A Reflection On Sun Executive Payouts For Failure 316
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."
To quote Mel: "Its good to be the King" (Score:5, Interesting)
Re:To quote Mel: "Its good to be the King" (Score:5, Interesting)
Because when it's their *job* to look out for the interests of the employees and stockholders, and they instead look out for only their own interests, it becomes something completely different from self-preservation, motivation, or whatever you want to call it. It becomes greed. It is arguably theft. It is almost certainly evil. It is in no way, shape, or form a 'job well done'.
Ahh, the good old days... (Score:5, Interesting)
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
Re:How Companies Work (Score:4, Interesting)
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:How Companies Work (Score:3, Interesting)
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.
Re:How Companies Work (Score:5, Interesting)
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.
Re:How Companies Work (Score:4, Interesting)
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
Re:Link to DailyKos diatribe? (Score:5, Interesting)
What's wrong with DailyKos? Do they, you know, actually lie, or do they just say things you don't want to hear? If you think they lie, provide a documented example.
Re:Not very shocking (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?
Blah blah Kos blah blah (Score:5, Interesting)
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.
Re:Ahh, the good old days... (Score:3, Interesting)
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, years ago, REQUIRED SGI big iron to do.
Re:To quote Mel: "Its good to be the King" (Score:4, Interesting)
It's really more about the circle-jerk of top executives and boards of directors across multiple companies. If you subscribe to that approach, fine, but companies would be much stronger if they had people who didn't wish to game the system. Don't worry, those kind of people will be systematically locked out unless corporate laws change, so you still have a shot.
As far as top executives just doing the same thing as people throughout the company, why aren't other employees receiving a "tin parachute" that is proportional to their own contributions to the company? No, top executive benefits are not just different in degree but different in their fundamental nature as well.
Re:To quote Mel: "Its good to be the King" (Score:2, Interesting)
Then if that bothers you and the shareholders, then write it that way in the fscking contracts. You can't blame a person for trying for and taking the absolute best deal they can get. If I could catch a deal like this, I'd do it in a heartbeat and I doubt you'll find many humans out there that wouldn't accept a sweetheart deal like this in a second if it was offered to them.
If it bothers the people in charge of the company, then for goodness sake, tie their fiscal rewards directly to the company's success/failure.
But seriously, I cannot blame a person that convinces a company to give them a compensation contract that pays a shitload of money with no basis on measurable accomplishments. If someone offered me a job where I could get $15 million for basically just having my name on an office, showing up a few days a year for a year or two...please what do I have to do to be first in line?
Re:To quote Mel: "Its good to be the King" (Score:5, Interesting)
"Since many board members are senior executives at other firms and sit on each others boards, there really isn't much incentive for them to not grant large parachutes and such. It simply wouldn't be rational to potentially jeopardize their own upcoming reward."
So, why don't the stockholder vote these board members out?
Of course, that's the simplistic answer. Reality is, as usual, more complex. There are many mechanisms in place that stop or deflect shareholder revolt. Some of the mechanisms are used by the boards themselves - information suppression or obfuscation (how many small shareholders are knowledgeable enough to understand the employment contracts of a CEO?), misleading reports, bad decisions that satisfy groups of shareholders (like paying dividends at the wrong time), and others . Some are not, like the inherent inertia of most shareholders, and especially the fact that many of the largest shareholders in major companies are institutional: banks, mutual funds, pension funds, investment companies. The boards of THOSE shareholders are exactly the people the GP was talking about, and they won't vote to replace their country club colleagues.
Re:How Companies Work (Score:2, Interesting)
Re:How Companies Work (Score:3, Interesting)
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 refused to work. Socialism tries that, through high tax, but resulting in stagnant economy. Capitalism does not try to suppress but to take use of that; it works the best still, though often resulting in concentration of economy resources. If you can come up one with a perfect system, we will award you with a Nobel Prizes in Peace and Economy.
If you think the top level executives make too much, try to start you own company and see how hard it is to even make the minimal wage for yourself and how much you have to bet your life on it up front. Then if you do succeed, you will promptly become one of the selfish executives. If you ever try managing people, you can also see how selfish or lazy your employees can be, especially in the time of company crisis.
That's being the case for the last millions of years and may probably be true for the next 1000 years. Maybe until eventually human beings become pets of robots (who will then fight for their own intergalactic interests.)
Comment removed (Score:3, Interesting)
A heart-warming summary (Score:4, Interesting)
Oh, thank God and it's About Damn Time. Not only did someone post something like this, it got modded to "+5 Insightful."
Finally, please God, finally let the tide turn.
I was around in the late 70s/early 80s when Carl Icahn and T. Boone Pickens started their "Big Lie," that corporations and corporate leaders have no duty but to enrich themselves. When they first started crowing "maximize shareholder value, maximize shareholder value...," they got laughed out of the room. Of course corporations had responsibilities beyond the bottom line. The whole point of giving them tax breaks and the corporate veil against liability was because they promised to benefit society as a whole in their corporate charters.
The raiders refined their argument a bit and started arguing "Maximizing shareholder value benefits society most." (see Danny Devito in "Other People's Money" for a taste of it)
But then Ross Perot and his ilk got their hands around our schools, and a whole generation of kids came out moaning like zombies, "Corporations have no responsibility but to themselves, Corporations should only look to the bottom line..." I've been trapped in this farmhouse for 20 years now, nailing boards over the windows as fast as I can, screaming truth into the dark.
In exchange for the liability shields and massive tax considerations they are given, every corporation ever formed has given us their sworn commitment in their corporate charter that they will benefit society as a whole.
Goid bless you, Man, posts like yours give me reason to hope.
Re:How Companies Work (Score:2, Interesting)
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.
The executives are different then the stockholders in that they make the future. They have inside information before it becomes inside information and act on it to their own benefit. Watch the insider trading of a company.
They regard employees as assets. They don't layoff people they liquidate assets.
I've got a merger pen. I've helped put 2 CFOs and 1 CEO away. As a result I'm unemployable. That doesn't matter though because it's about honor not money.
Re:To quote Mel: "Its good to be the King" (Score:4, Interesting)
Paid to Leave, Not to Fail (Score:3, Interesting)
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.
There was no failure!!! (Score:4, Interesting)
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.
Re:Wow, you just don't understand any of this, do (Score:2, Interesting)