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Optical/IP

Fat Cats Feast, Despite Layoffs

Despite the massive layoffs and cost-cutting measures that many optical networking companies face, some experts say they're not expecting executive salaries to drop much this year.

Instead, as the year wanes and firms prepare financial statements that reveal what their top honchos took home, signs are that the news won't be heartening to many rank-and-filers who've gotten the axe this year. Indeed, it appears companies with the largest pink slip totals are among those paying their CEOs top dollar.

Take the case of Rick Roscitt, who took over as CEO of ADC Telecommunications Inc. (Nasdaq: ADCT) earlier this year (see Rick Roscitt). According to SEC filings, Roscitt negotiated a base salary of $900,000 and a signing bonus of $1,500,000 with ADC's board. He also gets a long-term restricted cash compensation package totalling $5,500,000, of which $1,500,000 will be payable on his first anniversary of employment -- February 15, 2002.

All this and stock options too. Not to mention five weeks of paid vacation. In all, Roscitt's taking away $3,900,000 in basic cash compensation this year -- higher than predecessor William Cadogan, whose cash compensation in 2000 was $2,793,572, including $750,076 in base pay, $1,994,258 in bonuses, and $49,238 in miscellaneous earnings.

Meanwhile, ADC has joined the list of companies who have trimmed over a third of their workforce. By August, ADC had cut 40 percent of its staff, roughly 9,500 employees.

ADC isn't alone, but it's tough to tell just yet whether the public companies in this sector are ready to cut their executives' pay as part of their overall cost reduction programs. In a year of increasingly gloomy forecasts and heavy layoffs, there's some external pressure to do so, but experts give mixed messages about the possibility of major change.

"I'd expect executive pay to go down, but then, I expected it to go down last year as well," says Scott Klinger, an analyst with United for a Fair Economy (UFE), a not-for-profit organization that tracks the gap between America's very wealthy and the rest of the population. He says CEO pay in the U.S. has grown 20 percent in firms that have laid off 1,000 or more workers this year.

For many execs, keeping par with last year's pay would be a boon. Prior to leaving JDS Uniphase Inc. (Nasdaq: JDSU; Toronto: JDU), Kevin Kalkhoven made $738,078 in salary and bonuses and millions of dollars worth of exercised stock options.

When Jozef Straus, the present CEO, took the helm at JDSU, he contracted for a base salary of $500,000, plus an annual bonus of up to 100 percent of his annual salary, dependent on how well he achieves his objectives.

This year, JDSU has cut 15,000 people, 60 percent of its workforce.

John Roth, the CEO of Nortel Networks Corp. (NYSE/Toronto: NT), was awarded $6,773,616 in cash compensation in 2000, including a base salary of $1,104,167, a bonus of $5,636,250, and miscellaneous earnings of $33,199. Nortel won't comment on what Roth will earn this year until its proxy statement is officially published.

This year, Nortel has announced 30,000 layoffs, and word has it, more may be coming (see Nortel: More Layoffs?).

Some companies hint at changes. John Chambers of Cisco Systems Inc. (Nasdaq: CSCO) has stated that he will be taking a base salary of just $1 this year.

These cuts aren't likely to nibble into the boss's wallet too severely. After all, Chambers made $1,000,000 in bonuses last year -- on top of his base salary of $323,319. Sources valued his stock options at more than $100 million.

While Lucent Technologies Inc. (NYSE: LU) hasn't yet published the compensation figures for its present CEO, Henry Schacht, industry sources say it's likely to be different from that of his predecessor Richard A. McGinn, who left under a cloud in October 2000 (see McGinn: McGone). But for Schacht, it won't be tough to undercut the salary levels of the McGinn era and still make a sizeable living. From 1998 through 2000, Lucent's board approved over $20 million in base salary and bonuses for McGinn. That doesn't count miscellaneous additional cash compensation and the value of McGinn's stock.

In fairness, by 2000, Lucent's board, critical of the company's stock performance, had McGinn on short rations, leaving his $1,100,000 base salary unadjusted from the year before and giving him no bonus. But SEC filings issued by Lucent this summer reveal a rich severance package for McGinn, including a $5.5 million cash lump sum, his legal fees paid, and his bank loans covered to the tune of $4.3 million. McGinn also has ongoing pension, life insurance, and retirement benefits with Lucent -- not to mention his stock holdings.

In addition, until December 1, 2001 (unless he gets another job), Lucent will reimburse him for "all reasonable costs incurred by him in obtaining, furnishing and equipping an office at a non-Company location" at up to $9,000 a month.

McGinn's not the only executive who has gotten a good severance deal from Lucent. Deborah Hopkins, the CFO who resigned her post in May (see Lucent CFO Quits, World Yawns), just over one year after she'd joined the company, was awarded a $3,300,000 lump sum this summer. Hopkins will continue to receive medical and dental insurance, car allowance, and financial counseling, paid for by Lucent for two years, if she doesn't get another job first.

All of this was awarded in addition to Hopkins' regular compensation for 2000, which totaled $5,165,298 in base salary, bonuses, and other cash compensation. In total, Hopkins was awarded over $8 million for one year's work -- not counting stock awards and options.

