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."
Easy Solution (Score:5, Funny)
To quote Mel: "Its good to be the King" (Score:5, Interesting)
Re:To quote Mel: "Its good to be the King" (Score:5, Insightful)
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.
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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
Re:To quote Mel: "Its good to be the King" (Score:5, Informative)
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.
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Foolhardy, yes. Wealthy enough not to miss $600K? Hell no.
Wow, you just don't understand any of this, do you (Score:5, Informative)
All three parts of your claim there are wrong, which makes you completely wrong, not "half-right." From : [wikipedia.org]
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]:
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:
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.
American companies are unique in this respect. (Score:5, Informative)
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"?
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'.
Re:To quote Mel: "Its good to be the King" (Score:5, Insightful)
Unfortunately, there are still numerous methods of "legal" *ahem* acquisition of funds by those in power on the corporate board. Enron was the first case where boards were whacked, and you can see the effect that it has had in such board rooms. The aforementioned people in power are very mindful that they don't wind up walking to the gallows. (And of course by gallows I mean at worst a small country club resort for a few months/ maybe a year.)
The severance deals such as poison pills and golden parachutes usually end up poisoning the shareholders and being a golden shower on the hard working employees. They very rarely do anything but line the pockets of executives.
But hey, thuggery, buggery and some skullduggery. A CEO's life for me!
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That may be the job title...but how is that any different than other job titles like general manager, breakroom supervisor, tec
Re:To quote Mel: "Its good to be the King" (Score:5, Insightful)
That may be the job title...but how is that any different than other job titles like general manager, breakroom supervisor, technician, janitor. All of those people also have 'jobs' that support the interests of others...and in a less direct way, even the stockholders too. But you seem to have this thought, from your writing, that the top boss should somehow be more altruistic about their jobs vs their survival instincts.
All anyone is saying is that they should be rewarded/reprimanded based on how well they do their *job*, not how cleverly worded their compensation contract is that lets them only show up two months a year, drive the company into the ground, then walk away with enough money to last them the rest of their miserable lives. Until executive election becomes more transparent in cases like this, it should rightly be criticized for what it is, nothing more than an elitist cabal designed to enrich the wallets of those holding positions of power; by the elite, for the elite.
You seem to think that just because they make obscene amounts of money, and that people like you don't really know what it is that they do or how it is that they got their job, that they shouldn't be held to any measure of accountability and instead should be able to finagle any amount of money out of the company they want to, and be able to walk away scot-free when it turns out that they spent the past 2 years working in the exact opposite way they were supposed to be.
Many high level executives run their companies right, and recognize that they have a huge responsibility on their shoulders. Just because people like you have no problem robbing a company blind (out of self-described 'self interest') as soon as there was no one looking over your shoulder, doesn't mean that it should be acceptable.
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Where is the motivation to move the world forward? If everyone followed your rules, we would still be living in caves clubbing each other for a share of elk meat. You have been brainwashed to think that as long as you only look out for yourself, and that others do the same, that we will all live prosperous lives marked by hard work and individual success. The truth is that without cooperation we would be nothing as a society, and with as quick as you (and jerkoffs like you) are to forget what cooperation
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.
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Why is it that people doing what people do naturally -- looking out for their own interests -- is normal and acceptable when you do it, but evil and wrong when somebody else does it?
It's different when the "someone else" is the board of a publicly owned company.
That said, that sort of behavior is also to be expected due to inherent differences of interests in the principal-agent relationship.
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Well, it isn't like these CEO's held a gun to the boards collective head and forced them to hire them AND to give them these packages. It is the company's own fault for striking such bargains in the first place...they signed the paperwork too, so there should be no bitching when executive Billy Bob exercises his contractual options for his own benefit.
Re:To quote Mel: "Its good to be the King" (Score:4, Informative)
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.
Unfortunately, that also means there aren't many actual controls on executive compensation.
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:To quote Mel: "Its good to be the King" (Score:4, Interesting)
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Corporations incorporated in states where the stockholders votes are advisory and lack binding authority.
Large blocks of stock owned by hedge funds which are run by other wealthy people.
