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Where is the pro-business chat?

Discussion in 'Business, Investment and Economics' started by Zaxon, Mar 30, 2019.

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  1. Zaxon

    Zaxon The voice of reason

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    One thing that really needs to be addressed is CEO pay. CEOs, in my opinion as a shareholder, should be treated just like any other employee.

    Unskilled workers get lower wages. Higher skill people, like computer programmers, get paid more. But I'm sure they're not paid $1 more than what the company has to pay them to get them in the door. It's all about supply and demand of labour.

    But not so with CEOs. The CEO pay is approved by the board. The board is made up of ex CEOs (and current ones for other companies). So it's all a "boys club". The CEO gets overpaid. He later gets put on a board where he determines the pays for another CEOs. Warren Buffett said in an interview, that he's never heard of a board turning down the recommendation from the company’s Compensation Committee. So that's a huge problem.

    From my point of view as a shareholder, a CEO should be paid the minimum that is required to get him in the door, just like a programmer. Sure we want good ones, but companies manage to hire amazing, technical specialist, without paying them millions just to turn up to work.

    I believe that CEOs should get shares so that their interests are aligned with shareholders. Perhaps something like zero cash, and a modest wage paid 100% in shares, would be more aligned to the shareholders' interest who actually own the company.
     
  2. Value Collector

    Value Collector Have courage, and be kind.

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    I don’t mind paying a good ceo a lot of money, But it should be based on performance.

    I am against handing over shares to them, I would rather compensate management in cash, rather than give them a slice of the farm.

    Pay also needs to be based on the correct performance metrics, so it Aline’s them with shareholders.
     
  3. Value Collector

    Value Collector Have courage, and be kind.

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    Did you know that on average only about 5% of the Gross national product of the USA goes back to the investors that own all the capital assets make the economy function.

    The other 95% goes to workers, the government and a small portion is lost to waste, theft and corruption.
     
  4. Zaxon

    Zaxon The voice of reason

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    So you'd advocate KPIs where the CEO gets fired or gets warnings if they don't meet them, rather than shares?
     
  5. Craton

    Craton Mostly passive, contrarian.

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    To the OP and with no respect intended. Interesting convo by the way.

    Surely, without business we wouldn't have the capitalist society we live in and hopefully enjoy thus by extension no businesses, so in fact whether we are aware or not, we are all pro-business. :2twocents
     
  6. Smurf1976

    Smurf1976

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    I'd be happy with that if we're talking about long term performance not short term.

    There's a few too many "make it look good then move on before it falls in a heap" types around for my liking.

    As an example of that I'll point to the Whyalla steelworks. One man from overseas manages to see opportunity and make things happen where however many Australian managers in that and all sorts of other manufacturing industries have failed dismally over an extended period. The rest should be paid what they're worth - around $60K a year as a basic office worker.

    No doubt there are some good CEO's around but quite a few seem to manage to do nothing more than hire a consultant to tell them to close the place. Any clown could do that, you don't need to pay more than $30 an hour for that.

    For the few with actual ability and vision - sure, pay them well. :2twocents
     
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  7. Zaxon

    Zaxon The voice of reason

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    Except for a few hippies living in communes, oh, and the communists hiding under our beds of course :)

    I don't think the average worker is really pro-business though. They're pro a good job. And pro having plenty of money to spend. But beyond that, most workers possibly feel adversarial towards business. Your boss underpays you, and overlooked you for a promotion. Your electricity provider put up your charges by 20%. So it's totally appropriate for the average man in the street to feel negatively towards business.

    But in a share owners' forum, I'd expect our members to be earning some portion of their income from shares. That may range from very little to 100%. So that skews how we feel about business when we're part owners of them. Or so I would think.
     
  8. Zaxon

    Zaxon The voice of reason

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    Agreed. I think surgeons and AI specialists programming self-driving car software, should earn more than CEOs. They've got a much more specialized skill set.
     
  9. Smurf1976

    Smurf1976

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    Of those CEO's I'm aware of, the good ones are passionate about the business or at least the industry overall.

    In simple terms if you're running an organic food company then don't hire a CEO who'd just as happily work for a chemical manufacturer or an airline if they offered more money. Hire someone who's actually interested in the industry not just a generic manager. :2twocents
     
  10. SirRumpole

    SirRumpole

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    People like the ex directors of AMP should be required to pay their salaries and bonuses back after all the damage they've done.
     
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  11. Value Collector

    Value Collector Have courage, and be kind.

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    I think he best case is to have a relatively low base wage, and have the ceo and other managers earn bonuses for meeting certain performance goals trailered to where the company is now vs where we want it to be.

    I wouldn’t judge them on share price performance etc, that will just make them stock promoters, I would judge them based on earnings growth, return on equity and other operating factors tailored to the situation.

    And as smurf said I would base the targets over time, eg where they sit 1yr , 3yr and 5yr etc.
     
  12. Value Collector

    Value Collector Have courage, and be kind.

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    Investors/business help workers earn more money than they other wise would.

    For example, picture a miner moving iron ore with a shovel and a wheel barrow, they would struggle to have enough productivity to create $10 of production a day.

