本帖最后由 swolf54 于 2009-10-26 14:55 编辑
这周的DEBATE是关于CEO工资的问题，阅读上没有太大的难度，词汇和用法也不是很陌生。只是BACKGROUND的两篇有一些看不懂，需要继续加强练习。在两个作者的DEBATE中有一些句子可以用在argument中，还是多不错的。
TOPIC: The opposition's rebuttal remarks
BACKGROUND
Pay and politics
Aug 6th 2009
From The Economist print edition
So far, Congress is taking a surprisingly sensibleapproach to the problem of pay
Illustration by David Simonds
THE boardrooms of America were ready for misery.
Whatelse could result from Congress’s fury at runaway executive pay, outrageousWall Street bonuses and handsome rewards for failure? The bosses canbreathe a little more easily. The Corporate and Financial InstitutionCompensation Fairness Bill that won a healthy majority in the House ofRepresentatives on July 31st turned out to be remarkably restrained—in someways even too restrained (see article). However, withthe Senate still to look at the legislation and the practical details of itsimplementation to be hammered out, there is plenty of time for that to change,for better or worse.
Despite the usual complaints about government heavy-handedness fromRepublicans and business lobbyists, the Housebill contains none of the expected attempts to impose detailed limits on thesize or structure of pay that would merit such alarm. Instead, as Barney Frank,the chairman of the House financial-services committee, puts it, “The questionof compensation amounts will now be in the hands of shareholders and thequestion of systemic risk will be in the hands of the government.” Thisdivision of labour is right in principle. The difficult bit will be making itwork in practice.
The shareholder part of the bill is fairly straightforward: shareholderswill have the right to vote each year on the compensation packages and any golden parachutes of senior executives. Criticssay this may allow what ought to be business decisions to become politicised,as activist shareholders—notably union pension funds—make mischief. But the experience in Britain, whereshareholders have had exactly the same “say on pay” that the House voted for,suggests the opposite danger: that shareholders will rarely vote against a paypackage and that when they do their vote, being merely advisory, will beignored by management, as the board of Royal Dutch Shell did in M ay. Perhapsthe vote, on both sides of the Atlantic, should be made binding. Even thatwould make little difference unless ways can be found to persuade institutionalshareholders to vote for pay packages that serve their long-term interests.
The problemwith financial pay
The other prong of the new legislation has the greater potential to gowrong. As defined, it is hard to quibble with.It gives financial regulators the right to obtain information about theincentive structure of pay in financial institutions, and to opine on whetherthat structure poses a risk to the stability of the financial system. Fairenough. After all, banks are different from other sorts of companies. And itseems pretty clear that badly designed pay arrangements contributed to thefinancial crisis: bankers, brokers and traders were rewarded handsomely fordoing risky deals without being financially exposed if the deals went wrong.
But there are dangers. Systemic risk is due to be considered separatelyafter the summer recess. Pay rightly should be part of that discussion: bankswith risky pay structures need more capital than thriftier ones. But thesystemic regulator will surely come under pressure to rule on specificindividuals’ salaries for political reasons (ie, because the public thinks abonus is outrageously big, not because it is endangering the system). As the“special master” appointed by Barack Obama to rule on pay in firms receivinggovernment bail-out money is discovering, this is a hopeless task. Theinconvenient truth is that banking will pay its best performers the sort ofsums that outrage the public. The House bill makes it clear that it does notwant the systemic-risk regulator to rule on the amounts of pay, only the wayincentives are structured. Good. Now it is time to see if the Senate will be aswise.
The moderator's opening remarks
Oct 20th 2009 | Adrian Wooldridge
One of the few things that anti-globalisation campaigners and stockmarketinvestors agree upon is that executive payis out of control.
It is not hard to understand this shared outrage: executive pay hasexploded since the 1980s. For most of the postwar era executives earned a fewmultiples of the median pay. But thereafter, starting in America and slowlyspreading to the rest of the world, the multiples increased exponentially.Today many American workers earn in a year what their boss takes home in anevening.
Isn't this a disgrace? Critics of executive pay worry that even mediocrebosses are given outsized rewards. Robert Nardelli received a $20m pay-off whenhe left Home Depot even though the share price had fallen during his six-yeartenure. Carly Fiorina was $180m better off when she left Hewlett-Packarddespite a lacklustre tenure. Defenders of executive pay argue that great bossessuch as Louis Gerstner, the former boss of IBM, and Jack Welch, the former bossof General Electric, are worth every penny becausethey create huge amounts of wealth for both shareholders and employees.
