【草莓酱拌饭组】ECONOMICS DEBATE2 by Gary

gongyuxiang1990UID: 2697832

红色——生词和不懂的
橙色——有关主题
绿色——值得借鉴的
紫色——GRE词汇
Executive pay
This house believes that on the whole, senior executives are worth what they are paid.

The moderator's opening remarks

Oct 20th 2009 | Adrian Wooldridge

One of the few things that anti-globalisation campaigners and stockmarket(证券交易所) investors agree upon is that executive pay is out of control.

It is not hard to understand this shared outrage: executive pay has exploded（形容什么很强烈可以借鉴） since the 1980s. For most of the postwar era executives earned a few multiples of the median pay. But thereafter, starting in America and slowly spreading to the rest of the world, the multiples increased exponentially. Today many American workers earn in a year what their boss takes home in an evening.(形容一个量等于另一个量，再也不要用那土鳖的equal to了)

Isn't this a disgrace? Critics of executive pay worry that even mediocre（平庸的） bosses are given outsized rewards. Robert Nardelli received a $20m pay-off when he left Home Depot even though the share price had fallen during his six-year tenure. Carly Fiorina was $180m better off when she left Hewlett-Packard despite a lacklustre tenure（？？？如何理解）. Defenders of executive pay argue that great bosses such as Louis Gerstner, the former boss of IBM, and Jack Welch, the former boss of General Electric, are worth every penny because they create huge amounts of wealth for both shareholders and employees.

The debate about executive pay, though never cool, is particularly hot at the moment. Workers have been squeezed by the recession. Unemployment is approaching 10% in the United States and much higher numbers in many other countries. Numerous governments are planning to deal with their rising deficits by freezing public-sector pay. And yet many bosses and bankers continue to make out like bandits（土匪）—or so lots of people think.

We are lucky to have two of the best people in the business to debate this subject. Steven Kaplan, who proposes the motion, teaches at the University of Chicago's Booth School of Business. Nell Minow, who opposes it, is a long-time shareholder activist and chairwoman of the Corporate Library, a research company. (For people who want to know more about her she is also the subject of a profile（人物概略） in a recent issue of the New Yorker.)

Mr Kaplan starts off by making two fundamental points. CEO pay has not gone up in recent years; indeed, it has been dropping since 2000, particularly in relation to other well-paid groups, such as hedge fund managers, lawyers, consultants（医学专家） and professional athletes. Nor is CEO pay unrelated to performance Boards are increasingly willing to fire CEOs for poor performance.（读不懂！！！）

Ms Minow focuses heavily on the relationship between pay and the recent credit crunch（嘎吱声）. She points out that executive pay helped to create the mess in the first place: Countrywide's CEO, Angelo Mozillo, made more than $550m during his time in office. She also points out that the fact that many companies that were bailed out by the government continue to pay their CEOs huge salaries and bonuses is damaging the credibility of the system.

Such bold opening statements raise questions galore. Is Mr Kaplan justified in starting his account in 2000 rather than 1980, when executive pay exploded. And is Ms Minow right to concentrate so heavily on the financial sector（部门）? These are only a couple of the questions that we need to thrash out in the coming days.

The proposer's opening remarks

Oct 20th 2009 | Steven N. Kaplan

In the United States, the United Kingdom and elsewhere, CEOs are routinely criticised for being overpaid. Critics argue that boards do not respond to market forces, but, instead, are dominated by or are over-generous to their CEOs. Boards are criticised for not tying CEOs' pay to performance. These criticisms have been exacerbated by the financial crisis and the desire to find scapegoats.

I argue below that the critics are wrong and that there are many misperceptions of CEO pay. While CEO pay practices are not perfect, they are driven by market forces and performance. Contrary to public perception, CEO pay has not gone up in recent years. In fact, the average CEO pay (adjusted for inflation) has dropped since 2000, while the pay of other groups has increased substantially. Similarly, the view that CEOs are not paid for performance is wrong. In fact, the opposite is true and boards increasingly fire them for poor performance. And, most recently, consistent with market forces driving pay, the US and UK governments each hired a new CEO (of AIG and the Royal Bank of Scotland) for pay exceeding that of the median large company CEO.

