtonkem wrote: post #67

JoeCortopassi wrote: post #44

Of course they do. How else do you get people to stick around on a sinking ship? You and I wouldn't stay out of some sense of altruism, why would they? Heck, tech companies have to vest stock options over 4 years because most people would take the money and run. What does everyone think happens when everybody quits because there's no reason to work there? The money is just returned to investors? Even if that's all yo…

I understand that that's what's necessary to keep executives around. What's less clear is whether this why everyone else, especially the shareholders, want the executives to stick around.

If I offer you a deal on a dice roll where if it lands on 1 through 5 you get $1000 but if it lands on 6 you get nothing, and to play you only need to put in $10, that's a fantastic deal for you and the profit maximising move is to play. If the die lands on 6, that doesn't stop it having been the right move on your part to have played.

Companies going bankrupt in extraordinary market circumstances doesn't mean they were mismanaged. Only that their 6 has come up.

Re: On eve of bankruptcy, US firms shower executives with bonuses

#80

Post by II2II » Sat, Jul 18, 2020, 2:34 AM UTC

lend000 wrote: post #27

While it looks immoral if you don't understand the mechanics, people are simply responding to incentives around bankruptcy laws. Nobody wants to try to turn around a bankrupt company at their old salary (with their old RSU's and options now worthless). The real question is, should Chapter 11's even be allowed for corporations (as opposed to Chapter 7)? Shareholders vote for these because they know that in a Chapter 7…

> Nobody wants to try to turn around a bankrupt company at their old salary (with their old RSU's and options now worthless).

Why not? These executives are paid considerably more than rank-and-file employees under normal circumstances, yet still manage to get bonuses when things turn sour. In contrast, that rank-and-file will be expected to take a pay cut, work more, or lose their livelihood. It flies in the face of the traditional reasons given for the high pay of executives: this has nothing to do with how much value any given person contributes, since everyone is expected to contribute more while a certain population is expected to receive a smaller share; this has nothing to do with the burden of risk, since the people taking the greater risk are the ones who are paid least (in terms of employees) or are taking the brunt of the losses (in terms of investors).

So yes, it is immoral.