Lucent is certainly not the only company that continues to give out "golden parachutes." According to some U.K. newspapers, Lord Simpson, the ex-CEO of Marconi (see Heads Roll at Marconi), received $1.5 million in severance pay -- even though he has reportedly admitted responsibility for some of the company's latest financial woes. Marconi says the figure isn't valid, as it is still negotiating with Simpson.

Klinger of UFE says none of this is unusual. Top execs command big bucks, regardless of how their companies perform. "We don't see a big relationship between performance delivered and pay," he says.

Indeed, Klinger thinks technology companies may have been particularly hard-hit by a trend he has highlighted in his latest report. Specifically, after studying pay patterns for CEOs nationwide over a three-year period, he says he found a correlation between a company's stock performance and CEOs whose compensation is especially high.

"We found that if companies pay executives too much based on past performance, they tend to take higher risks going forward," he says. For instance, some execs, intent on meeting specific financial targets, are more likely to wind up pushing the limits of legality on accounting practices, or employing severe cost-cutting measures in order to meet specific short-term goals.

"It's a merry-go-round," he says. The upshot, he maintains, is that short-term gains are being sacrificed to strategies that might better benefit companies in the long run.

"CEOs justify their pay packages by saying they generate tremendous wealth for shareholders. But it’s a myth that CEOs are paid for excellence," Klinger wrote in a recent note. "Typically, their companies don’t deliver excellence. Companies with more limited wage gaps are actually better bets for shareholders."

Others say change is in the wind. "There's no doubt that salaries have gone down in general, and that CEO base salaries are getting lower," says Glen Rostie, president of The Network Mine, a search firm for networking professionals. He says any exec looking for a top-level job right now can expect most of his or her compensation to be in the form of bonsuses based on overall company performance.

— Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com
brichter 12/4/2012 | 7:46:46 PM
re: Fat Cats Feast, Despite Layoffs As someone who knows a forklift driver, if he's working 60 hrs. a week, he's making $80-85K a year!

And if your working 60 hours a week and driving a forklift for $20K a year, you think its absurd that the plant manager is making $150K a year.
Justathought 12/4/2012 | 7:46:50 PM
re: Fat Cats Feast, Despite Layoffs Optitude, Nandaze et al.
There is a tendency here that we end up with a sandbox-style, my-daddy-is-stronger-than-yours discussion and that may not be all that meaningful but allow me just a thought:

The former title of this discussion is somewhat misleading, neither Carmack nor myself invented it. Americans rightfully react to that title's blunt characterizations (inequity and corruption) of their country. This is probably neither the time nor the place for any criticism of this country, even though Carmack's points about the distribution of wealth and the judicial system in the US in my opinion seem well founded. An all-out satisfaction with the American way of life is fully understood and shared by many immigrants, particularly from the developing part of the world. However, those arriving from e.g. Canada, Australia and Europe may already have enjoyed the benefits Optitude listed, in their countries of origin. The "CAE"-immigrants, often well educated but opportunistic, are attracted by the higher pay-offs on their degress in the US. Still, they are not necessarily as content with the distribution of wealth, the related crime rates and the legal system (yeah I know, tell them to like it or leave).

Now, we all realize we can't both eat the cake and have it. Hence, the fact that most people from US, CAE and all other parts of the world for that matter, are all for their respective systems, doesn't prevent them from enjoying work outside their home country, learning from the experiences of others. America remains the land of opportunity, maybe partly because of the different perspectives immigrants bring to the table - not only Native Americans deserve credits for the greatness of our country.
Optitude 12/4/2012 | 7:47:43 PM
re: Fat Cats Feast, Despite Layoffs My coworkers and I have gotten big laughs from this Carmack character. We have to agree - his claims are those from someone who has no innate critical thought. And this is coming from an ASICs team of Pakistanis and Indians.

Carmack - if indeed you are a fellow foreigner, you are a laughing stock to all of us who have come to the United States so that we can do things like vote for our leaders for once, enjoy a just legal system, and live with a plurality of opinions. You no doubt can have your opinions however hilarious they are, but do not pretent to represent the (now near-majority!) immigrant population in the US.
nandaze 12/4/2012 | 7:47:44 PM
re: Fat Cats Feast, Despite Layoffs Carmack,

I have to agree with my fellow American. You spout out trite comments.

I have a Master in International Relations. I have lived overseas and speak two other languages fluently. I've been in International Business for the past seven years.

And I encounter people like you all the time.

You feel that since you've read a few books and visited the States, that you know us better than we know ourselves. You believe that we are ill-informed and uneducated, and that if only we knew what you knew we would not speak as we do. Look at all that lobbying. Isn't it terrible that in a capitalistic society the owners of the capital have so much say? Look at those executions. You're thinking, I'm so glad that I live in a civilized nation that believes in life time imprisonment. No chance we'll execute innocent people, we'll just lock them up the rest of their lives. I'm so superior to you, and I'm glad to mention this and many other salient points to my American friends whenever they come to visit me. I'm sure they enjoy my outside perspective, don't they?

God, you make me sick. You are full of sh#t. I'm so tired of you guys. Do you ever wonder why Canadiens wear their flag all the goddamn time when they visit Europe? So they don't have to hear that cr#p all the time from guys like you. Get a life.

We are a land fiercely protective of our individual liberties. We believe in secular not theocratic governing. We believe in the freedom of the press, the freedom of expression, and in the right to choose our leadership through democratic processes. We are fundamentally a good people.

We are not a land of corruption and inequity.