It is useful to understand how CEO pay is measured. It includes three components: salary, bonus and stock-based pay. It is usually measured in two ways. The first is the sum of salary, bonus, restricted stock and the expected value of stock options. I call this expected pay. Expected pay measures what boards believe they awarded the CEO. This is the best measure of what a CEO is paid each year. Note that the CEO does not actually walk away with this money. The second measure replaces expected stock option values with values actually realized and realised pay measures what CEOs walk away with.

The first graph shows average and median expected CEO pay for S&P 500 CEOs since 1994 (adjusted for inflation). It shows that median CEO pay has been stable since 2001; it has not increased. And average pay has declined substantially. In fact, average CEO pay in 2008 is below the average in 1998.

[Click chart to enlarge]

While average CEO pay has declined, the pay of other highly paid groups has increased. The second graph shows S&P 500 CEO pay relative to the income of the top 1% of US taxpayers. Relative to those other groups, CEOs are no better off in 2008 than in 1994. Strikingly, relative CEO pay is a half of what it was in 2001, a huge decline.

[Click chart to enlarge]

Which are those groups that have earned increasingly high compensation? Hedge fund, private equity and venture capital investors have increased their assets and fees substantially, translating into high pay. By one estimate, the top three hedge fund managers earned more in 2007 than all 500 S&P 500 CEOs combined. Professional athletes, investment bankers, consultants and lawyers also have benefited greatly. For example, from 2004 to 2008, the inflation-adjusted pay of partners at the top 20 law firms increased by 12% while that of S&P 500 CEOs dropped 12%. Those law firms had over 3,000 partners making an average of $2.4m each.

One can look at the Obama administration for other examples. Larry Summers made $8m (more than the median S&P 500 CEO) giving speeches and working part-time for a hedge fund. Eric Holder made $3.5m as a law partner.

So, while CEOs earn a lot, they are not unique. The pay of people in the other groups has undoubtedly been driven by market forces; all are compensated in arm's-length markets, not by cronies（好友）. Technology, globalisation and scale appear to have increased the market value of these groups. CEOs have not done better and, by some measures, have done worse. Those who argue CEOs are overpaid have to explain how CEOs can be overpaid and not subject to market forces, when the other groups are paid at least as well and are subject to market forces.

Why is the pay of these other groups relevant for CEOs? Top executives regularly leave to work for private equity firms and hedge funds. Law partners and consultants leave to work for public companies as general counsels and executives. Relative pay matters and all these groups are paid according to market demand. Markets are the driving force for senior executives in all these industries and talented people jump across industries, based on market perceptions of their worth.

Critics also argue that CEO pay is not tied to stock performance. Again, that is not true. Looking at what CEOs actually receive—realised（转变） pay—Josh Rauh and I found that firms with CEOs in the top decile（十分位数） of realised pay earned stock returns 90% above those of other firms in their industries over the previous five years. Firms with CEOs in the bottom decile of realised pay underperformed by almost 40%. The typical CEO is paid for performance.

This was reinforced in 2008, when average realised CEO pay declined by 25% (according to S&P's Execucomp). And Equilar, another provider of CEO pay data, estimated that the typical（典型的） CEO experienced a net worth decline of over 40%.

The final myth to bust is that CEOs control their boards and earn high pay through this control and not performance. In fact, CEO tenure has declined, from ten years in the 1970s to six years today, and boards have got tougher on their executives when they do not perform.

In sum, market forces govern CEO compensation. CEOs are paid what they are worth.（哈哈，老外做总结也是这么写的！） Talented individuals, who are perceived to be valuable, can move between industries to be compensated well. The clearest example of this is that even governments have to pay highly for talented executives. Recently, the Royal Bank of Scotland (under UK government control) hired a CEO with a package worth up to $16m; AIG (under US government control) hired a CEO with a package worth up to $10.5m. For these critical jobs, both of these executives received compensation exceeding the pay of the median S&P 500 CEO.

