Compensation, EU Style
I never knew these guys could be so creative.
Shareholders should have the power to curb bosses' pay and set caps on executive bonuses, the European Union's top regulatory official said on Wednesday, adding to pressure on banks and companies over excessive management pay deals.The plan from Michel Barnier, the European Commissioner in charge of regulation, could pave the way for a pan-EU law next year that would give investors legal clout to take on Europe's executive elite over pay.
"For all listed companies, I support transparency and increased shareholder responsibility ... for example ... mandatory shareholder vote on remuneration," Barnier said in a statement.
Doesn't sound so bad, right? Well, here’s the kicker:
There is mounting public anger at the widening gap between earnings of bankers and business executives and ordinary workers when many European economies are in recession and unemployment is high."I would also like to see it made mandatory for shareholders of listed companies to decide on two key ratios for their company," he said in a statement.
"The ratio between the lowest (and) highest paid in the company, and the ratio between the fixed and variable parts of the remuneration," he said.
Yeah, that’s right monkeys, M. Barnier wants to bridge the gap between the lowest and highest earners at your firm, so no matter who you are, what your position is, or how much money you’ve made for the firm, your comp will still be tied to the low man on the totem pole's. How French is that?
Okay, I’m all for shareholder power, and while I selfishly wish that banker pay remains the same, I know that reform would do a lot of good in the long run.
Those ratios however are just ridiculous. Capping bonuses that way and adding ceilings would be really counterproductive and could easily lead to some serious issues. I mean, what kind of pay ratio would a teller and the CEO have? They say it's around 1:75 now in the UK, what're they gonna do? Cut that in half?
Chances of this passing however are slim to none, but nevertheless, what do you think monkeys? Does this proposal make any sense? Am I totally wrong about this one? Most of all, how would you feel if your comp was calculated this way? Curious what you guys have to say about this.
Have a good one WSO.
Isn't the French President lobbying for 75% tax? He got elected!!!! go figure
Oh man. Let's have people who can't balance a balance sheet determine the "fair" ratio for a company's pay. I get it, the economy sucks, and when people are struggling, they don't want to see wealthy people doing well. But screwing with the rich people probably isn't the quickest way to fix the economy. I am also for shareholder power, but this will get interesting.
Fact is that the Europeans have a different model with more emphasis on wealth distribution than wealth maximization. Even if it sounds ridiculous to you, it's been working for quite a while, even if it needs frequent fixes, so how about you guys start considering that people might have different values than yours, and that it's been working? I'm regularly puzzled to see how intolerant and narrow-minded people on this forum are. Like you know the one truth and anything different is wrong..
As long as the EU market is big enough, companies will keep complying with whatever rule is enforced there (even those which don't make sense) to get access to them
I understand but this culture is evidenced by today’s Europe. On a larger scale, it’s internally destroying countries like Greece as well as the entire EU model. Conversely, a nation like Sweden can prosper under such a system because the scale of their population and government is smaller than the U.S yet larger socializing scales implode like the former U.S.S.R and require force not choice to work.
Equalizing pay is not going to solve anything. If you take an amount of money from an executive and give it to four non-management workers so each has a fifth of the original amount, it can only buy the same amount of goods and services after as it did before. The only thing that changes is the ownership and there's no real economic effect. Wealth is income producing assets which come through investment and if I were the person from whom the money was being taken then where's my incentive to start and succeed with a business if I have to share my earnings with those who bear little if no risk and are not in the substantial daily operations?
Further, I don't understand what the obsession with income inequality is either. What right can anyone claim on another's income, why should it affect anyone how much someone else makes, and just because its so why are they inherently to blame? Central to this thinking is a class envy notion which, in my opinion abdicates all sense of introspection and self-responsibility. Inherently, it’s someone or something’s fault for their lack of success and that ought to be equalized. More properly put, the rights of the minority should give way for the majority (i.e. general welfare). Instead, I believe there is more pervasive corporate culture problem with executive compensation, performance, and better incentive scheme’s can be had to properly motivate the right people and tie-in employee ownership.
To conclude, income equality is not the panacea to an economic utopia and there is more to life than money. This premise has been proven time and again in both academic studies and anecdotally so there is no real need to be either greedy (executives) or envious (workers). If you think otherwise than I say that you haven’t fully appreciated what life can offer yet.
I thought Soros was European. And about 7 or 8 dozen other people who come to mind. Aldo, wealth maximization is also not one of my values. Not the only one, at least.
If that happens, it will be great news for the 1 teller left behind. Of course s/he's going to have to do the work of the 5 that got canned, but s/he will make twice as much!
That proposal is complete bullshit. How would shareholders be able to judge what an appropriate cap or ratio is??? If institutional investors hold most of the voting rights the proposal likely wont change anything unless pay and bonuses are not in line with the competition. If you have got lots of small scorned investors who only want "fairness" then upper management will be out of the door if they dont get paid enough, or those at the bottom get paid more but will experience massive layoffs.
CEO pay has been increasing at a faster pace than any other position....more importantly the average CEO is seeing remuneration increase regardless of company performance. I dont see any justification for this. I've said it before, CEOs are paid by their buddies on the board. Those of you thinking they've "earned" this money are deluding yourselves.
I'm not convinced that most executives are such brilliant strategists such that they should command pay increments far in excess of the average employee. The executives in my own firm are simply old people who got lucky with their career choice and timing. Very replaceable and I can already see talented associates at my level who could make far better execsif given a shot.
To suggest that shareholders should not have the mandate to determine the compensation structure in the firms they rightfully own is what's complete bullshit.Perspiciatis iure vitae voluptate. Quae voluptates atque voluptas saepe. In quo consequatur assumenda sunt voluptatibus ut. Labore ipsa ratione ut ipsum delectus perspiciatis provident. Rerum officiis voluptate impedit ullam voluptatem sint molestias.
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