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Bonus the Belly up

Discussion in 'Political Debate & Discussion' started by LeBuick, Feb 27, 2009.

  1. Revmitchell

    Revmitchell Well-Known Member
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    Everyone will be paying a great deal more in taxes through many different taxing situations. It is yet one more lie that only the top 5% will see a tax increase.
     
  2. LeBuick

    LeBuick New Member

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    It worked during Clinton's administration and stopped working when Bush changed it. History doesn't agree with you.

    You must be kidding, why would they care about sharing a dividend with all the investors when they can take $10 Million right out the till?

    True, it is not my job to say who gets a bonus, however, as a tax payer bailing out these companies it's perfectly ok for me to disagree with paying $3.2 Billion in bonuses then asking the tax payers for $10 Billion in help.

    Why do you guys have a different standard when it comes to home owners and the size of the house they bought but feel it's good management to agree to large bonuses that don't reward company success?
     
  3. rbell

    rbell Active Member

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    I can't even begin to decipher the above statement.

    I will say that those in favor of a smaller government (pro-liberty) are being consistent: They don't want the government bailing out homeowners, and they don't want the government bailing out businesses. No inconsistency there. Since we're not in favor of bailouts anyway, CEO compensation is immaterial. In fact, "salary wars" are the inevitable consequence of government interference.
     
  4. rbell

    rbell Active Member

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    Another word, specifically for LB:

    In the last few weeks, we've disagreed more than before. However, I've been unneccessarily harsh towards you. I apologize for such. I'll still disagree with you (lots!) :D, but will do so in a more Christlike manner.
     
  5. LeBuick

    LeBuick New Member

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    I can buy that, but should the government stand idle and watch these executives steal the investors blind?

    I thought it was ok at one time then Bush encouraged us all to invest in 401K's which are going downhill with all this corporate greed.
     
  6. LeBuick

    LeBuick New Member

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    I apologize also and have sent you a PM.
     
  7. TomVols

    TomVols New Member

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    I wrote:
    LB bolded a part and then wrote :
    Well, dividends are typically set based loosely on performance of the company, their capitalization, future plans based on pro formas, etc., and the stock class. And who said bonuses reduce dividends? Where did that rabbit come from?

    Well, that's somewhat true. There are written contracts and implied contracts. Most of the time, sales / performance bonuses are in writing and can be changed in writing. That's been the way it's worked in my experience. I have the power to negotiate, but it's true I don't carry the clout that a union would carry at the bargaining table.
    Unions forget that they cannot exist without the company, but the company can exist without a union. Companies have forgotten that if you give away the store, those you give to will want more. GM never learned that strategy. Ask them how life's going.
    That's somewhat true. However, some states have rules regulating pensions that are backed under certain issues (annuities, for example).
    Very true. Anyone who believes the deficits of Bushbama will be wiped away with a magic wand is delusional.
    So very true. I'm not at liberty to give out the numbers, but if people will do research, they'll see that many F500 companies have CEOs who own large chunks of their company's stock. Some are done as payment, but some do this of their own invesment accord. couple of recent financial sector CEOs just bought heavy stakes of their own companies.
    Dunno who "you guys" are, but I say let the contract play out, be it a note, mortgage note, compensation agreement, etc. I do not believe the govt should bail out stupid CEOs or stupid homebuyers, FWIW. How's that for consistency :)
    I keep forgetting that we had Utopia under Clinton and Hades under Bush. Thanks to you on the left for reminding me. I appreciate that along with the reminder from the right that Bush never erred and Clinton was a ne'er do well.

    Hacking at its finest!
    The market decline may or may not be in toto due to corporate greed, but the reason Bush smartly wanted people to have PRAs was that (1) individuals should be responsible for their own retirement, (2) It was a long-term solution to a long-term problem, and (3) that the govt can't raid my 401(k) but they can raid SS and do so regularly. No one has their own SS. NO ONE.
     
  8. LeBuick

    LeBuick New Member

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    Bonuses come out the cash till so impact the bottom line. The same as hiring offshore cheaper labor impacts the bottom line. Dividends are a result of profits after all operating cost and future spending are paid. Bonuses add to the operating cost so directly reduce dividends. Especially when it's $3.4 Billion. That is a huge impact.
     
  9. Pastor Larry

    Pastor Larry <b>Moderator</b>
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    You have forgotten history. Clinton reaped the boon of a Republican congress and the dotcom boom.