The opposition's opening remarks

Oct 20th 2009 | Nell Minow

Excessive executive compensation of the past decade is both a symptom and a cause of the current economic mess.（这个阿姨比较直率，上来就直奔主题） And the post-meltdown awards are all but guaranteed to continue to create perverse incentives that will reward management and further damage the interests of shareholders and every other participant in the economy.

Incentive compensation rewarded executives for the quantity of transactions rather than the quality of transactions. It inevitably led to failures like the subprime（房屋抵押贷款中的次级贷款（Subprime）是本身存在信用问题的住房贷款，或者贷款人本身的信用等级比较低，即其信用历史曾发生过问题；或者贷款人出于转嫁利率风险等目的...
）disaster and the dominoes（多米诺骨牌） it toppled as it took the economy down with it. Worst of all, the avalanche of post-bailout （跳伞）bonuses and departure packages like the $53m Ken Lewis got from Bank of America have severely damaged the credibility of Wall Street and the American financial markets as a whole. The billions of dollars of losses do not come close to the reputational hit to American capitalism, which will increase the cost of capital（资金）这个含义不常见 for all US companies.

Panglossian（过分乐观的） observers will always be able to find some metric（衡量标准） to justify any level of pay. But the results speak for themselves. The decisions that led to the meltdown were made by executives who knew that they would be paid tens, even hundreds of millions of dollars no matter how successful the consequences of those decisions.

Let us look at ground zero of the subprime mess, Countrywide, where Angelo Mozilo made more than $550m during his time as CEO. When the compensation committee tried to object to his pay levels, he hired another compensation consultant, paid for by the shareholders, to push them into giving him more. He also pushed for, and was given, shareholder subsidies, not just for his wife's travel on the corporate jet but for the taxes on the imputed income from that travel. Instead of telling Mr Mozilo that he had no business asking the shareholders to subsidise his taxes, the board meekly（温顺地） signed off on it, making it clear to everyone in the executive suite that the pay-performance link was not a priority.

By the end of 2007, when Countrywide（全国金融公司） finally revealed the losses it had previously obscured, shareholders lost more than 78% of their investment value. Meanwhile, in early 2007 Mr Mozilo sold over $127m in exercised stock options before July 24th 2007, when he announced a $388m write-down on profits. Before the bailout, Countrywide narrowly avoided bankruptcy（破产） by taking out an emergency loan of $11 billion from a group of banks. Mr Mozilo continued to sell off shares, and by the end of 2007 he had sold an additional $30m in exercised stock options. There is the definition of outrageously excessive compensation.（都是经济学原理，看不懂啊！！）

Countrywide responded to a shareholder proposal（方案） that year asking for a non-binding advisory（咨询）
vote on its pay plan by urging shareholders to oppose it because "Countrywide has been an outstanding performer" and because "The Board's Compensation Committee has access to the best information on compensation practices and has a thorough process in place to determine appropriate executive pay." They could hardly have done worse. And it is likely that some market feedback on the structure of the pay plan could have given compensation committee members Harley W. Snyder (chair), Robert J. Donato, Michael E. Dougherty and Oscar P. Robertson worthwhile guidance.

Michelle Leder of the indispensable Footnoted.org website discovered that Frank A. Keating, Charles T. Maxwell and Frederick B. Whittemore, the compensation committee at Chesapeake Energy, not only paid the CEO, Aubrey McClendon, $100m, a 500% increase as the stock dropped 60% and the profits went down 50%, they spent $4.6m of the shareholders' money to sponsor（资助） a basketball team of which Mr McClendon owns a 19% stake, they purchased catering services from a restaurant which he owns just under a half of, and they took his collection of antique maps off his hands for $12.1m of the shareholders' money, based on a valuation from the consultant who advised Mr McClendon on assembling（装配） the collection. The board justified this by referring to Mr McClendon's having to sell more than $1 billion worth of stock due to margin calls, his having concluded four important deals and the benefit to employee morale from having the maps on display in the office. A market-based response would be: (1) that was his risk and it is inappropriate to the point of misappropriation（误用） to force the other shareholders, already substantially out of pocket with their own losses due to his poor leadership of the organisation, make up for his losses (2) if the deals are good ones, he will be adequately rewarded when the benefit of those deals is reflected in the stock price; and (3) you have got to be kidding. If this is pay for performance, what exactly is the performance we are paying for?（总感觉这阿姨跑题了，一直论述好像是腐败问题，貌似和有关CEO的待遇关系不大，不过我是没看懂）

These may be anecdotes, but they are illuminating ones. The numbers and details may be at the extreme, but the underlying approaches are representative. Even as outliers（局外人）, they still demonstrate the failure of the system to ensure a vigorous（精力充沛的）, arm's-length system for determining pay and the inability of the system to require an effective incentive programme with a genuine downside as well as an upside.