Re:To quote Mel: "Its good to be the King" (Score:5, Insightful)
This is what the economists call the "principal-agent" problem. The principal (shareholders) hire a bunch of people to do things in their best interests (get the company to make money and give that money to the principals) but the agents (CEOs, and his own agents) are "looking out for their own interests" and just set things up so they get rich one way or another.
It's "evil and wrong when somebody else does it" in this case because they're supposedly being paid to do better. It's "normal and acceptable" to some extent when you do it, because you're usually doing it with your own life and your own resources, unless you aren't, in which case that's just hypocrisy, which is nothing new in the world one way or another....
Re:To quote Mel: "Its good to be the King" (Score:5, Insightful)
Some people can look out for their own interests without dicking over others. For some people, viewing other people's interests as an integral part of their own is "natural".
The difference between "looking out for your own interests" and "looking out for your own interests by fucking over everyone else" is subtle, I admit, but once you grasp the nuance you'll see why behaviors that are on the surface the same are ultimately different, and why one is evil and the other is acceptable.
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Consider this. Corruption could just be seen as "naturally looking after your own self-interest". Since it is natural, it should be acceptable, except that it naturally leads to the demise of whole nations. We should demand better.
Re:To quote Mel: "Its good to be the King" (Score:5, Funny)
Why is it that people doing what people do naturally -- looking out for their own interests -- is normal and acceptable when you do it, but evil and wrong when somebody else does it?
Natural?! This is a Christian nation. As such, we do not look out for our own interests, but instead follow the Biblical commands to do nothing out of selfish ambition, vanity, or conceit, but in humility consider others better than ourselves. Each of us looks not only to our own interests, but also to the interests of others. We are peace-loving, considerate, full of mercy and good works, impartial and sincere.
Oh wait.
What you can expect from a republican. (Score:3, Funny)
Lets face it GOP'ers like McNeally dropped the pretense about Christianity and Christian virtue long time ago. The only use for Jesus that republicans like McNealy have these days is to continue to fool the foolish on the religious right. If Jesus can be used to sell a turd to a sock puppet in exchange for a dollar, he's worth something in their minds, otherwise he's there just to be peed on.
I can sympathize with the writer, but from a different perspective. As an investor I bought into the notion that S
Re:To quote Mel: "Its good to be the King" (Score:5, Insightful)
Stealing is looking out for your own interests too. However, society has rightfully restricted some selfish behaviors like stealing and fraud because they harm others. The ideal economic system would harness selfish desire to expand markets, increase efficiency and encourage innovation (ideal capitalism). When the economic system encourages self interest to the point of destroying others' wealth it's crony capitalism.
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"Why is it that people doing what people do naturally -- looking out for their own interests -- is normal and acceptable when you do it, but evil and wrong when somebody else does it?"
The answer to your question is fiduciary responsibility. In other words, we trust that the corporate executives will work for the corporate benefit and not their own.
It's the same fiduciary duty that keeps Steve Jobs from liquidating Apple and retiring with the sale proceeds to his own private country.
Re:To quote Mel: "Its good to be the King" (Score:5, Insightful)
In my mind it is the scope of reward that is evil and wrong. In the article, it is mentioned that one of the Sun executives is getting a severance package worth $175 MILLION dollars. That compensation package is enough to pay 1750 employees $100,000 for a year. Those 1750 imaginary employees who would be making that $100,000 are employees who are doing the jobs given to them by senior management. For all intents and purposes, those people are probably doing their jobs competently. Despite the fact that they are competent at their job, they are getting laid off.
People who are competent get laid off. The person responsibility for the health of the company gets enough money that he could pay 1749 other people a significant amount of money, even though he completely failed to keep the company going.
As the blog post mentions, the problem is fiduciary responsibility and the fact that in many cases (including Sun), the major share holders are also the executives themselves. So the CEO, CFO, Chairman of the Board and the rest of the executives set things up so that even in failing, they increased their stock value 42%. Thousands of employees lose their jobs, but those guys at the top get hundreds of millions of dollars among them.
