Forgot your password?
typodupeerror
Sun Microsystems Oracle The Almighty Buck

A Reflection On Sun Executive Payouts For Failure 316

Posted by ScuttleMonkey
from the lavishly-rewarded-for-failure dept.
With the Oracle/Sun merger finally completing at the end of January, one former Sun worker has taken the time to reflect a bit on the extravagant compensation and golden parachutes that the former executives at Sun are receiving for failing at their jobs. "I think it's fair to say that, for all the miscues that eventually led to its demise, the company created many products and technologies of value along the way, enough so that Oracle thought it was worth it to acquire them and try to keep them going. However, I think that it's equally fair to conclude that, after years of running losses, including about $2 billion in fiscal 2009, so that a buyout was necessary to avoid looming bankruptcy, Sun's executives did nothing to deserve lavish rewards, by any conceivable meaning of the word 'deserve.' But what actually happened is by now a familiar story. [...] And here's a prediction that I feel quite certain of: if, against expectations and my hopes, Ellison drops the ball and things start going south for Oracle, it's the employees who will suffer for it, and he'll be doing just fine."
This discussion has been archived. No new comments can be posted.

A Reflection On Sun Executive Payouts For Failure

Comments Filter:
  • by cohensh (1358679) on Monday February 08, 2010 @04:08PM (#31064134)
    If only they would have gone on Undercover Boss. All would have been solved.
  • by Fallen Kell (165468) on Monday February 08, 2010 @04:10PM (#31064164)
    As almost always in big business, those in control will make sure that their personal interests are met, even at the expense of the company as a whole. It is more important that the board makes sure they all get several million payout should the company fall apart.
    • by eln (21727) on Monday February 08, 2010 @04:19PM (#31064288) Homepage
      While there's no doubt golden parachutes in contracts are often excessive, in this case (from a quick scan of the article), the bulk of the compensation these guys received are from the buyout of the stock. They owned lots of stock (due to stock grants and options from the company, most likely), and so they get a big payout when Oracle buys all of that stock. Yes, they got a straight cash parachute too, but the bulk seems to be from stock.

      So, isn't the fact that they owned a lot of stock in the company, and thus their personal fortunes were tied directly to the company's performance, a good thing? We can argue all day as to whether or not their compensation in general was excessive (and it probably was), but it seems to me the fact that most of their golden parachute was due to the buyout of stock they already owned is a good thing.
      • So, isn't the fact that they owned a lot of stock in the company, and thus their personal fortunes were tied directly to the company's performance, a good thing

        I'm going to do something unheard of on Slashdot and give a reasonable answer to a reasonable question: you mentioned in the first paragraph the subtle flaw in this argument: "They owned lots of stock (due to stock grants and options from the company, most likely)". In other words, they were given this stock (I don't think executives get options
      • by bennomatic (691188) on Monday February 08, 2010 @05:29PM (#31065326) Homepage
        Good point, although there are mechanisms which allow for transactions like this to end up similar to handing over a jacket for general shareholders to divvy up while a company's executive team walks away with millions for what are nominally the same stocks.

        One of my own personal lessons: when WaMu was in the dumper, I bought a few hundred shares of their stock, feeling quite certain that they would be purchased by one of the more solvent banks, and at the worst, my stocks would retain their value in a trade for the new parent company's.

        I was half-right. Chase bought WaMu, paid off their executives handsomely (one guy who'd been there three weeks got $18M), and then somehow said, "We're buying all the assets, but not the liabilities." The stock that was held by John Q. Public (i.e. me) was associated with the organization which retained all the liabilities, and is now worth just a few pennies. I would offload it, but the cost of the transaction ($9.99) would eclipse the value of my WaMu stock.

        So it's all well and good to say that execs' fortunes are tied to those of their companies, but as it turns out, even that is not entirely true. There's always a way to game the system, and unless you're in the board room when it happens, there are very few protections out there.