We are proud of our country. Why don't you shut the hell up. Geez.

The Carmack 12/4/2012 | 7:48:18 PM
re: Fat Cats Feast, Despite Layoffs Carmack - I abandoned constructive terminology when you began insisting that corporate america runs washington dc, that we are all killers of the innocent, etc.

I never said either of these things. I clearly said that corporations have too much (IMO) influence when it's the people who are supposed to have influence. Everyone already has a vote as an individual. Why do some people need extra votes just because other people work for them? Sure they're not votes per se, but the lobbying money is as good as votes, and often better. I am entitled to the opinion above, and I should not be insulted simply because I have that opinion.

As for the second generalization you made, I did not say that "America kills the innocent". I said there is a chance that the innocent may get executed if you execute people. If you think that never ever happens, you are the one deluding yourself.

I sadly need to stick to my assertion that a) not enough oxygen is getting to your brain or b) you are trying to get a rise out of everyone by heeping insult onto americans and how we live or c) you have deep, deep problems with, or hatred of, the United States. You are clearly entitled to suffer from one or all of the aforesaid coniditons.

Bigotry will get you nowhere... Who's making the inflamatory personal attacks again?

The claims you make are far more profound and injurious than my harmless nicknames for you.

BS. Do you claim that just because I disagree with how much power lobbyists have, and that *maybe* I disagree with state-sponsored executions of criminals, I am a "mentally challenged"? I haven't said anything that many other people in your country don't say already, and have the *right* to say. I think it's clear that you are a kind of person who can't take somebody disagreeing with them on a "big issue". The points I made were just that, points in a debate, not insults.

Calling people names is not acceptable in a debate, once you learn that perhaps you will find people willing to continue conversations with you. See ya.
Closed Borders 12/4/2012 | 7:48:23 PM
re: Fat Cats Feast, Despite Layoffs Carmack - I abandoned constructive terminology when you began insisting that corporate america runs washington dc, that we are all killers of the innocent, etc.

I sadly need to stick to my assertion that a) not enough oxygen is getting to your brain or b) you are trying to get a rise out of everyone by heeping insult onto americans and how we live or c) you have deep, deep problems with, or hatred of, the United States. You are clearly entitled to suffer from one or all of the aforesaid coniditons.

The claims you make are far more profound and injurious than my harmless nicknames for you.
SPecial_Guy 12/4/2012 | 7:48:24 PM
re: Fat Cats Feast, Despite Layoffs Ordinarily I wouldn't weigh-in on this debate because I don't really have a leg to stand on in the area of executive compensation. I am not and probably never will be a CEO. Nonetheless, from the number and content of the existing posts, I figure I can drop in my two cents and I won't be too far from the existing posters on background. I apologize in advance to anyone I offend with this opinion because of my plebian place in the world. I am after all only an engineer.

My preposterous opinion follows:
Executive compensation, particularly in networking, is probably in line with the wildly unrealistic expectations of growth that the board projects onto corporate leadership. So few guys (or gals) are lucky enough to meet the street and their investors expectations quarter after quarter that many boards seem to have resorted to paying smart people for short lucky stints, followed by what is often times an early retirement at the hands of a naturally cyclical market. As an engineer I take a pragmatic view of the markets and am constantly amazed by the number of intelligent people, nay geniuses, who get caught up with the idea that financial statements are corporate America's analog of grades in management school. Personally, I think it is time to temper the use of pseudo-scientific valuation models and other growth projection instruments and increase awareness of the social values of a company as they pertain to improving general economic conditions and perhaps some social situations. Once we start doing that, I think salaries and other inequities in today's system will improve.

By the way, I'm a Texan so my comments should in no way be used to infer a socialist streak. I am a capitalist in a Texas-size way, but I do like Galbraith nonetheless.
The Carmack 12/4/2012 | 7:48:26 PM
re: Fat Cats Feast, Despite Layoffs Wish this were a rewarding exchange, but I have learned nothing from your inflammatory points.

Likewise.

As for inflamatory points, go back and see how many times you've insulted me personally and how many times I wrote things like "mentally-challenged", you'll notice that the futility of the exchange is entirely your own fault. Or maybe you won't...
The Carmack 12/4/2012 | 7:48:26 PM
re: Fat Cats Feast, Despite Layoffs Here, I'll make it really easy to tally up the "inflamatory points".

Personal attacks by The Carmack:

- Doesn't your bible say "thou shall not kill"?
- Enough already with the Alice references, try reading some other books...

Personal attacks by Closed Borders:

- Justathought - why do live here, if you have paranoid delusions that John Chambers and John Roth choose your political leaders?
- You subhuman idiot!
- Justathought - why doesn't Harvey sell you his ticket to Kabul, you kneejerk bleeding heart stone thrower?
- Have you ever been to the States? Seems that you haven't. Do you live in a Muslim police-state?
- The mystical world to which you refer must come from a chapter in Alice in Wonderland
- For you to say our companies choose our leaders is way-beyond retarded fallacy
- I think it is because you are looking to get a rise out of the LR readership.
- You clearly have not been to the States since the 1800's. No need for you to lie here. We stopped doing witch trials 200 years ago. The vestiges of our founding fathers are nothing more than vestiges.
- Wow - which chapter of Alice in Wonderland is that?
- And in this chapter of your Alice in Wonderland novel, you will probably tell me you have the lowest crime-rate in the world without execution - congrats, you PATHOLOGICAL LIAR!!!!!!!!!!
- Carmack - my severely mentally-challenged friend
- However, I have to say, all of your arguments lack credibility or good example. You clearly have no awareness of how mindlessly drivel-full your comments are (eg - America kills its own mercilessly, the big corporations choose my politicians.)