In my comments, I will discuss the seven deadliest sins（这是不是传说中的“七宗罪”？） of executive compensation, the two key elements that are essential for any plan that merits support from investors and the only metric that matters in looking at pay.

gongyuxiang1990UID: 2697832

Defending the motion

Steven N. Kaplan   

Neubauer Family Prof. of Entrepreneurship & Finance, University of Chicago Booth School of Business

Nell Minow argues that top executive compensation was a major cause of the financial crisis. She bases her conclusion on two "outlier" examples, Angelo Mozillo and Aubrey McClendon, that she calls "anecdotes".

Against the motion

Nell Minow   

Editor and Co-founder, The Corporate Library

The headlines are writing my rebuttal for me.

Goldman Sachs set aside $16.7 billion for compensation and benefits in the first nine months of 2009, up 46% from a year ago. While its net income has tripled, its core investment banking business is down 31%.

The moderator's rebuttal remarks

Oct 23rd 2009 | Adrian Wooldridge

It seems that experts are just as passionate on the subject of executive pay as the general public.（简单地道的说法）

Mr Kaplan argues that the most powerful criticism of executive pay-that bosses get upside and no downside-is simply false. He points out that three of the most maligned bosses in the financial services sector（部门）, Vikram Pandit of Citigroup, John Mack of Morgan Stanley and Kenneth Lewis of Bank of America, all lost small fortunes in 2008. CEOs as a group lost roughly 40% of their wealth in 2008.

Ms Minnow argues that her rebuttal is being written by the headlines. Financial service companies are once again paying huge bonuses
despite the fact that their companies have been propped up（支撑） by public money. She points out that CEOs enjoy the unique privilege of being able to appoint the people who decide their pay. She also reiterates the point that there are plenty of devices(此处做计谋) such as golden parachutes（降落伞）　　[“金降落伞”指的是雇用合同中按照公司控制权变动条款，对失去工作的管理人员进行补偿的规定。一般来说，员工被迫离职时（不是由于自身的工作原因）可得到一大笔离职金，它能够促使管理层接受公司控制权变动，从而减少管理层与股东之间因此产生的利益冲突，以及管理层为抵制这种变动造成的交易成本。]that cannot possibly be justified by performance.

In his expert evidence Rakesh Khurana tries to focus on fundamental questions such as what the purpose of compensation is. He argues that the market for CEOs is a highly distorted one because CEOs themselves can influence the process and performance is hard to measure. He suggests that extreme pay differentials can damage companies by attracting the wrong sort of bosses and demotivating（使失去动力） the rank and file. He also worries about the legitimacy of the system. One survey suggests that only 13% of people trust what CEOs say.

So far the voting is going heavily against the motion. But I wonder how far this is driven by emotion rather than a reasoned assessment of the evidence. I would urge the participants to pay close attention to the wording of the motion-particularly the key phrases 'one the whole' and 'deserve'. We need to focus more on the overall picture, around the world as well as in the United States, rather than on a few attention-grabbing anecdotes. And we need to think more closely about the word 'deserve'. Mr Kaplan's best chance of turning the voting around is to demonstrate that outstanding bosses can boost the performance of the organisations that they head, not only earning their pay but also benefitting workers, shareholders and consumers.

The proposer's rebuttal remarks

Oct 23rd 2009 | Steven N. Kaplan

Nell Minow argues that top executive compensation was a major cause of the financial crisis. She bases her conclusion on two "outlier" examples, Angelo Mozillo and Aubrey McClendon, that she calls "anecdotes". The plural of anecdote is data. 没看懂==And the data, that is the pay at a broad sample of financial companies, simply do not support her conclusion. Ironically, neither do her two anecdotes.

