There are so many comments in this thread justifying this behavior. > The last thing you want is key employees jumping ship > Of course they do. How else do you get people to stick around on a sinking ship? > While it looks immoral if you don't understand the mechanics, people are simply responding to incentives around bankruptcy laws Do people really believe that the mechanics of bankruptcy laws, and the incentives…
No, they are not part of the natural order of the universe, but with respect, thinking about this in "ruling class" terms is completely wrong. Neither word "ruling" nor "class" means anything in modern Western society, and neither do the two of them together. Using inaccurate and imprecise language commits two sins- fails to communicate why things are and fails to elucidate how they might be changed. The word owner h…
On eve of bankruptcy, US firms shower executives with bonuses
291–300 of 306 posts
Re: On eve of bankruptcy, US firms shower executives with bonuses
#292Earlier quoted context omitted.
This is the Pareto Principle at work. 20% of the people involved in an enterprise produce 80% of the value. It’s not that you don’t need the other 80% of the people, it’s that it doesn’t matter who they are. If you remove the people in the high productivity group and replace them with people from the low productivity type then the organisation loses (roughly) 80% of its productivity. Replace people in the low product…
If it’s galling for the essential people to be paid more, what’s a fair compensation structure in your view?
Re: On eve of bankruptcy, US firms shower executives with bonuses
#293Earlier quoted context omitted.
This would cause unreal job losses. Why in the world would you burn down a house just because someone bought it at too high of a price and now can’t afford the mortgage? How is that societally beneficial?
On the other hand, it frees up resources and market share for companies that have better policies and are looking beyond a 30 day time frame. And it's not like the house would burn down. The assets wouldn't go poof, they'd be auctioned off. The employees will lose their jobs, but then again, a competitor will be hiring because they will have more business, unless there is no market for the offered product at all. And…
Re: On eve of bankruptcy, US firms shower executives with bonuses
#294Earlier quoted context omitted.
There is evidence in both directions, but the data isn't great, because one of the reasons that boards offer large bonuses is to attract 'talent' to troubled or stagnant companies (which don't look great on the resume). Jim Collins (author of "Good to Great") has made the case that other factors are much more important. The other thing to keep in mind is that the 'huge' bonuses usually aren't very large from an incom…
It is, however, very difficult to prove that it was the executive who actually got you that extra growth, since there's no control group and many variables. Executives will claim victory for any profits and blame outside factors for any losses, making it impossible to really know if a different candidate for half the salary would have done just as well.
Still a fuzzy measure, but it would at least give them better incentives.
Re: On eve of bankruptcy, US firms shower executives with bonuses
#295Earlier quoted context omitted.
No, they are not part of the natural order of the universe, but with respect, thinking about this in "ruling class" terms is completely wrong. Neither word "ruling" nor "class" means anything in modern Western society, and neither do the two of them together. Using inaccurate and imprecise language commits two sins- fails to communicate why things are and fails to elucidate how they might be changed. The word owner h…
You pedantic rant aside, you didn't actually explain your point. How does paying large bonuses to executives protect the interest of creditors? I'm no expert but this sounds like how a person declaring bankruptcy might max out their credit cards at the apple store then sell them off for cash on Craigslist. I.e. Draining the bank so it doesn't go to creditors. This same pool of money used for gratuitous bonuses could…
But to explain-
In fantasy world the money going to bonuses could go to severance, but in reality that is a misuse of cash, in some cases illegal.
The owners are the only ones entitled to the cash in the business, well, after creditors are repaid. Reducing the debt owed to creditors is the function of bankruptcy.
Workers are not owners and they definitely are not creditors. Giving them severance could in fact be considered stealing.
Putting cash into keeping operations going to service debt- THAT is how the owner/creditor dynamic plays out.
And key employees- managers- without whom the business crank does not turn- they become MORE valuable. Hence, bonuses.
Is this moral? No. It isn't. I never said it was.
But the way to make it moral isn't to rant- which I didn't do- and make use of undefinable and wrong/inapplicable terms like "ruling class".
Neither "ruling" nor "class" has anything to do with these dynamics.
There are a very precisely defined set of roles and relationships here, enshrined in law, going back to tradition, for thousands of years.
The way to make it moral is to understand what an owner is, what a creditor is, how the law works, and then to define what morality means.
Does it mean that workers become creditors, that labor creates a debt? That might be one avenue to explore, from a moral universe perspective. But changes to one role will change the other roles, and what one person considers moral, others may not.
My experience is that most people who make claims of immorality do not understand ownership, a foundation principle upon which nearly all societies that have practiced philosophy and have attempted to define morality have been based on.
Forgive me but you cannot talk intelligently about morality if you do not understand ownership.