The debate about executive pay, though never cool, is particularly hot atthe moment. Workers have been squeezed by the recession. Unemployment isapproaching 10% in the United States and much higher numbers in many othercountries. Numerous governments are planning to deal with their rising deficitsby freezing public-sector pay. And yet many bosses and bankers continue to makeout like bandits（an outlaw who lives by plunder; especially: a member of a band of marauders）—or so lots of people think.
We are lucky to have two of the best people in the business to debate thissubject. Steven Kaplan, who proposes the motion, teaches at the University ofChicago's Booth School of Business. Nell Minow, who opposes it, is a long-timeshareholder activist and chairwoman of the Corporate Library, a researchcompany. (For people who want to know more about her she is also the subject ofa profile in a recent issue of the New Yorker.)
Mr Kaplan starts off by making two fundamental points(这个可以用在AW中了). CEO pay has notgone up in recent years; indeed, it has been dropping since 2000, particularlyin relation to other well-paid groups, such as hedge fund managers, lawyers,consultants and professional athletes. Nor is CEO pay unrelated to performance.Boards are increasingly willing to fire CEOs for poor performance.
Ms Minow focuses heavily on the relationship between pay and the recentcredit crunch. She points out that executive pay helped to create the mess in thefirst place: Countrywide's CEO, Angelo Mozillo, made more than $550m during histime in office. She also points out that the fact that many companies that werebailed out by the government continue to pay their CEOs huge salaries andbonuses is damaging the credibility of the system.
Such bold opening statements raise questions galore. Is Mr Kaplanjustified in starting his account in 2000 rather than 1980, when executive payexploded. And is Ms Minow right to concentrate so heavily on the financial sector?These are only a couple of the questions that weneed to thrash out in the coming days.
Moderator
It seems that experts are just as passionate on the subjectof executive pay as the general public.
Mr Kaplan argues that the most powerful criticism ofexecutive pay-that bosses get upside and no downside-is simply false. He pointsout that three of the most maligned（to utter injuriously misleading or falsereports about） bosses in the financial servicessector, Vikram Pandit of Citigroup, John Mack of Morgan Stanley and KennethLewis of Bank of America, all lost small fortunes in 2008. CEOs as a group lostroughly 40% of their wealth in 2008.
Ms Minnow argues that her rebuttal isbeing written by the headlines. Financial servicecompanies are once again paying huge bonuses despite the fact that theircompanies have been propped up（to support by placing something underor against） by public money. She points out thatCEOs enjoy the unique privilege of being able to appoint the people who decidetheir pay. She also reiterates the point that there are plenty of devices suchas golden parachutes that cannot possibly be justified by performance.
In his expert evidence Rakesh Khurana tries to focus onfundamental questions such as what the purpose of compensation is. He arguesthat the market for CEOs is a highly distorted one because CEOs themselves caninfluence the process and performance is hard to measure. He suggests thatextreme pay differentials can damage companies by attracting the wrong sort ofbosses and demotivating the rank and file. Healso worries about the legitimacy of the system. One survey suggests that only13% of people trust what CEOs say.
（上面是正反双方的观点提炼）
So far the voting is going heavily against the motion. ButI wonder how far this is driven by emotion rather than a reasoned assessment ofthe evidence. I would urge the participants to pay close attention to thewording of the motion-particularly the key phrases 'one the whole' and'deserve'. We need to focus more on the overall picture, around the world aswell as in the United States, rather than on a few attention-grabbinganecdotes. And we need to think more closely about the word 'deserve'. MrKaplan's best chance of
turning the voting aroundis to demonstrate that outstanding bosses can boost the performance of theorganisations that they head, not only earning their pay but also benefittingworkers, shareholders and consumers.
Defending the motion
Nell Minow argues that top executive compensation was amajor cause of the financial crisis. She bases her conclusion on two"outlier" examples, Angelo Mozillo and Aubrey McClendon, that shecalls "anecdotes". The plural of anecdote is data. And the data, thatis the pay at a broad sample of financial companies, simplydo not support her conclusion. Ironically, neither do her two anecdotes.（递进的感觉很好）
Ms Minow makes the following claims. (1) Incentivecompensation rewarded top financial executives for the quantity oftransactions, not the quality. (2) Top CEOs, like Mr Mozillo, took largeamounts of money out of their companies before their companies failed. (3) TheCEOs knew they were making bad investments, but did so anyway because theycould make more money doing so. (4) CEOs get upside, but no downside. (5) Thepost-meltdown awards create incentives that reward management, but damageshareholders and everyone else.
