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Welcome, neo-cons, to 4 years ago.
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Post Welcome, neo-cons, to 4 years ago. 
So I'm having a conversation with my mom about the state of the economy and credit and all that good jazz. I've had this conversation with her before, about 4 years ago when I had mentioned that the average executive's pay was about 300 times more than the average employee pay and that this was going to be a problem in the future. I was shot down immediately. She had spewed all kinds of stuff straight from Papa Bear and Ann Coulter and whoever else, saying that executives travel around the world meeting clients and potential clients, and they have more risk in that they're held responsible if something illegal happens under their noses, yadda yadda yadda.

Fast forward to yesterday, wouldn't you know it, but the big problem with our economy is executive pay run amok.

Why do I even bother talking?

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This issue frustrates me as well, Prae, but I don't understand what people expect to be done about it. I see four basic players here that could have impact- shareholders, employees, consumers and the government.

Why don't shareholders put the clamps on executive pay? After all, it's their pockets it's directly coming from.

Employees? The decline of union membership dulls this significantly, but traditionally if labor felt it wasn't getting enough of the pie, they shut the company down by refusing to work.

Consumers? If a company's prices are bloated due to payroll, they'll do business with someone who has a more competitive pricing structure. True of most consumer goods, disregard that as it pertains to health care and insurance.

The government? I don't see any constitutional authority for the government to dictate a ceiling on anyone's pay. Exception, of course, for bailed out companies who voluntarily accepted government oversight and policy input as a condition of their loans. In a simple world, anyone's bloated wages are kept in check by the income tax system, which confiscates most cash income on high earners. Unless, of course, they are busy keeping the income moving around to various tax-avoidance vehicles, which never seem to go away because our Congressmembers of both parties use them quite freely themselves and would greatly anger their political contributors if they made a move to curb them.

Repeat the question- what should be done about excessive executive compensation, and by whom?

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thrice wrote:
Repeat the question- what should be done about excessive executive compensation, and by whom?


Aye, this is a very big and important question. My guess would be that shareholders would be our best bet. They have the authority already to do something about this. The problem is that shareholders don't seem to want to hold exec's feet to the fire. Is it because they're hiring friends or what? I don't really know.

I'm pretty torn about government intervention. Too much is bad, too little is bad. You need just the right amount. But how much and where?

In the end, this post was mainly just me venting some frustration about arguing a point only to be shot down and then a few years later have it spewed back at me like it had never been argued before.

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"My guess would be that shareholders would be our best bet. They have the authority already to do something about this. The problem is that shareholders don't seem to want to hold exec's feet to the fire. Is it because they're hiring friends or what? I don't really know."

That's where the game gets interesting. Theoretically, any shareholder can get up to the microphone at the annual shareholders' meeting and bitch. But that's not where the real power is. It's in the Board of Directors, which is usually populated by fellow execs. My guess is that getting the shareholders to agree to anything and to mount a concerted effort to control corporate policy and compensation plans is like herding cats.

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Post Duties of Compensation Committee, United Health Group Board 
• Oversee the Company’s policies and philosophy related to total compensation for
executives, which shall be approved by the full Board by an affirmative vote of a majority
of the Board members.
• Approve annual and long-term performance goals and objectives for the Company’s
executive officers.
• Review and approve the compensation practices for the Chief Executive Officer (“CEO”)
and other executive officers, including base salary, short-term incentive compensation
and long-term incentive and equity awards, taking into account such factors as the
Committee deems appropriate.

Note: These are the folks who gave William McGuire hundreds of millions of dollars worth of stock options as compensation (which were, of course, illegally backdated to lock in enormous profits for him at the expense of other shareholders who did not have the advantage of being able to time-travel to purchase their shares of stock). Other than voting for or against the nominated Board of Directors, company shareholders had nothing to say about that decision.

There's the disconnect in corporate governance and accountability.

Guess I'll always be baffled at how these HMO's can employ some of the best paid executives in the entire world and still be referred to as "non-profit". They're obviously not handing out those kingly pay packages just for giggles.

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