        The cost of the lesson to me? $600.00. Luckily, I could afford it. On the flip side, my grandfather was heavily invested in Enron based on his retirement fund manager's advice, and when they went down, he lost a thousand times that while their execs walked away richer than Croesus.
        • Re: (Score:3, Informative)

          by bennomatic (691188)
          Oh, and a further note: while my grandfather is doing OK with his social security and some help from the family, that Enron loss represented the majority of what he'd saved from the time he started his first business, an upholsterer at age 14 living on his own in Chicago, until he finally sold his business at the age of 85.

          Foolhardy, yes. Wealthy enough not to miss $600K? Hell no.
        • by Estanislao Martínez (203477) on Monday February 08, 2010 @06:58PM (#31066634) Homepage

          I was half-right. Chase bought WaMu, paid off their executives handsomely (one guy who'd been there three weeks got $18M), and then somehow said, "We're buying all the assets, but not the liabilities."

          All three parts of your claim there are wrong, which makes you completely wrong, not "half-right." From : [wikipedia.org]

          "On September 25, 2008, the United States Office of Thrift Supervision (OTS) seized Washington Mutual Bank from Washington Mutual, Inc. and placed it into the receivership of the Federal Deposit Insurance Corporation (FDIC). The OTS took the action due to the withdrawal of $16.4 billion in deposits, during a 10-day bank run (amounting to 9% of the deposits it had held on June 30, 2008). The FDIC sold the banking subsidiaries (minus unsecured debt or equity claims) to JPMorgan Chase for $1.9 billion, which reopened the bank's offices the next day as JPMorgan Chase branches. The holding company, Washington Mutual, Inc. was left with $33 billion assets, and $8 billion debt, after being stripped of its banking subsidiary by the FDIC. The next day, September 26, Washington Mutual, Inc. filed for Chapter 11 voluntary bankruptcy in Delaware, where it is incorporated."

          To understand that passage, it's important to know that publically-owned banks in the USA are structured as a public holding company, which privately owns a bank. This is important because what you bought was shares of Washington Mutual Inc. (let's call it WMI), the holding company for Washington Mutual Bank (WMB). WMB failed, so the OTS seized it away from WMI and gave it to the FDIC, which then disposes of the assets and liabilities of WMB in order to make insured deposits and secured debtholders whole. At that point, WMI is bankrupt, so your stock investment is not really worth nothing anymore.

          But the more important thing to note is that Chase didn't buy WMI from the shareholders; they bought from FDIC the WMB assets and obligations that the FDIC was on the hook for.

          You're also wrong about the "buying all the assets, but not the liabilities part." From the FDIC statement on the closure [fdic.gov]:

          "Subsequent to the closure, JPMorgan Chase acquired the assets and most of the liabilities, including covered bonds and other secured debt, of Washington Mutual Bank from the FDIC as Receiver for Washington Mutual Bank. Any claims by equity, subordinated and senior unsecured debt holders were not acquired." [my emphasis]

          This is a standard FDIC bank closure; the FDIC takes care of insured deposits and secured debt of the banks it takes over, and only if there's anything left over from the bank's assets, then unsecured creditors and shareholders get some (in that order). Chase bought the WMB's assets and all the liabilities that the FDIC is on the hook for. The liabilities that Chase didn't get are the ones that the FDIC doesn't normally cover. So basically, the folks who are owed those debts were wiped out by the FDIC takeover, not by the sale to Chase.

          And thirdly, the WaMu executives that you claim got paid off handsomely were not paid by Chase. They were paid by WMI, the holding company that went bankrupt. Though the $17.5 million guy actually declined it:

          "Chief executive Alan H. Fishman was flying from New York to Seattle on the day the bank was closed, and eventually received a $7.5 million sign-on bonus and cash severance of $11.6 million (which he declined) after being CEO for 17 days."