These claims are false. As David Yermack of NYU pointed outin a recent piece in the Wall Street Journal, Vikram Pandit of Citigroup, John Mack ofMorgan Stanley and Kenneth Lewis of Bank of America:
"all lost small fortunes in 2008. The 2008compensation of Messrs Pandit, Mack, and Lewis was approximately minus $105million, minus $40 million, and minus $108 million, respectively, after takingaccount of the losses on the stock that each CEO owned in his firm. Other CEOsin the financial industry had similarly bad years. Kerry Killinger ofWashington Mutual lost more than $25 million before being ousted in September,Kennedy Thompson of Wachovia lost more than $30 million before being fired inJune, and Jeffrey Immelt of General Electric lost more than $60 million ...These CEOs' financial reversals were part of a robust system ofpay-for-performance widely used by most U.S. companies."
Yermack also points out that James Cayne lost most of hisbillion-dollar fortune when Bear Stearns failed and Richard Fuld of LehmanBrothers lost hundreds of millions of dollars.
The fact is that most financial-company CEOs received thelion's share of their pay in stock and options. And they kept most of that payas shares in their companies which they never cashed in. When the crisis hitand their stock prices sank, those CEOs lost a large fraction of their wealthand, in many cases, their jobs.
As I wrote in my first entry, this is true, in general, ofthe overall CEO market. CEOs earn a lot and their stock appreciates when theircompanies perform well. CEOs lose large amounts of wealth and their jobs whentheir companies perform poorly.It is irresponsible to claim that CEOs do not bear anydownside risk.In 2008, CEOs as agroup lost roughly 40% of their wealth.In direct contradiction to Ms Minow's conclusion, thefinancial CEOs were compensated in the end for the quality of theirtransactions. The CEOs did not take much off the table. The CEOs had asubstantial amount of downside risk. In fact, those CEOs would have been muchbetter off if they had not engaged in the transactions they did.
It is worth adding that David Yermack is a noted researcheron CEO pay who studies large samples over long periods. He has written severalarticles highly critical of specific CEO pay practices, like corporate jetusage. Nevertheless, his conclusion on the relation of CEO pay to the financialcrisis is diametrically opposed to MsMinow's (as is his characterisation of the CEO market in general).
A study of CEO incentives in a broader group of financialinstitutions during the crisis by Rudi Fahlenbrach and Rene Stulz of Ohio State(and a former president of the American Finance Association) confirms Yermack'sanalysis and also clearly refutes Ms Minow's conclusion.
Ironically, even her two anecdotes about Angelo Mozillo ofCountrywide and Aubrey McClendon of Chesapeake Energy fail to support her case.
Unlike the other CEOs mentioned above (and mostfinancial-institution CEOs), Mr Mozillo did manage to sell a lot of his stock.Unfortunately for him, the SEC has charged him with securitiesfraud（证券欺诈） and insider trading. And it is unlikely to lead to a goodoutcome for him. If found guilty, he potentially will end up paying three timeswhat he took out. Clearly, he appears to have behaved badly, but he did not getaway with it.
As for Mr McClendon, he runs an energy company. How couldhe possibly have had anything to do with the financial crisis?
（上面通过例子，把Ms Minow的论点一一推翻）
The preponderance（a superiority in weight, power, importance,or strength） of the data and, even Ms Minow's"outlier" "anecdotes," therefore, fail to provide anyevidence that top executive compensation had much to do with the financialcrisis.
Top executive compensation did not cause the financialcrisis. Instead, the crisis was caused by loose monetary policy, a globalcapital glut, over-high leverage at investment banks, mandates from Congress toprovide mortgages to people who could not afford them, flawed ratings from therating agencies and poor incentives at mortgage origination (not the CEO)level. Consistent with this（与此一致）, the financial crisis has spreadto financial institutions in other countries with very different pay practices.
Against the motion
The headlines are writing my rebuttal for me.
Goldman Sachs（高盛投资公司） set aside $16.7 billionfor compensation and benefits in the first nine months of 2009, up 46% from ayear ago. While its net income has tripled, its core investment bankingbusiness is down 31%. The Toronto Star quotes Goldman's CFO, David Viniar, using anunforgivable oxymoron in a conference call withreporters: "Our competitors are paying people quite well [and are] verywilling to pay employees guaranteed bonuses of very high amounts." (emphasis added)
Mr Viniar also showed that he has a very short memory,arguing that Goldman is operating without any government guarantee, ignoringthe reality of the government guarantee that kept the system going just a yearago.
These bonuses have nothing to do with paying for performance.How much of Goldman's bouncing back is due to the government's guarantees andthe hundreds of billions of dollars it poured into Goldman, Wall Street, andother subsidies and outright welfare payments to the very institutions thatcame close to bringing down the entire economy? Shouldn't the American peopleexpect some sort of discounted calculation of the bonuses that reflect amarket-based assessment of performance?
