[lorenzo]

In the Netherlands (and to a lesser extent in Belgium) there is a huge debate going on about the excessive salaries of top-managers.

The CEO's of two big energy companies (Nuon and Essent) make enormous amounts of money, while the price of energy keeps going up and while the salaries of the ordinary employees are going down. The citizens and customers are tired of this. These CEO's never have to prove that they're worth this much money, and that must change - they think. The debate has reached the highest political levels and might set interesting precedents for the rest of Europe and the world.

The citizens and clients have united in their resistance and have stopped paying their bills in protest (http://www.ikbetaalniet.nl translated as: "I won't pay any longer" - they demand that the shareholders reduce the CEO's salary to normal levels and that these top-managers prove their real productive value with hard numbers).

The shareholders will be acting soon, and they are on the side of the citizens and customers.

This time, this old debate has found scientific backing. World famous and Nobel Prize winning Dutch economist Jan Tinbergen published a fascinating and reveiling report about the matter. He looked at the real productivity of companies and economies, and who contributes what amount. Stunningly, the lower and middle "cadres" ("employees", I don't know how to translate this word) contribute positively to the productivity of companies and economies, while the upper cadres (the CEO's, CFO's etc...) all contribute negatively. (Amazing, isn't it?).

The report shocked the political community over here. It concluded, amongst other things, that top-managers are basically decoration and even bad for a company's performance. It showed how these top-managers use all kinds of strategies to keep themselves in power (ranging from intellectual terror to power abuse to blackmailing shareholders) and how they form a small network of people accross Europe and the USA who back each other and make informal deals about high salaries. The markets have stopped working here.

This comes from a widely respected, world famous economist, known for his objective analysis. The guy basically calls upon us to dump top-managers unless they prove their value by hard numbers.

I think this is a very interesting debate. I hope it spills over into all European countries and into the US. Because with Peak Oil, we're going to see a lot more manipulation by CEO's, who quickly want to grab a piece of the pie now that they still have the opportunity. What do you think?

(For those who understand Dutch, here's an online discussion and forum, with TV debates and a lot of interesting material: http://www.ncrv.nl/rondomtien ).

[smiley]

"cadres" ("employees", I don't know how to translate this word)

try echelons, or ranks

[lorenzo]

thx smiley

[tokyo_to_motueka]

George Monbiot in the Guardian last week on workers' co-ops:
[url=http://politics.guardian.co.uk/economics/comment/0,11268,1457644,00.html]A vehicle for equality
[/url]
$this->bbcode_second_pass_quote('', 'I')n several other countries, workers' co-ops, in which all the workers have a stake in the business and a voice in its decision-making processes, have flourished. After the Argentinian economy collapsed in 2001, about 160 businesses were taken over by co-ops. Some of them have done so well that the owners, who had been unable to make them pay, are now suing the workers in the hope of taking the factories back. One of the reasons for their success, according to the Washington Post, is that they have dropped their "higher-paid managers from the payroll". (How often do you read that in the Post?) The money that would have been snaffled by the executives has instead been reinvested.

Dutch and Danish farmers have survived the invasion of the superstores because, unlike British farmers, they process and market much of their produce cooperatively, and so can bargain collectively. They can also achieve economies of scale, which is why British people eat Danish butter and Danish bacon. The Mondragon co-op is now the biggest industrial group in Euskadi (the Basque country) and the seventh biggest in Spain, with 71,000 workers. Altogether, workers' co-ops around the world employ about 100 million people.

[ohanian]

The salaries of COE and DIRECTORS are NOT BASED on how good or productive they are.

Merely how scarce they are.

The reason COMPANY A pays ceo Fred $5 million a year is to prevent COMPANY B from hiring ceo Fred for $4.9 million a year.

comprehend this!

[tokyo_to_motueka]

$this->bbcode_second_pass_quote('ohanian', 'T')he salaries of COE and DIRECTORS are NOT BASED on how good or productive they are.

Merely how scarce they are.

The reason COMPANY A pays ceo Fred $5 million a year is to prevent COMPANY B from hiring ceo Fred for $4.9 million a year.

comprehend this!

[JohnDenver]

I want to do the following experiment:
Develop a computer program which simulates executive decision-making. The algorithm wouldn't have to be that complicated. For the tough calls, it could just steal ideas from other companies, consult the "consensus" of economists in the newspaper, use astrology, flip a coin, consult the I Ching etc.
Run it as a straightforward horse-race of two companies, one run by a computer, one run by human being.
Kind of new twist on automation and downsizing... This time it works from the top-down.
The workers could make the computers into mascots. Give them pet names like the "Head Honcho" or "Our Fearless Leader".