Ms Minow makes the following claims. (1) Incentive compensation rewarded top financial executives for the quantity of transactions, not the quality. (2) Top CEOs, like Mr Mozillo, took large amounts of money out of their companies before their companies failed. (3) The CEOs knew they were making bad investments（投资）, but did so anyway because they could make more money doing so. (4) CEOs get upside, but no downside. (5) The post-meltdown awards create incentives that reward management, but damage shareholders and everyone else.

These claims are false. As David Yermack of NYU pointed out in a recent piece in the Wall Street Journal, Vikram Pandit of Citigroup, John Mack of Morgan Stanley and Kenneth Lewis of Bank of America:

"all lost small fortunes in 2008. The 2008 compensation of Messrs Pandit, Mack, and Lewis was approximately minus $105 million, minus $40 million, and minus $108 million, respectively, after taking account of the losses on the stock that each CEO owned in his firm. Other CEOs in the financial industry had similarly bad years. Kerry Killinger of Washington Mutual lost more than $25 million before being ousted in September, Kennedy Thompson of Wachovia lost more than $30 million before being fired in June, and Jeffrey Immelt of General Electric lost more than $60 million ... These CEOs' financial reversals were part of a robust system of pay-for-performance widely used by most U.S. companies."

Yermack also points out that James Cayne lost most of his billion-dollar fortune when Bear Stearns failed and Richard Fuld of Lehman Brothers lost hundreds of millions of dollars.

The fact is that most financial-company CEOs received the lion's share of their pay in stock and options. And they kept most of that pay as shares in their companies which they never cashed in. When the crisis hit and their stock prices sank, those CEOs lost a large fraction of their wealth and, in many cases, their jobs.

As I wrote in my first entry, this is true, in general, of the overall CEO market. CEOs earn a lot and their stock appreciates（升值） when their companies perform well. CEOs lose large amounts of wealth and their jobs when their companies perform poorly. It is irresponsible to claim that CEOs do not bear any downside risk. In 2008, CEOs as a group lost roughly 40% of their wealth.

In direct contradiction to Ms Minow's conclusion, the financial CEOs were compensated in the end for the quality of their transactions. The CEOs did not take much off the table. The CEOs had a substantial amount of downside risk. In fact, those CEOs would have been much better off if they had not engaged in the transactions they did.

It is worth adding that David Yermack is a noted researcher on CEO pay who studies large samples over long periods. He has written several articles highly critical of specific CEO pay practices, like corporate jet usage. Nevertheless, his conclusion on the relation of CEO pay to the financial crisis is diametrically（完全的） opposed to Ms Minow's (as is his characterisation of the CEO market in general).

A study of CEO incentives in a broader group of financial institutions during the crisis by Rudi Fahlenbrach and Rene Stulz of Ohio State (and a former president of the American Finance Association) confirms Yermack's analysis and also clearly refutes Ms Minow's conclusion.

Ironically, even her two anecdotes about Angelo Mozillo of Countrywide and Aubrey McClendon of Chesapeake Energy fail to support her case.

Unlike the other CEOs mentioned above (and most financial-institution CEOs), Mr Mozillo did manage to sell a lot of his stock. Unfortunately for him, the SEC has charged him with securities fraud and insider trading. And it is unlikely to lead to a good outcome for him. If found guilty, he potentially will end up paying three times what he took out. Clearly, he appears to have behaved badly, but he did not get away with it.

As for Mr McClendon, he runs an energy company. How could he possibly have had anything to do with the financial crisis?

The preponderance of the data and, even Ms Minow's "outlier" "anecdotes," therefore, fail to provide any evidence that top executive compensation had much to do with the financial crisis. （辩论比较犀利，各个击破得出结论！）

Top executive compensation did not cause the financial crisis. Instead, the crisis was caused by loose monetary（货币） policy, a global capital glut, over-high leverage at investment banks, mandates from Congress to provide mortgages to people who could not afford them, flawed（有缺陷的） ratings（信誉度） from the rating agencies and poor incentives at mortgage origination (not the CEO) level. Consistent with this, the financial crisis has spread to financial institutions in other countries with very different pay practices.（批驳完毕后提出自己的观点）

The opposition's rebuttal remarks

Oct 23rd 2009 | Nell Minow

The headlines are writing my rebuttal for me.