And now I hope you see the irony of you claiming:

- Wish this were a rewarding exchange, but I have learned nothing from your inflammatory points.
Closed Borders 12/4/2012 | 7:48:28 PM
re: Fat Cats Feast, Despite Layoffs Carmack - my severely mentally-challenged friend:

I lived overseas for half of my life. Thanks for the offer, but I don't think spending more time overseas is going to do anything much more for me.

I enjoy being convinced of other's views in the back-and-forth of dialog. However, I have to say, all of your arguments lack credibility or good example. You clearly have no awareness of how mindlessly drivel-full your comments are (eg - America kills its own mercilessly, the big corporations choose my politicians.)

Wish this were a rewarding exchange, but I have learned nothing from your inflammatory points.
Belzebutt 12/4/2012 | 7:48:31 PM
re: Fat Cats Feast, Despite Layoffs I speak from experience. Yes, there are CEO's who are crappy getting high salaries, and the opposite is true too. In general though, there is pretty good correlation between company performance and total compensation for execs. It's not by virtue of careful selection, but strategy.

I hope you are right, and that these boards handing out big paychecks and golden parachutes are just an accounting irregularity. Of course this already happened in the past before the bubble, recall Apple's last CEO (Amelio??) who was also handed a golden parachute when there was no bubble to ride on.

Anyway, hopefully most of them get what they deserve, and indeed, running a company and promoting its image is a huge and immensely important job, that should get lots of $$$ associated with it. It's just that lately the impression has been that lots of $$$ comes independant of success. But this point has already been made so I don't want to go in circles. Your point is taken.
lighthearted 12/4/2012 | 7:48:31 PM
re: Fat Cats Feast, Despite Layoffs why let the analysts who meet with the ceos off the hook? surely, you could have included them in one of your points. or, perhaps, they deserve a point of their own!!
The Carmack 12/4/2012 | 7:48:31 PM
re: Fat Cats Feast, Despite Layoffs Nor is the FBI or CIA proud that they failed to catch in a timely fashion the terrorists that killed three of my classmates and 6,800 others.

I'll take your incessant attacks on me as spoken in anger at the tragic loss of friends. No hard feelings.

PS. Enough already with the Alice references, try reading some other books... I suggest non-fiction works on foreign countries, you may be less prone to saying "go back where you came from" after finding out that the world outside America isn't so bad.
netskeptic 12/4/2012 | 7:48:34 PM
re: Fat Cats Feast, Despite Layoffs (1)Life in general is a grossly unfair exercise, it is time to get over it.

(2)All the pyramid schemes are destined to fail one day, so NASDAQ cannot be an endless source of free money, it is time to get over it.

(3)Having incompetent CEO is the surest way to drive any business under. Offering a lot of dough does not guarantee a competent CEO, not offering a lot of dough guarantees an incompetent CEO. Most people are incompetent and most CEOs are incompetent too, so it is simply unavoidable that most companies are paying a lot of dough to a complete morons, if you still did not get over it go to statement (1) above

Thanks,

Netskeptic

Mary Jander 12/4/2012 | 7:48:34 PM
re: Fat Cats Feast, Despite Layoffs For the record, JDSU told me Tuesday 9/25 that there have been no adjustments to Jozef Straus' salary, that rumors otherwise are pure speculation. Still, it may be worth watching over the next few weeks to see whether any changes materialize.
Scott Raynovich 12/4/2012 | 7:48:35 PM
re: Fat Cats Feast, Despite Layoffs Peter--Mary looked into this and apparently it wasn't true.
Peter Heywood 12/4/2012 | 7:48:36 PM
re: Fat Cats Feast, Despite Layoffs Light Reading has received a note from someone who appears to work for JDSU saying:

"Actually J. Strauss has foregone his salary this year and requested that his salary be paid out as employee bonuses to deserving employees instead."
butYouYes 12/4/2012 | 7:48:36 PM
re: Fat Cats Feast, Despite Layoffs I ask to my self: If the top execs have everything paid - car, medical insurance, houses, offices,... - why do they need so much money to live?
Closed Borders 12/4/2012 | 7:48:37 PM
re: Fat Cats Feast, Despite Layoffs >> Really, I thought you had a job because your employer makes money...


Wake up. Every country has some form of lobbying. It's like saying that human society has no human nature to say that politics and government have no lobbying. As long as government extends beyond coverage of the individual (hence my voting rights) to coverage of other entities (hence their lobbying) you will see some form of lobbying in every square inch of the world. The mystical world to which you refer must come from a chapter in Alice in Wonderland if you claim your, or other, countries do not have lobbying. We have the best type of lobbying - it is easily visible, exposed in its excess, and constantly under scrutiny - unlike most others. Also, I must say, I have never seen a guy named "Cisco" go to the voting booth. For you to say our companies choose our leaders is way-beyond retarded fallacy.


>>> Hence the point about inequality in the US... some people can get fired for screwing up orders of fries, others will get several $ million in severance for doing a million times more damage.


