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

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

#111

Post by ashtonkem » Sat, Jul 18, 2020, 4:36 AM UTC

jbc1 wrote: post #79

ashtonkem wrote: post #67

Earlier quoted context omitted.

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 w…

In principle I agree, in practice I'm less sure.

I agree that "well, you drew the short straw in getting a pandemic" is a fair reason to explain an executive's failure socially, but I've never known investors to be this kind and charitable. In my experience investors want to extract value right now, and they're more than happy to chuck executives away if they think someone else could do better no matter what the underlying cause was.

Secondly, while this behavior is galling in the current context, it's hardly new. The 2005 law banning executive bonuses during bankruptcy wouldn't be put in place if it wasn't already a problem. Under the general case you laid out above, investors appear happy to hand out bonuses for executives that crashed the company after rolling a 3.

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

#112

Post by R0b0t1 » Sat, Jul 18, 2020, 4:36 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…

You're assuming an uncaptured market which doesn't seem sound. You can definitely find insular peer circles in C-level exec positions.

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

#113

Post by R0b0t1 » Sat, Jul 18, 2020, 4:38 AM UTC

mcrae wrote: post #75

daniel-cussen wrote: post #65

Earlier quoted context omitted.

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 thre…

He's arguing the support is nonsensical considering the facts. That you disagree is your opinion.

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

#114

Post by [deleted] » Sat, Jul 18, 2020, 4:38 AM UTC

gethoht wrote: post #88

lend000 wrote: post #83

Earlier quoted context omitted.

> So yes, it is immoral. Who did the immoral thing here? The executives don't set their own pay, and didn't necessarily ask for a bonus. What, you would decline the bonus and step down to restore your honor in their position? Doubtful. Meanwhile, the shareholders are giving bonuses which likely result in lower overall comps for these executives, after taking into account that the RSU's and options in their comp packa…

They don't set their own pay. It's set by board members that are probably executives in other companies. The C level engineered an entire system where it's impossible for them to lose.

[deleted]

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

#115

Post by mirimir » Sat, Jul 18, 2020, 4:39 AM UTC

User23 wrote: post #87

lend000 wrote: post #83

Earlier quoted context omitted.

> So yes, it is immoral. Who did the immoral thing here? The executives don't set their own pay, and didn't necessarily ask for a bonus. What, you would decline the bonus and step down to restore your honor in their position? Doubtful. Meanwhile, the shareholders are giving bonuses which likely result in lower overall comps for these executives, after taking into account that the RSU's and options in their comp packa…

While technically the board of directors sets executive compensation, one must remember that those board members are largely executives at other companies and the executives are often board members elsewhere. So in practice it’s a circlejerk and executives do set their own compensation via implicit quid pro quo. Also, you appear to be confusing morality with legality. Screwing over line employees up to and including…

Exactly. In other contexts, however, we'd call that a conspiracy. So why don't we here?

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

#116

Post by mostlyghostly » Sat, Jul 18, 2020, 4:41 AM UTC

jolux wrote: post #108

mostlyghostly wrote: post #106

Earlier quoted context omitted.

"very few businesses are the product of a small subset of its people" Hate to break it to you but that is EXACTLY what is going on here. Some people have EXPONENTIALLY more impact on saving a business than everyone else in the building. Real world examples: - Two sales people who knew every high profit customer in our local market, which was the core of our turnaround plan - My product engineer, with "the specs in he…

I mean yeah but at this point you are basically admitting that keeping the company alive is more important to you than treating your employees equitably. Entirely possible for others to disagree with that stance, though your position does make sense if you take it.

Eh, you're not getting just how deep in the shit we were.

Sometimes you can't give everyone a pony.

There simply wasn't any money. That's the essence of running in financial distress. No banks, no loans, insurance support payments got swiped by other people we owed money to... You're running on the cash in the till.

We started with 500 jobs, most of which were union gigs with benefits. About 50 were still with us a week later, when this brutal end game went into full effect.

The cost of failure for this nasty little endgame for the 50 survivors, the quest for a sustainable business? We were an older union workforce, operating in an area with young non-union shops with sketchy labor policies. Our local employees were getting offers for $12 / hour with no benefits. Or a 40%+ drop in compensation for office staff due to age discrimination.