          So basically, you made a bet on a bank that was about to fail, without understanding even a single iota of what happens when banks fail, and then you failed to learn how your investment failed. I can certainly understand and sympathize the part about making the bet on something you don't understand, if you hedge your bet accordingly (which you certainly seem to have done). What I can't understand is your inability or refusal to actually learn how your investment failed.

    • by reporter (666905) on Monday February 08, 2010 @05:05PM (#31064966) Homepage
      With regards to highly compensated senior management, American companies are relatively unique. Among Japan, Europe, and the USA, the ranking from highest relative compensation for the CEO to lowest relative compensation is the following.

      1. USA

      2. Europe

      3. Japan

      Here, "relative" means dividing (1) the annual income of the chief executive officer by (2) the average annual income of the employees who are not part of the management structure.

      Table 2 on page 6 of an interesting document analyzing the financial compensation of American CEOs [americanprogress.org] is instructive. For the sake of this discussion, we can reasonably assume that figure in the aformentioned category #2 is approximately the same throughout the West.

      Table 2 then, in effect, gives us the relative compensation of the CEOs in the West. The typical American CEO in 2003 received annual compensation that is worth $2.2 million. The typical European CEO received $700,000. The typical Japanese CEO received $460,000.

      Was the American CEO worth his pay? American neoconservatives answer, "Yes." They say that such compensation enables American companies to be top-notch competitors in high-technology.

      On 2009 November 5, "The Economist" issued a startling report [economist.com]. It asserts, with plenty of evidence, that Japanese companies are the sole manufacturers of numerous components that are critical to the operation of high-technology devices ranging from tiny disk drives to huge nuclear reactors.

      So, who is telling the truth? American neoconservatives or the "The Economist"?

  • thnx, but no thnx. (Score:4, Insightful)

    by polar red (215081) on Monday February 08, 2010 @04:12PM (#31064202)

    The system will regulate itself? HAH! yeah, keep voting for the big bucks ...

    • The system will regulate itself? HAH! yeah, keep voting for the big bucks...

      And you propose what exactly as an alternative? Shall the government, on your behalf, intervene with coercive force to appropriate the private property of Sun and Oracle shareholders? Did Sun or Oracle receive taxpayer bailout money? What gives you the right to insert yourself into a transaction between two private third parties? You may not like what Ellison has done after the acquisition, but it was his perfect right as the new owner to do it.

  • by fuzzyfuzzyfungus (1223518) on Monday February 08, 2010 @04:13PM (#31064212) Journal
    I thought you could.
  • by fahrbot-bot (874524) on Monday February 08, 2010 @04:14PM (#31064222)

    Sun's executives did nothing to deserve lavish rewards, by any conceivable meaning of the word "deserve".

    Don't worry, I'm sure they'll do better at their new jobs with Goldman Sachs, J.P. Morgan Chase, AIG, ... (sigh)

  • How Companies Work (Score:5, Insightful)

    by Bruce Perens (3872) * <bruce@perens.com> on Monday February 08, 2010 @04:15PM (#31064224) Homepage Journal

    How Companies Work

    There are a few top managers, and they run the company for their own interests. If they have stockholders, they have to make some pretense that they are working for the stockholders, but look how much stock _they_ are getting out of the company. Sometimes they collect a $1/year salary to look good, while they get many Millions of dollars in stock per year. Rarely do people at this level work for anyone but themselves.

    Then there are a number of second-tier managers, whose goal is to make the most out of the company that they can, or to make it to that top level so that they can run the company for their own interest. Sometimes people at this level have other motivations.

    Then there are lots of other people. Often these people haven't even thought very deeply about what their motivations are. They are essentially treated as work-units which keep the company operating, but they are as expendible as a server in a rack. Fortunately, companies do need their talents, at least for now.

    Then there are the small stockholders. They cross their fingers and hope the managers will do a good job for them, but they really do not have any power to influence the company.