You have your cause and effect reversed - I think it is because you are looking to get a rise out of the LR readership. Rich McGinn may have been erroneously overpaid for a couple of quarters, but nobody is proud of that, nor would anyone stand up for it now they know what harm he has done. They did not pay him because he perfomed poorly - they paid him well because they thought the future of Lucent under his leadership was very promising - an example of egregious oversight...Nor is the FBI or CIA proud that they failed to catch in a timely fashion the terrorists that killed three of my classmates and 6,800 others.



>>> Easy with the attacks there. If you have such separation of church and state, why does every government speech end with "God bless America"...BLAH BLAH BLAH...


You clearly have not been to the States since the 1800's. No need for you to lie here. We stopped doing witch trials 200 years ago. The vestiges of our founding fathers are nothing more than vestiges. And you live in a country with clearly, physically demarcated lines encircling the popular religions from government?!!! Wow - which chapter of Alice in Wonderland is that?

That your country does not execute is your own decision. People who feel that serial rapers-and-killers of pre-teenage girls should have a chance at rehabilitation have voted in the US - in some states they are the majority, in others they are not, and thus execution is legal. And in this chapter of your Alice in Wonderland novel, you will probably tell me you have the lowest crime-rate in the world without execution - congrats, you PATHOLOGICAL LIAR!!!!!!!!!!
HarveyMudd 12/4/2012 | 7:48:38 PM
re: Fat Cats Feast, Despite Layoffs I completly agree with your sentiments.

Some of the companies AT&T offer large benefits to their board members making sure that the board does not take any adverse action. Shareholders can not take any action either.
77thlightguy 12/4/2012 | 7:48:39 PM
re: Fat Cats Feast, Despite Layoffs Beez...

I speak from experience. Yes, there are CEO's who are crappy getting high salaries, and the opposite is true too. In general though, there is pretty good correlation between company performance and total compensation for execs. It's not by virtue of careful selection, but strategy.

That's because the bulk of exec comp is options. As it should be. The CEO should be motivated by the thing he/she is supposed to maximize. The options plans I have seen are generally four years, with annual perks for making or exceeding plan, like cash for making sales, etc. So there is a short term and a long term objective, and they used to be pretty balanced.

Problem is, with the bubble, boards got overly generous. They thought the bubble was never going to end, just like everyone else. So big exec comp packages were rolled out, and signed. That's a contract. Now its time to pay the piper, and the market is in the crapper. Still have got to pay cash for last years sales, even though this years are zero. Options too, but they are probably underwater. There is some justice.

77
The Carmack 12/4/2012 | 7:48:40 PM
re: Fat Cats Feast, Despite Layoffs Yes, my employer lobbies, and that is one of the reasons I have a job...but they do not own my vote.

Really, I thought you had a job because your employer makes money. In our system the people are supposed to elect their leaders and tell them what they want, not the "employers" (whoever that is). Lobbying is a perversion of the system. It puts lots of power in the hands of very few, when we supposedly pride ourselves in our equality.

Good point, no excuse for that...

Hence the point about inequality in the US... some people can get fired for screwing up orders of fries, others will get several $ million in severance for doing a million times more damage.

Yes it does, but we enjoy separation of church and state. Have you ever been to the States? Seems that you haven't. Do you live in a Muslim police-state?

Easy with the attacks there. If you have such separation of church and state, why does every government speech end with "God bless America", with frequent "let us pray" moments? God is even printed on your currency. Not so separate is it. And yes I have been to the States. There are countries that have true separation between church and state, the US isn't one.

Besides, how is the separation of church and state any excuse? Their government kills its citizens for violating laws, yours does too. Some governments do not, period. There is zero chance of executing innocent people in those other countries, unlike in yours or in Afghanistan. The point is the system in the US is not as clean and just as many people believe it to be.
Closed Borders 12/4/2012 | 7:48:41 PM
re: Fat Cats Feast, Despite Layoffs >> Ever heard of campaign contributions or lobbying?

Yes, my employer lobbies, and that is one of the reasons I have a job...but they do not own my vote.

>> What has Richard McGinn done to deserve $5 million severance pay and a lifetime pension? Ran the largest US telecommunications company into the ground and costs thousands of people their jobs.

Good point, no excuse for that...


>> Doesn't your bible say "thou shall not kill"?

Yes it does, but we enjoy separation of church and state. Have you ever been to the States? Seems that you haven't. Do you live in a Muslim police-state?
The Carmack 12/4/2012 | 7:48:41 PM
re: Fat Cats Feast, Despite Layoffs Justathought - why do live here, if you have paranoid delusions that John Chambers and John Roth choose your political leaders?

Ever heard of campaign contributions or lobbying?

Justathought - so you're saying Jack Welch has not earned his "more-than-a-burger-flipper" salary. Look around your kitchen - GE has invented 2/3 of what you see. You subhuman idiot!

What has Richard McGinn done to deserve $5 million severance pay and a lifetime pension? Ran the largest US telecommunications company into the ground and costs thousands of people their jobs. Hey, if you give CEOs the credit for successes, you have to give them credit for the failures. It seems like most of them are not accountable in any way for their failures. If their job doesn't imply accountability for failure... maybe they don't deserve to get 100 x the salary of a regular guy.

Justathoug - Hmmmm - which process involves a jury of peers, and usually months, if not years, of deliberation?

