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On eve of bankruptcy, US firms shower executives with bonuses

reuters.com

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

#121

Post by mostlyghostly »

jolux wrote: post #118
mostlyghostly wrote: post #116

Earlier quoted context omitted.

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.

Not everyone is equal in that analysis.

And in a financially constrained endgame, you have to make choices about who to keep and cut.

Cutting that senior sales executive will cost 20 other jobs due to lost business and downstream implications.

Cutting the factory worker costs zero other jobs.

The harsh reality is not everyone matters equally.

[and to be clear, I'm not talking about bullshit deals just because someone was "loyal" to the CEO. This is real talk, people who actually can deliver a path to group survival]

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

#122

Post by lend000 »

drewrv wrote: post #109
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…

It's possible to have an immoral result without any individual doing an egregiously immoral thing. In fact it seems like a lot of law and corporate structure encourages these situations. Some examples that come to mind are paying low level employees such that they need government assistance, or situations where a corporation can break a law and profit more than whatever fine they might receive. Corporations are legal…

> It's possible to have an immoral result without any individual doing an egregiously immoral thing.

I disagree. Better terms might be structural failure or misallocation of resources. Is death by aging immoral? No, it's just the consequences of many moving parts.

We should still improve the system where possible, but calling something like this immoral implies that a witch-hunt is in order.

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

#124

Post by JKCalhoun »

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…

> While it looks immoral if you don't understand the mechanics, people are simply responding to incentives around bankruptcy laws.

Still looks immoral.

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

#125

Post by avs733 »

mostlyghostly wrote: post #89
II2II wrote: post #80

Earlier quoted context omitted.

> 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…

I've actually helped manage a company in financial distress. Here's reality: - First, most executives have little impact on the specific event that put the firm under. (I was a senior marketing person; the building burned down. Fire safety was most assuredly NOT within my purview or even something I could ask about) - Running a business in financial distress basically sucks. Take your job and make it 10 X harder. You…

- First, most executives have little impact on success of a firm in the best of times

- Working for a business in financial distress basically sucks.

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

#126

Post by lend000 »

Apocryphon wrote: post #107
lend000 wrote: post #47

Earlier quoted context omitted.

Perhaps it would make more sense to you if the headline were phrased: "On eve of bankruptcy, US firms restore a fraction of executives' previous salaries with retention bonuses, now that their options and RSU's are worthless, which of course made up most of their salaries." But that doesn't sell clicks as well to people who already have their minds made up.

You're still not making sense. Why would these firms want to retain executives who drove them into bankruptcy in the first place?

There is a long thread here now that addresses all your questions, rebuttals, and subsequent rebuttals.

But fundamentally, you need to realize that if something is happening in a statistically significant way (like it is here with dozens of companies doing the same thing at the same time), there is likely an explanation in structural incentives.

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

#127

Post by Apocryphon »

lend000 wrote: post #126
Apocryphon wrote: post #107

Earlier quoted context omitted.

You're still not making sense. Why would these firms want to retain executives who drove them into bankruptcy in the first place?

There is a long thread here now that addresses all your questions, rebuttals, and subsequent rebuttals. But fundamentally, you need to realize that if something is happening in a statistically significant way (like it is here with dozens of companies doing the same thing at the same time), there is likely an explanation in structural incentives.

Structural incentives can be immoral. Remember subprime MBSes?

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

#128

Post by mostlyghostly »

avs733 wrote: post #125
mostlyghostly wrote: post #89

Earlier quoted context omitted.

I've actually helped manage a company in financial distress. Here's reality: - First, most executives have little impact on the specific event that put the firm under. (I was a senior marketing person; the building burned down. Fire safety was most assuredly NOT within my purview or even something I could ask about) - Running a business in financial distress basically sucks. Take your job and make it 10 X harder. You…

- First, most executives have little impact on success of a firm in the best of times - Working for a business in financial distress basically sucks.

Find better executives :)

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

#129

Post by jolux »

mostlyghostly wrote: post #121
jolux wrote: post #118

Earlier quoted context omitted.

>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.

Not everyone is equal in that analysis. And in a financially constrained endgame, you have to make choices about who to keep and cut. Cutting that senior sales executive will cost 20 other jobs due to lost business and downstream implications. Cutting the factory worker costs zero other jobs. The harsh reality is not everyone matters equally. [and to be clear, I'm not talking about bullshit deals just because someone…

All I'm saying is that it's bad if you cut those people and use it to give your execs a golden parachute instead of more runway for the people left over.

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

#130

Post by jolux »

mostlyghostly wrote: post #120
jolux wrote: post #117

Earlier quoted context omitted.

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 fact…

I guess the real answer here is I'm not cut out to be an exec and I don't understand the mindset of people who are because I'm fine getting payed $100k a year (modulo inflation) for the rest of my life and I've lived most of my career at $30k, and I would never fire anyone to increase my own salary. I would sooner go broke at a company I ran than hang people out to dry who depended on me for a livelihood.
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