    Then there is the government. The government's job is to protect little guys with no power (the general population) from big guys with lots of power. But unfortunately the big guys essentially own the government, because of the fact that they pay for political campaigns and in other ways influence politicians, and because they are gate-keepers on jobs for voters.

    All of this motivated self-interest is supposed to result in a good working system for the general population. It doesn't work terribly well. However, there are many other systems that work even worse, so people are reluctant to change it. Also, the average person can not be bothered to concern himself enough so that in the aggregate with other people that person can effect change.

    • Re: (Score:2, Offtopic)

      by TooMuchToDo (882796)
      +1, Owes Bruce a Beer
    • by castironpigeon (1056188) on Monday February 08, 2010 @04:27PM (#31064402)

      the average person can not be bothered to concern himself enough so that in the aggregate with other people that person can effect change.

      This is because the average person probably isn't thinking much farther ahead than what he'll have for lunch tomorrow. By the time he realizes he won't have anything for lunch tomorrow he's no longer in a position to do anything about it.

      • Re: (Score:3, Insightful)

        by Rary (566291)

        the average person can not be bothered to concern himself enough so that in the aggregate with other people that person can effect change.

        This is because the average person probably isn't thinking much farther ahead than what he'll have for lunch tomorrow. By the time he realizes he won't have anything for lunch tomorrow he's no longer in a position to do anything about it.

        And those who are thinking beyond tomorrow's lunch are often deluded into believing that through sheer hard work and determination they can one day be at the top of this pile.

      • Lunch tomorrow... (Score:3, Insightful)

        by gillbates (106458)

        And if he's a manager, he'll steal your lunch and blame it on the bad economy.

    • by nedlohs (1335013) on Monday February 08, 2010 @04:28PM (#31064424)

      If those top managers are being paid in stock instead of in dollars, then clearly they are stockholders and hence their interests are one and the same as the stockholders. Which is the entire idea behind such compensation schemes.

      The real issue is that the stockholders are getting exactly what the want. Short term performance, and who cares about the long term. Since most of the shares are owned by mutual funds and so on and what they care about is how they did on last quarter's performance numbers.

      That the company will go broke in 5 years is irrelevant, they just want to perform better than their competitors this quarter. And since they make up the bulk of the owners that's how it is supposed to work.

      If the owners cared about long term performance they would structure compensation schemes to reflect that - mind you that is easier said than done. Short term stock price incentives, however, are just about the worst way possible to do that.

      • by Bruce Perens (3872) * <bruce@perens.com> on Monday February 08, 2010 @04:35PM (#31064510) Homepage Journal

        If those top managers are being paid in stock instead of in dollars, then clearly they are stockholders and hence their interests are one and the same as the stockholders. Which is the entire idea behind such compensation schemes.

        Well, sometimes. In this particular case, the Golden Parachute was constructed purportedly to make a hostile take-over unattractive. Otherwise, perhaps Carl Ichan might have owned Sun before now. But it is not at all in the stockholders interest at this point.

        We also have cases in which the managers receive different classes of stock from others. This seems to have been the case, for example, in the recent acquisition of Monta Vista, a former embedded Linux companies. The employees are said to have gotten $0 for employee stock, but some tiers of preferred stock took real money out of the company, as did the managers.

        • Oops. I forgot to mention stock dilution. Another big way to work against the stockholders with stock.
          • by nedlohs (1335013)

            No different than paying them in cash. It's compensation, something has to be transferred from the company (i.e. the stockholders) to the guy being paid.

            If it's cash then the company has less cash on the books and has more expenses (and hence less profit) which should reduce what it is worth and hence the share price. If it's shares then the share price will be reduced by dilution for the same end result.

    • Re: (Score:3, Interesting)

      by godrik (1287354)

      I am pleased to see I am not the only one to think that our (I should emphasize I am european) system suck so much; but so much less than the other one we know of.