There is a saying that "There is no greater sin than not knowing when you have enough." Corporate America is out of wack. The guys at the top fail so seriously that their companies go bankrupt. Despite that, they get millions of dollars. Employees who do their jobs don't get millions of dollars, and when the company fails they get assed out.
The "evil" that you don't understand is the rewarding of failure that leads to the suffering of others.
To make it easier to understand and to make a more basic explanation, lets replace "money" with "food". Lets say that the executive in charge of Sun has a machine that makes food for thousands of people. He runs the machine so poorly that it breaks down, and thousands of people no longer have access to the food it provides. In the process of breaking the machine, he manages to engineer it so that the very last time he runs the machine, it makes enough food to feed him, his family and his friends' families for a couple hundred years if they manage the food he created properly.
If there weren't laws in place to protect the asshole running the machine, the masses would tear him apart and divvy up the food he set aside for himself. Since there are laws in place, the asshole gets labeled "evil and wrong".
If there were justice in the world, or if the person running the machine were moral, he'd divvy up the remains equally among the tribe who helped him run the machine. There isn't justice in the world, and the man running the machine isn't moral. He took the lions share of what the machine produced and left everyone else out in the cold.
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.
People. This is why the guilotine was invented (Score:3, Insightful)
You think the executives of Sun are a problem?
Trillions to the bankers who are still being paid bonuses.
thnx, but no thnx. (Score:4, Insightful)
The system will regulate itself? HAH! yeah, keep voting for the big bucks ...
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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.
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Frankly, I would prefer that the government take half of my investment in taxes for the greater good of society at large than to continue to permit insiders like Madoff and McNeally walk away with essentially all of it because it is legal for them to do so.
An interesting position for a "shareholder". Precisely which companies do you own and how many shares? I have never heard anyone who actually owns shares say that they would prefer for the government to receive half "for the greater good of society at large". People with positions like that are very rarely owners of anything substantial; least of all stocks or bonds in my experience. I don't believe you when you say that you own shares with a position like that.
As for Bernard Madoff, I would never have been
Can everybody say "principal–agent problem"? (Score:3, Informative)
Past performance no guarantee of future gains... (Score:3, Insightful)
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)
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.
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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.
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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.
Re:How Companies Work (Score:4, Insightful)
Arbeit macht frei.
Lunch tomorrow... (Score:3, Insightful)
And if he's a manager, he'll steal your lunch and blame it on the bad economy.
Re:How Companies Work (Score:5, Insightful)
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.
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.
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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.
Options (Score:4, Informative)
You can't be serious. OK, maybe you are serious, but in that case you're missing a whole lot.
Your typical employee stock grant vests after four years at a fixed strike price, which is generally set at some price the stock reached at some arbitrary point previous to the start of those four years, generally around when the board decided on the employee stock plan. So, the employee is actually being granted a sort of stock future. If the stock goes up, the option has some value. If the stock goes down and stays there, the option is never exercised. So, the non-employee and management stockholders only get diluted when the stock goes up (in which case they make money anyway). And the company takes on its balance sheet not the current price of the stock at the time the option is exercised, but the strike price set in the option grant, which is of course less. The funds gained by the employee come from the sale of the stock to the public at the time the option is exercised. not from the company.
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Because that is the stockholder view as well.
If the stock goes up the mutual fund looks good and the performance metrics will attract some more clients. If the stock goes down, who cares it's the idiot client's money anyway.
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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: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
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We are all slaves to the vote.
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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
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Thanks Bruce. Now I'm suicidally depressed...
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I'm a peon, and I'm trying to get the most out of the company for my own benefit too.
Re:Clap Clap... (Score:4, Informative)
I don't discuss my finances on the net, unlike another Open Source evangelist who once made a really big fool of himself this way, because he says he lost it all. However, I play or have played all of the roles I discussed.
Missing the point. (Score:2, Informative)
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Sure, I'll do that if you can explain how he's doing the work of 1000 employees.
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Hmmm... so to distill your point - a sick Taco Bell employee who washes his hands and by doing so, doesn't cause E. Coli contamination resulting in millions of dollars of losses for his parent company should be paid like a CEO?
And if another sick Taco Bell employee doesn't was his hands and does cost the company millions of dollars, he should also be paid like a CEO?