[ohanian]

$this->bbcode_second_pass_quote('tokyo_to_motueka', '')$this->bbcode_second_pass_quote('ohanian', 'T')he salaries of COE and DIRECTORS are NOT BASED on how good or productive they are.

Merely how scarce they are.

The reason COMPANY A pays ceo Fred $5 million a year is to prevent COMPANY B from hiring ceo Fred for $4.9 million a year.

comprehend this!

[tokyo_to_motueka]

$this->bbcode_second_pass_quote('ohanian', 'Q')uestion: Why would you want to stop another company from paying way too much for an overrated CEO?

Answer: Because ceo Fred if hired by company B can do $30 million dollars worth of damage (in loss of sales) to company A. Where as ceo Fred if hired by company A, will just sit on his arse and do nothing all day. So it is rational for company A to pay ceo Fred $5 million dollars to sit on his arse and do nothing all day.

[heyhoser]

Enrons of the world UNITE and squash these measly peasants!

[ohanian]

$this->bbcode_second_pass_quote('Raphael', '
')And sometimes they are simply hired to clean house.
They are paid for their ruthless, disregard for humanity.
They are simply assassins, heartless economic harbingers of greed.

They are paid 'bonuses' for their ability to f***! their fellow man. Capitalism, greed and self-interest to themselves and shareholders ... black vs red ink underlies all of their decision making.
Layoffs create prosperity for THEMSELVES and the HIERARCHY of shareholders.

Have you seen 'The Corporation'?

I just do not find much benevolence in your intellect ohanian.


Namaste

[ohanian]

$this->bbcode_second_pass_quote('tokyo_to_motueka', '')$this->bbcode_second_pass_quote('ohanian', 'Q')uestion: Why would you want to stop another company from paying way too much for an overrated CEO?

Answer: Because ceo Fred if hired by company B can do $30 million dollars worth of damage (in loss of sales) to company A. Where as ceo Fred if hired by company A, will just sit on his arse and do nothing all day. So it is rational for company A to pay ceo Fred $5 million dollars to sit on his arse and do nothing all day.

[dmtu]

Not at the CEO level but, I've seen a couple of the axe grinding, head hunting, "gonna make some changes around here" types. In my case an (obviously failed) aerospace engineer thinks he's a mine general manager. He has endorsed the "you don't need to know nuttin except how to manage people" approach to management and will only promote yes men. Productivity is on par with third world nations and the people who know how to do the job won't even put in for a promotion hence, people promote from entry level positions end up in management. sickest work culture I have ever seen. If that's what CEOs do then I'm all for their banishment.

[lorenzo]

Lots of good arguments so far.

The Tinbergen report also concluded that CEO Fred and CEO John continuously meet at restaurant Big Fat Cat and make a deal that they won't work for under US$ 5 million a year, no matter what the market forces are. There's rationality in their strategy because it serves both well, but for the company and for society at large, it means hell.

Hence Tinbergen's oblique hint: dump'em, hard research shows they're useless.

[tokyo_to_motueka]

$this->bbcode_second_pass_quote('ohanian', 'I') think you are getting confused. When did I say company A sacked ceo Fred?

I said "If company B hires ceo Fred then ceo Fred when in charge of company B can damage the sales of company A by stealing away company A's customers and turning them into company B's customers."

Then company A must never allow company B to hire ceo Fred. What is the best way to prevent company B from hiring ceo Fred? By paying ceo Fred $5 million dollars a year to sit on his arse and do nothing all day.

ceo Fred need not have worked for company A before at all. He just need to be a bloody good ceo (for some other company say company K).

[GD]

Isn't the board room part of the problem?
All the major shareholders approve each others salaries (and lovely whopping bonuses).
Meanwhile employees are told things like "don't expect a pay rise this year, count yourselves lucky you don't get a pay cut. In fact, count yourselves lucky to be in a job..."

And there's nothing the employees can do about it. (Revolt would mean closure and reopening somewhere else.)

The problem is the corporations have so much power now that they treat the world like one big playground. Here's something that can be done about it.

[Doly]

$this->bbcode_second_pass_quote('tokyo_to_motueka', '
')therefore you don't need to hire them and if someone else does, they are useless, so there is nothing to fear.