    Then picture the same miner after an investor has purchased them a $5 Million dump truck, suddenly they can earn $100,000+ a year, while also creating enough value to pay back the investor a healthy return on his $5 million, and send some money along to the government too.
     
  13. Value Hunter

    Value Hunter

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    I am not sure where you get 5% from unless you mean an average over an extremely long period of time? According to current statistics (see link below) it appears to be around 10% currently unless I am misunderstanding something.

    https://fred.stlouisfed.org/graph/?g=1Pik
     
  14. SirRumpole

    SirRumpole

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    There used to be companies where the CEO worked his way up from the company's mail room or whatever to the top job learning about the customers and business as they went along.

    I don't know how common that is these days, most CEO's seem to be headhunted from rivals or outside the industry.
     
  15. Value Collector

    Value Collector Have courage, and be kind.

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    The figures I was looking at went from 1900 to 2010.

    If your figures are correct it does seem to have jumped up since the GFC.

    However that is probably due to lower interest rates we have had since then, so the “corporate profits” have been lifted at the expense of the Bond investors, not at the expense of workers.

    But still, even at 10%, that still means 90% of all production is going to other stake holders.

    ————-

    But as I said earlier, it is natural that the capital owners share of the pie should rise as industry becomes more capital intensive and less labour is needed to produce the goods and services.
     
  16. Craton

    Craton Mostly passive, contrarian.

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    I'd suggest that using "the average worker" as a term of reference is far too broad a generalization.

    The way I see it and from a point of view of living and working in both locales, is that those living/working in the bush have a different attitude than the coastal cousins, hippies and Red's included, with regards to business.

    Now, if you take the workers in public service work (health, teaching etc) I can virtually guarantee that their perspective is more skewed towards the negative sentiment. Now don't get me wrong, I personally know people that come knock off time, they are outta there right on the siren but then, I know of so many that balance that out by staying behind and going above and beyond.

    Also, those starting out on a working career have a different set of expectations.

    Negativity.
    As an e.g. we had Big W close down here locally and those loss of jobs didn't just impact those employed. Due to less foot traffic in that shopping precinct, several other businesses closed the doors in a few short months that followed so yes, there was negativity towards Big W in that sense.

    I think businesses whether public or private are far more valued in the bush and seen largely as a positive more so than in metro areas. This brings me to another point and that is, how getting to and from work and the type of lifestyle one leads impacts on this pro-business discussion.

    in 1981, the travel to and from my 1st job in Sydney "cost" me (on a good week) about 16hrs via car five days a week. Two whole days out of five so I could eck out a meagre existence. No, public transport was out as it would've meant one bus and a train change at Central and that was just one way and bugger knows how much more time it would take. I didn't blame the boss or his business or felt negative towards him. In fact I felt lucky to have a job but I sure was negative towards that travel time!

    Share ownership may or may not skew ASF members perception. I personally don't think it does because a share is just a commodity, to be bought and sold so positive or negative thoughts would be on whether to take a profit or a loss or simply to hold. If those thoughts are emotive, then that's a different kettle of fish altogether.

    I would make this assumption though, peoples' attitudes towards anything, would stem from their character type, their personality (glass half full or empty) and their socio-economic background, their peer groups, single or in a relationship and a whole bunch of other influencing factors. To paint a broad stroke labeling most (average) workers as negative towards business and that we are mostly pro-business is such a varying variable that a consensus or constant is out of reach. Perhaps we need a poll...
     
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  17. Smurf1976

    Smurf1976

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    Management plays a huge role in the public service.

    I once had the experience of seeing a change of manager result in pretty much the entire workforce going from "above and beyond" to "race out the door" in their outlook and in due course anyone who had a credible plan B left.

    That was in the PS as such, not any business etc owned by government (eg power industry) as those have a culture much closer to that of the private sector.

    Similar management situations do arise in the private sector, indeed the individual I'm referring to did exactly the same thing in their two previous jobs which were private not government.

    Often this is dressed up as cost cutting, efficiency improvement etc but what it leaves is a shell operation which has driven out any real skill and commitment on the part of staff and which ends up costing an outright fortune through mistakes, lost productivity and so on. It might recover someday but not within a decade.

    There's at least one listed company I'm aware of trying to rebuild its skill base following a period of that approach. No comment as to who that is. :2twocents
     
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  18. qldfrog

    qldfrog

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    The south african ceo ..and his clique at BHP did a great job of self destruction in a way Smurf describes, now slowly rebuilding under the new management...
     
  19. Value Collector

    Value Collector Have courage, and be kind.

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    Yeah, he was a boom time ceo, his investments would have only worked out if the commodities boom was endless.
     
  20. Zaxon

    Zaxon The voice of reason

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    As an example of the different thinking between an investor and a non investor, in LA recently, Uber drivers went on strike.
    upload_2019-4-1_2-35-53.png

    I discussed this news story with a friend who doesn't invest. My first reaction was that Uber is currently making a huge loss, and to remain a viable business, they need to take out some costs. Otherwise there will be no Uber to pay drivers in the future.

    upload_2019-4-1_2-39-28.png

    My non investor friend said the strike was fully justified. His position was that if Uber is losing money, that's their own fault. That's got nothing to do with the drivers.

    Perhaps the truth is somewhere in the middle. But often investors and non investors have a very different initial view of the world.
     
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