Stop the Slaughter

It has occurred to me that the tale of the Goose that Laid the Golden Eggs has a serious flaw to it. The foolish couuple, upon killing gthe goose, should have found gold, more gold than the two had seen in their entire lives. With that gold they should have left their hum drum little lives and lived like a lord and lady. The original ending should come around when they realize that their purse has a bottom, unlike the goose.

I came to this idea there has been a group of people in the last deacade or so who have killed their geese and gotten quite wealthy by it. I write of the CEOs and other executives who have run companies into the ground and jump with their golden parachutes just before impact.

If one looks at the various stories, a couple of themes emerge: living the high life on the company diame, and manipulating the stock price with accounting shenanigans. The first is just flat out theft, while the secong is theft by a more subtle method.

The only remedy I can suggest for the first case is to the share-holders: "Wake up!" There has come to be a mystique surrounding CEOs and other members of the MBA caste. What has been forgotten is that these executives are no less servants of a company than a butler would be the servant of a house. So keep an eye on them. (Not that I think that employees are by definition untrustworthy, but I have worked for companies where the execs. acted as if they were.)

The second case is where the execs. make everything look fine and dandy untile the house fall in on everyone. Some would say that this is the result of so many executives reimbursement being dependant on the price of the stock. Once upon a time, CEOs were paid ludicrous millions of dollars a year. It became fashionable among the left wing types to be able to rattle off how many times more the CEO earned than his average line worker. The huge numbers were vulgar, and they made easy targets of political opportunity. Eventually a law was passed that denied the tax exempt status of employee compensation to any one salary of over a million dollars a year.

So, instead of getting paid in cash, the idea was to pay them in stock options. Not only would it bea tax-free way of renumerating the honchos, it would tie their compensation to a clear measure of performance: the stock price.

Now, that worked for a while until some on the MBA caste did the math and realized just how stinkng rich they could become in one shot by inflating the stock price in the short term while damning the company in the long term.

The remedy? Give back the tax-break on salaries. We may see what some would call vulgar salaries, but it would be a much clearer gauge of performance. It would be much easier to say if a CEO is worth $15 million dollars a year than it is to say if he is worth 20 thousand shares at a strike price of thirty dollars a share maturing in nine months. It would also not pressuer said CEO to have the price high in nine months at the expense of the price of the stock two years after he leaves.