    • by Publikwerks (885730) on Monday February 08, 2010 @04:38PM (#31064550)
      I disagree with the form/function of the Government. I think it follows exactly the same for as a corporation. As the stakeholders, politicians have to pretend to be working for us. But they are just like the two tiers of managers. They are always looking out for themselves and looking to advance to the next level.
      Tell me the last time a politician voted on something they saw as political suicide?
      And as for the motivations of us little people, I think a more accurate description is that we are too busy avoiding getting crushed by corporations and the government to act proactively for change most of the time. Besides, if we had the power to control our own fate, we would just give it back as we are too short sighted to handle it
      • One man, one vote. Larry Ellison is the man, and he's got the vote.

        We are all slaves to the vote.

      • Re: (Score:3, Interesting)

        by hackingbear (988354)

        Selfishness is the most important natural characteristics of all lives -- from virus and bacteria to human beings -- that's why they compete and evolve. Even though they may act cooperatively sometimes but ultimately they are striking for their own interest. You can blame God or natural selection, depending whichever you believe.

        There is no known system that can effective suppress selfishness. Communism tried that but resulting in power concentrated in a handful of dictators while rest of the people refuse

    • Thanks Bruce. Now I'm suicidally depressed...

    • I'm a peon, and I'm trying to get the most out of the company for my own benefit too.

  • Missing the point. (Score:2, Informative)

    by sunking2 (521698)
    Let's compare the total money he has been paid in 20+ years to the total salary that Sun has paid out to all it's employees and shareholder dividends before you decide the compensation is lop sided. Say what you want, this article is sour grapes.
    • by tthomas48 (180798)

      Sure, I'll do that if you can explain how he's doing the work of 1000 employees.

      • by sunking2 (521698)
        Explain to me how many of said 1000 employees have created a company that employs thousands. Say what you want about CEOs stepping into a job that already existed, this is not the case here. Because of this guy 1000s of jobs and probably $ billions have been paid out to employees in salary. Yes people are losing their jobs, and that sucks. But there are a hell of a lot more people who retired and are doing so happily after working at Sun for a good chunk of their careers.
    • by Romancer (19668)

      So why don't the other employes that are actually making the company better by designing products, manufacturing them, marketing them and selling them get anywhere near the salary that this guy gets? Compare the total salary of one person in product design that launched a family of products that nets the company millions. That's actual work. Even the guys manager that helped get the team together and "optomized workflow" had more of a hand in the company being productive and profitable than this yahoo so fa

  • 1. Develop great products.
    2. Run company into ground.
    3. ???
    4. Profit w/golden parachute.

    This seems to be a very successful formula for many executives over the last decade. Not that society benefits from all this "creative destruction" to enrich a few people.
    • Develop great products

      Where's the great product?

      * Java isn't a product, because its free.

      * Solaris lost the unix mindshare ware to Linux.

      * The side effect of AMD's 64 bit Opteron lunge at Intel was to make every computer 64 bit RISC workstations, so now SPARC is kinda pointless.

      * For personal computer, Apple has elegant worskstations down to a science

      Bottom line is, computing is a volume business, not a high end one, and Sun was focused on the wrong end of the scale.

      Franky, if I was a shareholder of Oracle,

      • by creimer (824291)
        Step 1 refers to days when Oracle was king, where engineers wanted a SPARC workstation rather than an underpowered Intel box running Windows NT. Step 2 is what you're referring too. Sun has executed poorly in recent years when entire markets were changing.
    • by _Sprocket_ (42527)

      This seems to be a very successful formula for many executives over the last decade. Not that society benefits from all this "creative destruction" to enrich a few people.

      But to be fair - isn't this the real story of Silicon Valley? It seems there's always a failing company that was the new, disruptive company not long before that. Of course, most companies never get to be the new success. And a very few companies survive success.

      Heck - a company could be doing everything it was doing during it's halcyon days and yet still go out of business because of other influences in the industry around it. In short, it doesn't have to be YOU driving the company in to the ground. O

  • by elrous0 (869638) * on Monday February 08, 2010 @04:20PM (#31064294)
    ...But if we hadn't paid them a competitive salary we might have lost them.
  • And this seems like another example of employee theft.