Once again, Wall Street is all about capitalism when itcomes to the upside, but all about socialism when it comes to the downside,（绝妙的比喻） that is, from each,according to his ability, to each, whatever he can get away with.
Also this week, we had the testimonyof Neil Barofsky, the special inspector general for the government's financialrescue programme before the House Committee onOversight and Government Reform. The serial offender AIG has promised$198m in bonus pay to its employees next March, according to the testimony, andthere is very little the government or anyone else can do about it. Because thebonus agreements were entered into before the bailout, the government has nolegal authority to stop them. All Special Master Kenneth Feinberg can do is askthe company not to pay the bonuses and rattle his sabreabout the pay he can control going forward, hoping that the threat of clampingdown on the 25 executives at each of the covered companies he does haveauthority over will be enough of an incentive to force a change. In themeantime, once again, pay is uncoupled from performance. Even the company hasgiven up on trying to make that case, relying instead on opportunity costs tojustify the bonuses and arguing that these kinds of payments are necessary inorder to keep the employees from leaving. Based on their past performance andtheir unwillingness to tie future pay to genuine measures of sustainablegrowth, I suggest that the best choice for shareholders is to let them leave.
Mr Barofksy gave the committee a Treasury Department report on the lastset of outrageous AIG（American International Group）
bonuses. Itconcluded in part that "Treasury invested $40 billion of taxpayer funds inAIG, designed AIG's contractual executive compensation restrictions, and helpedmanage the Government's majority stake in AIG for several months, all withouthaving any detailed information about the scope of AIG's very substantial, andvery controversial, executive compensation obligations." If a privateentity had been asked for emergency funds, it is unthinkable that any money would have been advanced
without establishingsome control over compensation. There are two reasons for this. The first isagency costs. Anyone (other than Secretary Henry Paulson, apparently) puttingmoney at risk will want to ensure that it will not be inappropriately appropriated. The second is the high likelihood that the previousincentive structure was a significant factor in the bad decisions andcatastrophic risk management that created the need for the funds in the firstplace. And really, that is all the argument one needs. By definition,the incentive compensation was badly designed, as proved by the results.However, I will respond to some of the points raised by Professor Kaplan.
First, we disagree on the calculations that support theconclusion that CEO play has been declining. Our figures, based not ontheoretical pay but on realised pay, are as follows.
Clearly actual pay is the better measure of payeffectiveness. I also question the validity of the Equilar survey figures. Theyare based on the reported total compensation in the summary compensation table,which is even further from reality than the "expected pay", as it isjust an accounting cost.
I do not understand why he brings up the net worth of CEOs;that has no relationship whatsoever to theirpay, its relationship to performance, or its effectiveness at aligning CEOs'interests with shareholders'.
（上面是数据的论证）
Second, Professor Kaplan states, "The typical CEO ispaid for performance. Boards increasingly fire CEOs for poor performance."The second sentence has no relationship to thefirst. Boards may fire CEOs for poor performance, but they pay them boatloadsof money for that performance on the way out of the door. Just look atKen Lewis's departure from Bank of America. Disastrous performance thatapparently included lying (about what else? bonuses) and an unprecedented voteof no confidence from shareholders that removed him as chairman, may indeedhave caused him to be fired (though the board did not use that term). But his$53m retirement package does not feel like pay for performance to me.
Professor Kaplan tries to obscure thepoint by bringing in law firm partners, athletes and other highly-paidprofessionals. Partners in law firms are paid accordingto formulas set by the partnership. As in any other private firm, there are noagency costs to worry about and they can do whatever they like. Athletes, moviestars and recording artists, who have a much greater range and far greater elasticityin compensation, engage in vigorous arm's length negotiations on pay; their payis not set by boards they appoint, as CEOs' is.
（上面是对CEO工资增长与其他职业比较的论证）
And it is hard for me to understand how anyone could pointto the US or UK government authorising excessive pay as a validation of thesystem. As noted above, the government has repeatedly failed as regulator or asprovider of capital in curbing outrageously destructive executive compensation.
Here are seven deadly sins found in executive compensationplans. Each of them is conclusive evidence that the system is out of whack.
1. Making up for losses in stock valuewith other grants of cash or stock.
2. Imputed years of service to increase retirement benefits.
3. Setting the performance goals too low or other phonymetrics to trigger bonuses.
4. Dividends on unvested stock.
5. Outrageous departure packages.
6. Stock options that are not performance-based or indexed.
7. Perquisites and gross-ups.
In my next response, I will explain how to do it right.
|
GO
发表于 2009-10-8 11:36:46
发表于 2009-10-9 19:58:55
转发