Doesn't your bible say "thou shall not kill"?
itworksallthetime 12/4/2012 | 7:48:41 PM
re: Fat Cats Feast, Despite Layoffs How about compensation where salary is fixed at some reasonable number - say, 120k and perks. Options that are directly tied to performance with three tiers - short term , medium term and long term. Most weightage is given to long term - this rewards consistent good performance.

Also, a system of penalties where if you screw-up then you basically end up with a reduction in the number of options you got. This should take care of consistent bad performers orlet us say objectively-challenged CEOs.

After all, the CEO is responsible for the long term performance/ non-performance of the company. And, if you leave the company then nothing because you just decided you have no/ less interest in directly contributing to results.
Closed Borders 12/4/2012 | 7:48:42 PM
re: Fat Cats Feast, Despite Layoffs >> Just because our large enterprises may have a say on who to pick for our government doesn't mean we're corrupt...

Justathought - why do live here, if you have paranoid delusions that John Chambers and John Roth choose your political leaders?


>> To call us inequal when the fine leaders of our industry are paid no more than a modest 500 times the pay of the guy flipping burgers, is outrageous.

Justathought - so you're saying Jack Welch has not earned his "more-than-a-burger-flipper" salary. Look around your kitchen - GE has invented 2/3 of what you see. You subhuman idiot!


>> And Harvey - don't you dare draw a parallel between the barbarian executions in Kabul and the human way we put people to sleep down in Texas - that would be just too much.


Justathoug - Hmmmm - which process involves a jury of peers, and usually months, if not years, of deliberation? Justathought - why doesn't Harvey sell you his ticket to Kabul, you kneejerk bleeding heart stone thrower?
Justathought 12/4/2012 | 7:48:43 PM
re: Fat Cats Feast, Despite Layoffs I completely agree. Just because our large enterprises may have a say on who to pick for our government doesn't mean we're corrupt. To call us inequal when the fine leaders of our industry are paid no more than a modest 500 times the pay of the guy flipping burgers, is outrageous.
And Harvey - don't you dare draw a parallel between the barbarian executions in Kabul and the human way we put people to sleep down in Texas - that would be just too much.

-----------
Hi Harvey:

Why don't you use the return-portion of your ticket to Afghanistan. You should make it back in time for the execution of the week in the Kabul soccer stadium.
Belzebutt 12/4/2012 | 7:48:44 PM
re: Fat Cats Feast, Despite Layoffs If your CEO does not get the company rolling, products out the door for profits, he gets to lose his job too. So if he can't get sales, he has to cut costs. In this market, getting sales is very very hard. Even if he cuts costs, and makes sales, he may lose his job. It may not be good enough to satisfy the companies investors.

I used to think that too. After reading that article though, it seems to me that most CEOs get paid bonuses no matter what. And these severance packages of millions, plus life-time benefits? You're going by the premise that "the CEO will get fired if he does bad". Excuse me, but how is McGinn's firing package supposed to be a deterrent? It's more like a great reward.

They are supposed to get paid what the market determines they are worth. But it seems like that is not happening at all, it seems like there is very little risk in their job. If their job has so little risk then they get paid way too much, and not because they have special abilities, but because they are part of a little club.

If CEOs were really getting paid market price, I wouldn't complain.
loosemoose 12/4/2012 | 7:48:46 PM
re: Fat Cats Feast, Despite Layoffs Getting paid for what you're worth is somewhat dillusional. Going back to the message in my prior posting, corporate boards of public companies have been all too willing to let the man (or very few women) at the top set their own salaries.

Over the past 20 years smart CEOs have been able to find loopholes in compensation and make the best of it. In the meantime, most boards don't have the guts to say "no."

I'm all for everyone getting as much as they deserve, but when the price of a CEO's hefty bonus is to trim 30% of the company's workforce, something is out-of-whack. Sure, in some companies you're getting rid of the lower performing workers, but a lot of time a lot of corporate knowledge is walking out the door.

There will be no solution to this problem until shareholders begin to demand more accountability on the parts of those running the companies. And most shareholders I know only care about buying low and selling high, rather than investing in what they believe is a well-ran company.

LM
fk 12/4/2012 | 7:48:47 PM
re: Fat Cats Feast, Despite Layoffs Such naivity is charmingly refreshing. You're paid what they think they can get away with paying you. Ability, motivation and choices do factor into things to a greater or lesser degree, but opportunity is at least as important as any of these. Luck is also a much larger contributor to takehome pay than most people would care to admit.

Very few people are ever paid more then they are worth for very long.

This assumes a perfectly efficient market, which, for better or worse, is nonexistent. There are plenty of people, who, like Rich McGinn, get paid much more than they're worth for an inordinate period of time. Consider other market distorting factors, such as membership in a union, which can insulate a non-performer from the consequences of failure to perform. Tenure, in some professions, serves the same purpose. The simple fact of the matter is that the market is imperfect because it is subject to various distortions. At the executive level, the "good old boys' network" can drastically affect one's level of compensation.