    The only difference between employees in upper management and all the other employees is the scale of the looting.

    Why do shareholders tolerate this?

  • by stokessd (89903) on Monday February 08, 2010 @04:24PM (#31064358) Homepage

    I loved my sparc 1+ with the funky ruled reflective mouse pad, and the quirky SunOS. For some reason I always wanted pizza for lunch after working on it all morning. Ahh those were the good days, oh mosiac how we used you to find things in the larval days of the web.

    Linux really ate Sun's lunch. All the reasons to own a Sun largely evaporated with Linux. I say that as a researcher and end user, not a data center wienie. As soon as linux and commodity hardware got good enough, it was all over for Sun. I really feel bad (and old) but frankly I'm surprised that they lasted this long.

    Sheldon

    • by Bruce Perens (3872) * <bruce@perens.com> on Monday February 08, 2010 @04:28PM (#31064430) Homepage Journal
      Beige boxes with tiny margins ate Sun's lunch, once they could run any reasonable operating system, or even an unreasonable one. Remember when so many people thought the future would be Windows and that Unix was dying? That was so depressing that we had to fix it by ourselves. But the beige boxes would have taken over either way.
      • As opposed to beige boxes with little purple accents :D

        They really charged too much for SPARC and hung onto it too long. By the time they diversified with the x86_64 hardware and such it was too late - IBM had eaten the higher end market, but Linux and Windows had eaten the lower end.

        That, and many people truly despise Solaris.

      • Beige boxes with tiny margins ate Sun's lunch, once they could run any reasonable operating system, or even an unreasonable one. Remember when so many people thought the future would be Windows and that Unix was dying? That was so depressing that we had to fix it by ourselves. But the beige boxes would have taken over either way.

        I'm pretty sure - well, it's obvious really - that a change in direction would have changed their fortunes, but it would have had to have happened a fair way upstream.

        Sun was focused on two things - product and services. For product they had SunOS and the E-series high performance servers. SunOS was indeed punished by Linux (it's very difficult to compete with "free") and the E-series were something of a dead end. Yes, they were putting money into refining it but they were basically acquired Cray derivat

      • Re: (Score:3, Interesting)

        by logicassasin (318009)

        Very true, though Windows did pretty much kill one Unix vendor: SGI. I remember looking at 3D Artist and other CGI-focused magazine back in 1997, dreaming of the day I could own an SGI box, only to see the rather rapid rise of NT4 and Pentium II based machines equipped with an Evans and Sutherland, 3DLabs, or Integraph 3D card take over in this space. Eventually, it took over completely and nowadays pretty much any run-of-the-mill PC with a Geforce or Radeon in it can handle fairly complex animation that, y

  • by Anonymous Coward on Monday February 08, 2010 @04:26PM (#31064388)

    In the introduction I referred to what I call the "Reaganist dogma" of the free market, my description of what a Republican might refer to as "capitalism" as opposed to "socialism".

    Reagan got that from the economists. He didn't think that up himself. That's one of the incorrect assumptions economists use in their models and theories - free markets always work and that the market is rational.

    Free markets work only within a narrow range of economic activity. If they exceed those ranges then you get bubbles and collapses. That's why the Fed was created to try to eliminate those things. Of course, if you get a Randian dogmatic believer in the free markets of a Fed Chairman (Greenspan), then you end up with serial bubbles: stock market and real estate.

    There's a few other blanket assumptions that economists make that are horribly incorrect in the real World, but I'll save those for another time.

    Oh, and economists need to get over their physics envy. They develop these impressive mathematical models and everything but the underlying assumptions are incorrect. As in this example, the assumption is that markets are rational. As we have seen, they are hardly rational.

    Reading assignment: rational irrationality.