Goldman Sachs set aside $16.7 billion for compensation and benefits in the first nine months of 2009, up 46% from a year ago. While its net income has tripled, its core investment banking business is down 31%. The Toronto Star quotes Goldman's CFO, David Viniar, using an unforgivable oxymoron in a conference call with reporters: "Our competitors are paying people quite well [and are] very willing 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, ignoring the reality of the government guarantee that kept the system going just a year ago.

These bonuses have nothing to do with paying for performance. How much of Goldman's bouncing back is due to the government's guarantees and the hundreds of billions of dollars it poured into Goldman, Wall Street, and other subsidies and outright（直接） welfare payments to the very institutions that came close to bringing down the entire economy? Shouldn't the American people expect some sort of discounted calculation of the bonuses that reflect a market-based assessment of performance? Once again, Wall Street is all about capitalism（资本主义==！） when it comes to the upside, but all about socialism when it comes to the downside, that is, from each, according to his ability, to each, whatever he can get away with.

Also this week, we had the testimony of Neil Barofsky, the special inspector general for the government's financial rescue programme before the House Committee on Oversight and Government Reform. The serial offender AIG has promised $198m in bonus pay to its employees next March, according to the testimony, and there is very little the government or anyone else can do about it. Because the bonus agreements were entered into before the bailout, the government has no legal authority to stop them. All Special Master Kenneth Feinberg can do is ask the company not to pay the bonuses and rattle his sabre（佩剑？） about the pay he can control going forward, hoping that the threat of clamping down on the 25 executives at each of the covered companies he does have authority over will be enough of an incentive to force a change. In the meantime, once again, pay is uncoupled from performance. Even the company has given up on trying to make that case, relying instead on opportunity costs to justify the bonuses and arguing that these kinds of payments are necessary in order to keep the employees from leaving. Based on their past performance and their unwillingness to tie future pay to genuine measures of sustainable growth, I suggest that the best choice for shareholders is to let them leave.

Mr Barofksy gave the committee a Treasury Department report on the last set of outrageous（不寻常的） AIG bonuses. It concluded in part that "Treasury invested $40 billion of taxpayer funds in AIG, designed AIG's contractual executive compensation restrictions, and helped manage the Government's majority stake in AIG for several months, all without having any detailed information about the scope（范围） of AIG's very substantial, and very controversial, executive compensation obligations." If a private entity had been asked for emergency funds, it is unthinkable that any money would have been advanced without establishing some control over compensation. There are two reasons for this. The first is agency costs. Anyone (other than Secretary Henry Paulson, apparently) putting money at risk will want to ensure that it will not be inappropriately appropriated（不适当地拨款）. The second is the high likelihood that the previous incentive structure was a significant factor in the bad decisions and catastrophic（灾难性的） risk management that created the need for the funds in the first place.

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.（这阿姨还是比较委婉的，先分析一堆案例，然后才开始反驳上边那大叔）

gongyuxiang1990UID: 2697832

First, we disagree on the calculations that support the conclusion that CEO play has been declining. Our figures, based not on theoretical pay but on realised pay, are as follows.

Clearly actual pay is the better measure of pay effectiveness. I also question the validity of the Equilar survey figures. They are based on the reported total compensation in the summary compensation table, which is even further from reality than the "expected pay", as it is just an accounting cost. （我想知道做ARGUMENT时能不能这样质疑数据？）

I do not understand why he brings up the net worth of CEOs; that has no relationship whatsoever to their pay, its relationship to performance, or its effectiveness at aligning CEOs' interests with shareholders'.

Second, Professor Kaplan states, "The typical CEO is paid for performance. Boards（委员会） increasingly fire CEOs for poor performance." The second sentence has no relationship to the first. Boards may fire CEOs for poor performance, but they pay them boatloads of（大量） money for that performance on the way out of the door. Just look at Ken Lewis's departure from Bank of America. Disastrous performance that apparently included lying (about what else? bonuses) and an unprecedented vote of no confidence from shareholders that removed him as chairman, may indeed have 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（表示不赞同某观点时可用）.