That's the difference between retiring for a nice middle class lifestyle and eating cat food for your golden years. Fifty lives fucked up, for loyal company soldiers.

So yeah, I wanted to keep the company alive to save jobs.

I'm a high end mercenary; I had an offer within a week of formally rolling off the program and plenty of consulting work to tide me over. My only prize here was moral satisfaction.

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

#117

Post by jolux » Sat, Jul 18, 2020, 4:47 AM UTC

ajzinsbwbs wrote: post #110

jolux wrote: post #108

Earlier quoted context omitted.

I mean yeah but at this point you are basically admitting that keeping the company alive is more important to you than treating your employees equitably. Entirely possible for others to disagree with that stance, though your position does make sense if you take it.

I don’t understand what you are proposing as an alternative. If the company dies who is going to take care of the employees? Lay off everyone because it would be wrong to only save some? If everyone makes that noble choice all we get to show for it is a depression.

If you can't keep everyone on in the first place it's pretty ugly to give the people at the top bonuses, they have less to lose from losing their job in the first place.

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

#118

Post by jolux » Sat, Jul 18, 2020, 4:49 AM UTC

mostlyghostly wrote: post #116

jolux wrote: post #108

Earlier quoted context omitted.

I mean yeah but at this point you are basically admitting that keeping the company alive is more important to you than treating your employees equitably. Entirely possible for others to disagree with that stance, though your position does make sense if you take it.

Eh, you're not getting just how deep in the shit we were. Sometimes you can't give everyone a pony. There simply wasn't any money. That's the essence of running in financial distress. No banks, no loans, insurance support payments got swiped by other people we owed money to... You're running on the cash in the till. We started with 500 jobs, most of which were union gigs with benefits. About 50 were still with us a w…

>Sometimes you can't give everyone a pony.

I'm not suggesting you can, I'm suggesting it's bad to give some people the boot and others a pony in the hope of saving an abstraction. The company doesn't exist outside of the people whose livelihoods it sustains.

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

#119

Post by cinquemb » Sat, Jul 18, 2020, 4:56 AM UTC

jolux wrote: post #117

ajzinsbwbs wrote: post #110

Earlier quoted context omitted.

I don’t understand what you are proposing as an alternative. If the company dies who is going to take care of the employees? Lay off everyone because it would be wrong to only save some? If everyone makes that noble choice all we get to show for it is a depression.

If you can't keep everyone on in the first place it's pretty ugly to give the people at the top bonuses, they have less to lose from losing their job in the first place.

And they also have less incentive to stay because these are supposedly people who could provide the same work for other companies in similar situations at the same or higher prices. I find myself in this situation right now: ill stay on at higher prices if the company wants to renew its contract, or i'll leave for another place (I have more people emailing me for work than I have before the pandemic and I'm not on any social media and don't have a personal website).

In an environment where businesses have been operating on massive leverage for years, there's a fight brewing over who is going to get cash-flows and who will not, this obviously extends to workers who have outsized impact on whether any given business will stay open or file chapter 7/11.

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

#120

Post by mostlyghostly » Sat, Jul 18, 2020, 4:58 AM UTC

jolux wrote: post #117

ajzinsbwbs wrote: post #110

Earlier quoted context omitted.

I don’t understand what you are proposing as an alternative. If the company dies who is going to take care of the employees? Lay off everyone because it would be wrong to only save some? If everyone makes that noble choice all we get to show for it is a depression.

If you can't keep everyone on in the first place it's pretty ugly to give the people at the top bonuses, they have less to lose from losing their job in the first place.

I'm keenly aware of the disparity. However...

- If we do not keep the highly paid senior sales rep, we're going to have no customers and thus... everyone gets canned. - They are objectively better off leaving for another firm, where they don't need to worry about impending doom. So we need to provide an appropriate incentive to prevent them from breaking ranks and screwing everyone else left behind. - The humble factory worker or customer service person doesn't have that same kind of impact on the whole....

Any moral conversation ultimately becomes a discussion about why someone with objectively better and safer options should continue to work for a company that is paying them less than market. Unless everyone else is willing to work for reduced salary / benefits and promise not to quit, that's not a morally tenable position....

Personally, I'd love it if people acted for the greater good. That's not going to happen here, unless you want to restrict people from changing employers and force them to show up to work...