    Oh, OK the last thing: the behavioral economists are redeeming the whole "profession"! :-P

    • What'd you do, take an introductory economics course and decide to give us your critical analysis of the entire field? I think most economists realize that markets are inefficient and economic actors aren't perfectly rational.

      Go study econometrics for awhile and then get back to me and tell me that the mathematical models are useless, or that it's not really a profession. Predicting the price changes of commodities is an incredibly valuable skill that companies will pay out large salaries for.

  • This is hardly specific to Sun. Somewhere over the past 30 years the notion of a bonus has changed from being a reward for a job well done to being an entitlement - a basic part of the compensation package.

    Or rather, that notion has changed among the executive class. Ordinary working stiffs weren't informed, which is why they are outraged at bonuses for failure.

  • Shocking (Score:3, Informative)

    by whisper_jeff (680366) on Monday February 08, 2010 @04:30PM (#31064446)

    ...if Ellison drops the ball and things start going south for Oracle, it's the employees who will suffer for it, and he'll be doing just fine.

    Welcome to the real world. This is the way of things. Get used to it because it's never going to change.

  • the serfs may starve, but the lords still get their due.

  • At that level... (Score:4, Insightful)

    by straponego (521991) on Monday February 08, 2010 @04:40PM (#31064572)
    Success or failure is irrelevant. It's a buddy network, and these guys have no interest whatsoever in the long-term well-being of their companies. They'll get top executive positions elsewhere if they want it. They'll make some big, short-term changes when they hop on-- layoffs are great for their bonuses, the bonuses are all about short term profits-- trash the company, and move on. It's a grifter aristocracy.

    Look at execs from AOL, Yahoo, now Sun... hell, Carly Fiorina is running a campaign to do to California what she did to HP. Ask anybody who worked at HP while she was there, or any stockholder, how that works out. At least the citizens of California will have some say over whether she is taken on. Hard to believe such a tech-savvy state would fall for her, but...

    And Sun execs. Oh ho, they're brilliant. "We hate Linux! We're doing Solaris x86! Linux rules! We're cancelling Solaris x86! Linux is GARBAGE! We're the biggest Linux providers in the world! No, wait: screw those customers. Oh hey, we have Solaris x86! I mean Linux! I mean OpenSolaris! Okay, now it's really open! It runs all that great OSS stuff without that horrible Linux!"

    Yeah. They've done very well by themselves. And will continue to do so.
  • by John Hasler (414242) on Monday February 08, 2010 @04:42PM (#31064610) Homepage

    They are payouts as specified in the executives' employment contracts. Next time you hire executives try to negotiate better contracts.

    • by tjstork (137384)

      They are payouts as specified in the executives' employment contracts. Next time you hire executives try to negotiate better contracts.

      Our socialist friends only believe in negotiations with a rifle.

    • by NormalVisual (565491) on Monday February 08, 2010 @05:43PM (#31065576)
      You say that as if the shareholders had any real way to influence those contracts. It seems with most public companies, the shareholders are expected to write checks, sit down, shut up, and passively accept everything the senior management team does.
  • Not very shocking (Score:5, Insightful)

    by Angst Badger (8636) on Monday February 08, 2010 @04:49PM (#31064680)

    Techies often have trouble understanding this, coming as they do from a very strongly meritocratic culture: the world at large is so far from being meritocratic that the sheer extent of its non-meritocracy strains the imagination. Professional academics often run into the same blank wall of incomprehension.

    By no means am I saying that this is a good thing, or even that it is strictly necessary (though that is certainly a possibility given primate psychology), but the fact remains that the normal means of acquiring wealth is by conniving, cheating, swindling, and deceiving to one degree or another. If wealth was awarded on the basis of hard work, knowledge, or creativity, then the world would be full of super-rich construction workers, mathematicians, and artists. Instead, it is awarded on the basis of how good you are at talking (or coercing) people into giving it to you. Period. Things like quality, reliability, creativity, and utility are, at most, means to an end, and are by no means indispensable, except perhaps as grist for motivational speeches given to the people who do the work by the people who receive the rewards.