In theory, it's all about supply and demand, skill and performance, etc. In practice, there are so many other factors to consider that to consider only the theoretical is hopelessly facile.

leer 12/4/2012 | 7:48:49 PM
re: Fat Cats Feast, Despite Layoffs And if your working 60 hours a week and driving a forklift for $20K a year, you think its absurd that the plant manager is making $150K a year. The difference is the result of ability, motivation and the consequence of choices. Sport figures, actors and CEOGÇÖs make relatively, tremendous amounts of money simply because their execution impacts millions of lives for the better or worse. Very few people are ever paid more then they are worth for very long.
nobollox 12/4/2012 | 7:48:51 PM
re: Fat Cats Feast, Despite Layoffs The concepts in business are simple, yet cogent. Supply and demand, risk vs reward, visbility vs accountability.

It is a balance of all aspects, whether apparent or disguised. CEO's don't just appear out of nowhere. They have proven track records, the ability to lead people, and a good sense of the overall macro & micro economies. The key to making money is having people and businesses work for you, not you for them.

It is very easy for an engineer to feel disrespected or unfairly compensated with such a huge disparity is wages. However, when do you see that engineers name in the Annual Report of a company. Let's just hypothesize that an engineer sets a goal and does not accomplish it on time. To the outside world, who do you think gets blamed for the pushback in timelines, milestones, sales objectives, relationships with customers, etc. Let's say there are a 500 engineers, 100 sales people, 150 manufacturing people, 12 executives, etc, that to the outside world, has one figurehead and liason. Companies should want a CEO that smybolizes and represents their company. Somebody who can manage/envision/empower/motivate people, not replace a highly educated and seasoned engineer.

I say neither job is easy. It is a matter of scope, responsibility, visibility, reputation, business sense, skill sets and a pervasiveness.

The wage gap may not be fair, but the stress, dedication, lifestyle (family life included, or lack thereof), etc., that follow might not be either. If you happen to be like one of these people are currently an engineer, keep it up, and you won't be for long.

Background about myself - young, non-executive, financial person, working for a large corporation.
GJ 12/4/2012 | 7:48:53 PM
re: Fat Cats Feast, Despite Layoffs isn't who is worth how much or where the grass is greener. The issue is the compensation package. In most companies, the top execs are the only ones who get any kind of option package and most of their income is based on the stock price. If the price tumbles, the self interest of the CEO says to lay off as many as needed to bring the price back up and then sell. Employees suffer, customers suffer, and long term, the shareholders suffer. But that's the way it works and we all know it. So the solution is equally simple - stop giving these people stocks - just pay them a flat salary and maybe corporate America will stop bowing to the whims of a bunch of Wall Street brokers. WOW - a stable economy!
litehearted 12/4/2012 | 7:48:53 PM
re: Fat Cats Feast, Despite Layoffs I bet you love the freedom you have to spew your venom at this time. There are poor and homeless everywhere in the world. Ask your commie and socialists buddies about how well the world treats them. The Afghans do a great job with the helpless and poor. They have made the whole country live in the same economic condition. Helpless and poor.


Hi Men, What do you expect from America. It is a land of corruption. Screw the helpless and poor people.
rahulak 12/4/2012 | 7:48:57 PM
re: Fat Cats Feast, Despite Layoffs After reading this article and most of the messages, I am convinced that the easiest thing to do in this troubled economic environment is to become a CEO and hit a fortune. Jack Welch, Bill Gates, Scott McNilley, Larry Ellison and even Warren Buffet really appear to me plain luckey to have 'hard working' people who brought their respective companies to their present laurels, obviating any contribution from these do-nothing guys.

So most of us should be doing what is really so obvious. Getting financing is so easy with many 'ignorant' VCs just finding an excuse to throw money at us. Managing investor relations and Wall Street analysts again is a cake walk as they too 'don't-know-anything'. Sales and profits will be taken care of by 'hard working employees who deliver the goods'. In any case, if something goes wrong, you can always fire the 'innocent' employees and continue to 'fleece' the companies! In conclusion, CEO's is an armchair job with fat salaries!

SO WHAT ARE THE CRITICS WAITING FOR? GET YOURSELVES APPOINTED AS CEO OF AN EXISTING COMPANY, ELSE START A COMPANY AND BE THE CEO!!!

LET US FOLKS KNOW HOW YOU FARE ON THIS 'DO-NOTHING' ASSIGNMENT.
[email protected] 12/4/2012 | 7:49:00 PM
re: Fat Cats Feast, Despite Layoffs Hey Harvey.....


piss off. Why don't you tell us where you hail from and we'll be happy to point out the pimples on your collective butts.
77thlightguy 12/4/2012 | 7:49:00 PM
re: Fat Cats Feast, Despite Layoffs You can tell from the postings who knows what they are talking about, and someone just blowing air.

Harvey: I presume you have lost your job. I am sorry for that. Your CEO or manager probably thought that the rest of the company could get along better without your services. Given your ingratitude for being given the job in the first place, I guess I can understand some of his reasons for picking you versus someone else.

Nobody owes you a living, much less a job to pay the rent, and much less a good career, just like nobody owes your company anything.

Where do you think the money in your company comes from? How much of it do you think there is?

If your CEO does not get the company rolling, products out the door for profits, he gets to lose his job too. So if he can't get sales, he has to cut costs. In this market, getting sales is very very hard. Even if he cuts costs, and makes sales, he may lose his job. It may not be good enough to satisfy the companies investors. Yes, I am afraid they get the boot for the markets problems. CEOs are supposed to pull rabbits out of hats.