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So that last reply was flip. But I did want to point out an important point. The value of CEOs is grossly overvalued. And it seems to be people who tout the power of the market most who are defending them. But why do you never see one of these jobs on Craiglist? It would be easy enough to prove you had what it takes. Your resume would look something like this:
started company - grew to couple hundred thousand in revenue
appointed CEO of new company took it to $5 million in revenue, continued to increase reven
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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
What a great success story... (Score:2)
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.
What was the great product? (Score:2)
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,
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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
Well, sure they sucked... (Score:5, Funny)
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which is why OP is modded funny!
Executives are employees, too (Score:2)
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?
Re:Executives are employees, too (Score:4, Informative)
Why do shareholders tolerate this?
Because the ones who are small have no real recourse, and the ones that are large are mostly institutions with upper management making these decisions, and why should they want to rock this boat ?
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:Ahh, the good old days... (Score:4, Insightful)
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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.
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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
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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
Reaganist? No, Economists. (Score:5, Insightful)
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
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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.
Cance in base assumptions (Score:2)
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)
...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.
Under corporate feudalism... (Score:2)
the serfs may starve, but the lords still get their due.
At that level... (Score:4, Insightful)
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.
They are not "payouts for failure". (Score:4, Insightful)
They are payouts as specified in the executives' employment contracts. Next time you hire executives try to negotiate better contracts.
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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.
Re:They are not "payouts for failure". (Score:4, Insightful)
Not very shocking (Score:5, Insightful)
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.
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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)
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.
thank shareholders (Score:2)
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
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.
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.
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I'm thinking that DailyKos got the link on this one because everyone else got done talking about the potential golden parachutes back in June of 2009.
http://www.theregister.co.uk/2009/06/12/sun_network_gets_it/ [theregister.co.uk]
Re:Link to DailyKos diatribe? (Score:5, Insightful)
Diatribe or not (no, I didn't bother to read it), I don't think Oracle's is going to be anywhere near the kind of situation Sun ended up in for the foreseeable future. Sun had multiple sources of direct competition across a good deal of their product range and many IT budgets just couldn't justify paying the extra cash for the few extras Sun brought to the equation. Oracle, on the otherhand, has seen off almost all of its competition: DB2, Ingres and Informix are either history or essentially relegated to also-rans in the marketplace for high-end DB servers with paid-for support and an SLA that you could take to court if you had to. It's going to take a screw-up of positively epic proportions for Oracle to go down the pan; "dropping the ball" wouldn't even come close...
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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:Link to DailyKos diatribe? (Score:4, Insightful)
What's wrong with a site where anybody can post any kind of opinion?
Nothing. You just have to remember that. Posts on a places like dKos only speak for the poster, not "liberalism" or even "the Democratic Party", even the editorial policy of the site. The purpose of dKos is to help get Democrats elected. The vast majority of what is there does nothing useful for anyone, other than to provide Bill O'Reilly a fishing ground for something to rage at on a slow news day, Hell, he doesn't even have to wait for an outageous comment, he could post one himself. Not that i think he does, mind you. There'd be no point with an infinite number of monkeys at his beck and call.
Basically dKos is too large to police. If you are an abuser and you get noticed, you will be summarily canned, but that often takes a long time and you can simply sign up under a different name. So you can get just about anything on dKos, from astroturfing provocateurs, the usual contingent of sincere loonies, and quite a few intelligent, thoughtful people trying to make themselves heard of the bedlam.
Want to blame somebody? Blame Bush. It was the anti-Bush fervor that took dKos from a fairly interesting site to the madhouse it is today. [Note deliberate use of irony here]
Alternatively, blame the design of the site, which encourages a desperate contest to get noticed before your post falls into oblivion.
But whatever the cause, you're on your own when it comes to content posted there. It doesn't necessarily reflect the philosophy of the site's owners. It may not reflect the political philosophy of the person posting it. Most of it is junk. Some of it is worth reading. All of it is worth taking with a grain of salt.
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It is so choice. If you have the means, I highly recommend picking one up.
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You're completely right. And that is why Bernie Madoff is a god!
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