    They can't take 10mill right out of the till. As officers of a publicly traded company they have silent periods on either side of quarterly reports. Furthermore, a small change in stock price means small bucks for you, but it means millions for them. So yes, they have way more at stake than you do.

    You can certainly disagree.

    This makes no sense to me. I don't follow your argument here.

    I didn't say it was good management to agree to large bonuses. I said it's not your place, nor the government's place to decide that. When it comes to home owners, people bought the house. No one forced them to buy it or to live in it. Like any other investment, there was no guarantee it was going to go up in value. And in fact, it hasn't lost any value unless you try to sell it.

    So your argument doesn't seem to make any sense here.
     
  10. TomVols

    TomVols New Member

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    You're close, but not quite there. Some general observations (very general, as this topic takes chapters in most grad level Finance textbooks):
    1. Dividend payments are not as simplistic as you would lead us to believe. Yes, bonuses come out of a company's books (not necessarily cash) but from a company's profits/budget. Performance bonus/commission costs are offset by increased sales and increased revenues. Cash reserves are not typically used for compensatory purposes, barring inadequate sources of internal financing. Bonuses/commissions are generally exempt from this because, again, they are paid from increasing profitability.
    2. Dividends come from retained earnings, which are typically disconnected somewhat from a prior year's budget constraints regarding salaries, etc. IOW, I will set the salary for 2009 in 2008 for you if you work for me. I cannot (most likely, will not) know the retained earnings (pro forma aside) until the end of the FY,say end of Q2 '09, for example, at which point a dividend will be declared going forward. By that point, salaries/compensation are already paid and/or being paid. RE represents past earnings minus previously paid dividends. This figure then provides a future base for future dividend payouts.
    3. Dividend payments are heavily regulated as to size (can't pay too much, jeopardizing capitalization for debt retirment purposes, and you can't pay too little per the IRS rules on deferred capital gains and accumulated earnings limits). So the RE will have this cost built in
    4. No question that, over time, over-budget costs in capital, debt, salaries, etc. will impair somewhat (remember #3) the RE of a firm, thereby affecting dividend payout. But that's forward, not backward, as you argue. (can't go that way per Capital Impairment regs).

    Real world example: Company X recently paid its employees a performance bonus based on increased revenue in 2008. That number was forecast and the overage was offset due to higher profits. For reasons that would require graduate level accounting credits, the company actually declared a loss for 2008. Later, due to declining financial forecasts and internal liquidity & capitalization needs, a dividend was declared that was substantially less than 2008. Remember the order. Compensation was paid based on financial plans already made and results that have occured. Dividends are paid on plans currently being made and results that have yet to occur but are anticipated.

    Should business, as you seem to believe, be as easy as the kid's lemonade stand down the street? That's a discussion for another day. Bottom line: it isn't, thanks to a million reasons (federal regulations, accounting games to comply and mitigate these, etc.).
     
  11. LeBuick

    LeBuick New Member

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    You forgot the word SHOULD. "Performance bonus/commission costs should be offset by increased sales and increased revenues."

    This is the problem, they are paying bonuses in nonperforming companies when you pay $3.4 Billion then ask the tax payers for help. If there were increased revenues to justify those bonuses they wouldn't need the tax payers help and I wouldn't be bringing them up.

    I appreciate the lesson, much of it I didn't know. But let's cut through the figures and get to the bottom line, reasonable bonuses would equal increased profitability would equal higher dividends even if just a few cents. Like the CEO, when you multiply that few cents by your numbers of stocks it makes a big difference to all investors big and small.

    I still believe the CEO should not be chairman of the board and the board should primarily be paid with stock options. With that formula, an investor can invest with confidence since the oversight committee (the board) has skin in the game.
     
  12. TomVols

    TomVols New Member

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    Well, if these aren't available, they're not paid. Same with dividends and RE, to a somewhat similar extent.
    Revenues can increase and the books can still be bad due to debt outlays and a myriad of other reasons.
    CEOs are not always board chairs. Even still, they are often voteless and sometimes voiceless. And CEOs/BoDs often have their compensation tied heavily to a company's stock.
    A year can make a huge difference. When these bonus/commissions were set in the previous budget cycle, we were in a much different environment. We didn't have the first major financial go down until very late Q3 '08. Public perception has led to pressure, though it's based on a lack of understanding and knowledge.
     
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