Do you think CEOs like to sack good people? The answer is no. Even sacking someone that really deserves it is very hard. They may have a family that depends on them. If they are bad, it is really tough, because you know they will have a hard time getting another job.

Grow up...or move to some place in the world that feels it owes you a living just for being alive.

That would be: nowhere.

77
Jon Bon Jovi 12/4/2012 | 7:49:00 PM
re: Fat Cats Feast, Despite Layoffs Hi Harvey:

Why don't you use the return-portion of your ticket to Afghanistan. You should make it back in time for the execution of the week in the Kabul soccer stadium.
HarveyMudd 12/4/2012 | 7:49:01 PM
re: Fat Cats Feast, Despite Layoffs Hi Men, What do you expect from America. It is a land of corruption. Screw the helpless and poor people.
[email protected] 12/4/2012 | 7:49:01 PM
re: Fat Cats Feast, Despite Layoffs A good CEO should not come cheap. If they deliver results for their shareholders, they should get paid. Capitalism measures success in terms of metrics like P&L, ROI, and shareholder value.

However,

Good CEOs are those that can lead people based on vision, inspiration and calling forth the best in others. You don't need to slash and burn, exploit, threaten or abuse people to get to the promised land. My feeling is that most of the CEOs out there spend too much time reading Tom Peters, Micheal Hammer or even Mr. Welch trying to figure out what it means to manage. A lot of the CEOs in the Optical space were nothing but profiteers with the sole objective of getting to IPO or a pawning off a piece of crap company on larger entities who fell asleep at the switch.
Jon Bon Jovi 12/4/2012 | 7:49:04 PM
re: Fat Cats Feast, Despite Layoffs Judging by green's current and past postings, s/he is a self-consumed top level exec sh*tting bricks because s/he is also enjoying inordinate profiteering at the expense of the people who truly deliver the company to success - the engineers and others underneath him/her. We all hope you get your come-uppance soon!

But the question is - does green merit the bonus fk outlines in sh*tting a brick:

"1. Wipes self after defecating: $200,000
2. Washes hands: $100,000"


>>> the price of a good or service is determined by the supply and demand curve. The CEO's like any other employee are doing a service and their compensation is determined by the market dynamics. so instead of complaining like a bunch of commies go out there and get into the top 10%.
read Jack Welche's "Jack straight from the gut" if you have some time left after your whining..
loosemoose 12/4/2012 | 7:49:06 PM
re: Fat Cats Feast, Despite Layoffs An article in one of this summer's issue of the Harvard Business Review tackled this subject.

Seems that most publicly held companies hire Executive Compensation consultants to lead their board's compensation committee. Most of these compensation committees (made up of board members) have very little experience in the human resources area, so it's very easy for a consultant to find reasons to pay these big salaries.

In the end, who is responsible for paying these consultants? The executive getting the big pay off, that's who!

The article's message was that shareholders need to wake up and smell the coffee - often the more the executive takes home, the less the shareholder end up getting.

Face it - we need to return to the days when executives drew a regular salary, and get bonuses ONLY when they do their jobs right - turning a profit. There is only one way to make this happen, don't throw the proxy in the trash - read it and exercise your rights as a shareholder!
green 12/4/2012 | 7:49:07 PM
re: Fat Cats Feast, Despite Layoffs the price of a good or service is determined by the supply and demand curve. The CEO's like any other employee are doing a service and their compensation is determined by the market dynamics. so instead of complaining like a bunch of commies go out there and get into the top 10%.
read Jack Welche's "Jack straight from the gut" if you have some time left after your whining..
gardner 12/4/2012 | 7:49:07 PM
re: Fat Cats Feast, Despite Layoffs I've never understood how top executives at companies that are doing poorly can get multi-million dollar bonuses.

Because people have been conditioned for years to accept a winner take all society. It is an unquestioned assumption of any hierarchical society that the spoils go to those who are high up on the totem pole. It was that way under communism and it is that way under capitalism. Performance is the excuse for allocating the resources unequally but it is merely a pretext and always has been. Every year or so Business Week does front page article about the most overpayed CEOs. They've been doing it for years and will continue to do it until people put their foot down and demand that it be different. I think change is more possible now because knowledge workers are in a better position to argue their case. They are sophisticated and articulate and can refute the fallacies that CEOs and other executives use to make their obscene pay seem like a natural and positive consequence of an efficient market.
fk 12/4/2012 | 7:49:08 PM
re: Fat Cats Feast, Despite Layoffs I've never understood how top executives at companies that are doing poorly can get multi-million dollar bonuses. You have companies that layoff tens of percents of their employees, have sequentially smaller profits (or even losses) and for this the boss gets millions? Sweet work if you can get it.

What are the bonuses for, when the company is hemorraging money? How do they write the contracts for these positions?

1. Wipes self after defecating: $200,000
2. Washes hands: $100,000
3. Loses less than $10M: $1M
4. "Rightsizes" more than 20% of staff: $750,000
5. Gropes less than three subordinates: $350,000
Jon Bon Jovi 12/4/2012 | 7:49:09 PM
re: Fat Cats Feast, Despite Layoffs What a pathetic board to have accepted his package.

Someone should challenge him to donate $1m in his first year salary to the WTC firefighters. He'd still have millions left from his first year.

Whatever happened to great corporate chieftains who, out of concern for their companies, took cuts?

Makes me sick...
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