That's my point.
Cheers, best wishes.
Re: On eve of bankruptcy, US firms shower executives with bonuses
#296Earlier quoted context omitted.
> 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) That's perhaps reasonable for you, but business succession planning and disaster contingency planning is the job of the board and executive team. They made a choice to discount th…
You're assuming: a) the risk can be neatly packaged and mitigated b) the cost of appropriately mitigating that risk wouldn't preclude running the business. Long tail risks exist in every business, that rare event that takes the whole thing down. There are tons of them. Each of which has a .00001% chance of happening. The consumer brand version of this having one of your employees say some stupid shit in at bar (on vi…
More to the point, you're in a dog eat dog world, and for most of those dogs this 0.00001% chance won't happen in the lifetime of the firm. So they don't spend money on mitigating it, which gives them a competitive advantage over every dog that does spend the money.
Spend money on enough 0.00001% things, and they will grind you into the dust. Locally the way out is legislation that evens that playing field by forcing everybody to spend that money. But you can't control low cost overseas producers in that way.
Nothing is as easy as it appears.
Re: On eve of bankruptcy, US firms shower executives with bonuses
#297Earlier quoted context omitted.
"You are under the impression that companies love throwing money at executives, but just like regular employees, companies only pay the minimum they NEED to pay them to keep them around." Only because we have a system where every company - you know, controlled by execs, and a board made up of execs or former execs from other companies - tell this tale. We have to stop pretending C-level and VP-level people are specia…
I don't think you understand how corporations work, fundamentally. The executives aren't the bosses - the shareholders are the bosses. They aren't idiots paying the CO's exorbitant amounts for fun. They do it because they have no other alternative.
The shareholders aren't the bosses, they're the audience.
Re: On eve of bankruptcy, US firms shower executives with bonuses
#298Earlier quoted context omitted.
I think this is your point but helping spell it out. The father in this case is probably the best shot at obtaining more food for the starving family and needs energy to do so.
you've made a lot of assumptions to reach that conclusion. for counterbalance, women burn less energy per mass on average and are less massive on average, which means they'd last longer in the search, raising the likelihood of finding food.
My assumption is men did more hunting and women gathering, and that in a starvation scenario, known gathering food sources would have been exhausted.
Sorry for any Paleolithic women I may have offended with my post!
Re: On eve of bankruptcy, US firms shower executives with bonuses
#299Earlier quoted context omitted.
This is patently false. 11s work. You know know how you can prove it? There’s less than a handful of chapter 22s (11, followed by an 11). Fundamentally it’s better for society for capital structure participants to get wiped out, including most non-wage perpetuation liabilities than for the company to just die. Greenspan wrote a sweeping history of American capitalism over 3 centuries (great book) and his belief was t…
You'll need a source for your aggressive claims -- these suggest that chapter 11 recidivism isn't that rare ("less than a handful" is patently false) [0][1]. And I wouldn't go so far as to abolish it, but to give debtors a stronger vote in the proceedings. Right now, the balance of power strongly favors shareholders, socializing the losses amongst creditors and prolonging the demise of companies that have no future (…
To your following point, that’s not how bankruptcy works. Creditors can credit bid, creditors can hand together and push a company into involuntary bankruptcy (not common), creditors have a tremendous amount of remedies whereas shareholders do not. It would be a super long discussion really chopping this up, as to why, however look up recovery rates for different assets and/or market prices for various liquid (aka tradeable) assets after a company files for bankruptcy. You will find the higher up the capital structure the security (aka secured debt, followed by unsecured debt, followed by equity) the higher the price/recovery/expected value.
The link you sent was interesting though. Thanks for sharing.
1. https://www.uscourts.gov/statistics-reports/us-bankruptcy-co... 2. https://www.google.com/amp/s/www.sissonlawoffice.com/blog/fi...
Quote: “ Radio Shack made the news in 2017 when it filed for Chapter 22. That second Chapter 11 came only two years after it underwent a restructuring in 2015. Instead of opting to continue the business, its owner, General Wireless Operations, chose to liquidate all the remaining retail outlets.” ....seems pretty rare to me.
Re: On eve of bankruptcy, US firms shower executives with bonuses
#300Earlier quoted context omitted.
This is patently false. 11s work. You know know how you can prove it? There’s less than a handful of chapter 22s (11, followed by an 11). Fundamentally it’s better for society for capital structure participants to get wiped out, including most non-wage perpetuation liabilities than for the company to just die. Greenspan wrote a sweeping history of American capitalism over 3 centuries (great book) and his belief was t…
American average wellbeing Does that mean if Americans are, on average, deeply unhappy and far less well off than the median, it's evidence that the capitalist system is failing? Because I have some news for you...