    • Re: (Score:3, Interesting)

      Hence the deaths of DEC, SGI, the real HP, and many many others. CRAY is still barely holding on.

      I wonder when we'll see Apple and Motorola eventually walk this path?

  • Here is a theory (Score:5, Insightful)

    by mbone (558574) on Monday February 08, 2010 @04:49PM (#31064686)

    Here is a theory that I heard expressed by a C level corporate executive :

    The top people should be paid enough to make the people on the rung just below them green with envy, so that they will work their butts off to get to the top, and so on, proportionally, down the line. (In other words, the motivation is not greed, but envy.)

    I haven't heard this expressed much in public, but it explains the high payments and bonuses in bad times much better than the "we pay them for their successes" theory.

  • If you're feeling a need to point fingers, go look over at the shareholders. Sure, exec's basically set their own remuneration through undue influence over the "remuneration committee", but it gets approved by the shareholders.

    It's not going to stop until the broad body of shareholders as a whole start exercising their power. Not just at a few companies with good governance, but everywhere. Shareholders can't be left thinking that they have to turn a blind eye to absurd remuneration or they will simply go

  • by idiotnot (302133) <sean@757.org> on Monday February 08, 2010 @05:16PM (#31065130) Homepage Journal

    Golden parachutes aren't a Republican phenomena, and the Silicon Valley tech companies aren't exactly fertile ground for the GOP as far as fundraising goes.

    Nor is rewarding mediocrity limited to the upper-echelons of society (see: Detroit).

    What the author did get right is that the boards of directors make these decisions. In companies where a scant few hold lots of sway, they look out for themselves instead of the working minions. Think Carl Ichan ever got a raw deal on a company he came in and dismantled?

    The fixes are simple, but neither political party has the political will to do it. The tax reforms in 1986 allowed most of this, and it benefits wealthy interests (read: donors) on both sides of the aisle. Think Bear Stearns was a high-time GOP operation? How about Fannie and Freddie?

    1. Tax stock options as regular compensation, taxed at normal income tax rates. Tax it at the stock's full price on the day the option is exercised. If the option is never exercised, fine. The executive doesn't pay the tax.
    2. Place a time limit on option execution.
    3. Tax fringe benefits as compensation (hello, "Cadillac" health plans).
    4. Encourage firms to hire executives on fixed-term contracts with fixed compensation. Stop making compensation based on stock price performance.

    But it'll never happen. And, while I'm glad to see that they're taking notice, the stupid from dKos burns. It burns a lot.

  • by Doc Ruby (173196) on Monday February 08, 2010 @11:23PM (#31068416) Homepage Journal

    These execs aren't being paid because they failed. Their failures are now irrelevant, because they're leaving and the company is being changed by the new owner.

    They're being paid to leave. They have contracts and other leverage that could do damage to the new company if they didn't leave quietly. It's cheaper to pay them to leave than to let them stay, to fight them, or to let them do whatever they can do with their access or knowledge of the inner workings and the people who do stay.

    This is also the reason the bankers who crashed the economy are getting paid, though their failures were epic.

    You don't get paid for your work. You get paid for what it costs to get rid of you or to keep you, depending on what you do in return for getting paid.

  • by swordgeek (112599) on Monday February 08, 2010 @11:53PM (#31068558) Journal

    Jonathan made it clear well over a year before the Oracle offer was on the table that they were trying to find a buyer.

    Sun had, at one recent point, enough CASH RESERVES to take the company private again, and stayed public, aggressively driving the stock price lower and lower.

    This is a big success for the executives--they crushed Sun, forced an acquisition, and got richer. That was their goal, they succeeded, and should therefore get their money!

    So it goes.

Thus spake the master programmer: "After three days without programming, life becomes meaningless." -- Geoffrey James, "The Tao of Programming"

Working...