Professor Kaplan tries to obscure the point by bringing in law firm partners, athletes and other highly-paid professionals. Partners in law firms are paid according to formulas set by the partnership. As in any other private firm, there are no agency costs to worry about and they can do whatever they like. Athletes, movie stars and recording artists, who have a much greater range and far greater elasticity in compensation, engage in vigorous arm's length negotiations on pay; their pay is not set by boards they appoint, as CEOs' is.

And it is hard for me to understand how anyone could point to the US or UK government authorising excessive pay as a validation of the system. As noted above, the government has repeatedly failed as regulator or as provider of capital in curbing outrageously（蛮横的） destructive executive compensation.

Here are seven deadly sins found in executive compensation plans. Each of them is conclusive evidence that the system is out of whack.

1.    Making up for losses in stock value with other grants of cash or stock.
2.    Imputed years of service to（把…归咎于） increase retirement benefits.
3.    Setting the performance goals too low or other phony metrics to trigger bonuses.
4.    Dividends on unvested stock.
5.    Outrageous departure packages. （嘛意思？）
6.    Stock options that are not performance-based or indexed.
7.    Perquisites and gross（总额）-ups.

In my next response, I will explain how to do it right.

中原527UID: 2707367

真认真啊....
我惭愧蹲角落里画圈圈去....

gongyuxiang1990UID: 2697832

Featured guest

Professor Rakesh Khurana

Western society is in the middle of an unprecedented political, social and economic debate about what to do about executive compensation. This is in part fuelled by the economic crisis and the multibillion-dollar taxpayer-financed bailout of the financial industry, ranging from banks to insurance companies. It is also due to the fact that the US government is now the direct majority owner of one of the largest industrial concerns in the world, General Motors. Moreover, public outrage over compensation is likely to swell even further in the coming months as government bailed-out financial service firms prepare to pay out record levels of bonuses, even while still having access to public monies in numerous forms.

Executive pay, however, has been an issue for the last several years. Even before the current crisis academics recognized the factors explaining the rise in executive pay are complex and are in part endemic to a market and institutional system which has changed dramatically over the last half-century. Therefore, to arrive at an appropriate solution, we must start by asking ourselves some fundamental questions about what the purpose of compensation is and whose interests are being served or not served by the existing system.(一针见血啊！)

It is clear that many policymakers do not believe the system is serving society well. The problems of executive compensation have become so intense that in the United States a pay czar（地区监制） has been appointed to examine the issue. Historically, such czars have been appointed to address complex social problems, such as drugs, climate change and AIDS. In other words, problems that are perceived by the body politic as a threat to the basic social order and a threat to society's most critical institutions.

I see two challenges with addressing the issues of executive compensation. First is that it can become a passionate debate, informed more by ideology and emotion than facts. Second, it is an issue that is not often discussed in context or examined holistically with respect to its implications for organisations or the larger society.
不得不说这个GUEST逻辑很清晰
There are three reasons that are often used to explain the level of CEO pay. First, CEO pay is tied to long-term performance. That is not true. And no matter how many times it is said by CEOs, boards and executive compensation consultants, it does not make it true. Seldom has a more untoward wrong fact been perpetuated. Scores of academic studies show that the typical long-term incentive plan or (LTIP) is three years. Moreover, despite two decades of stock option grants, the average CEO holds the same amount of stock they did in 1992. Executives do not hold their stock. Academic studies by Professors Lucian Bebchuk and Jesse Fried and others have shown that as soon as their stock options vest or restrictions on stock sales are removed, CEOs sell their shares almost immediately. Moreover, when executives fail, they are protected by generous severance packages that typically result in tens of millions of dollars of payout for the average dismissed CEO in the Fortune 500.

The second reason used to explain the high levels of CEO pay is that market processes of supply and demand set the wage levels. CEO pay, in other words, is no different than the way pay is set for a star athlete or movie star. Last month, in an interview with Bloomberg News, President Obama questioned whether we should be capping pay of executives because we do not do so for NFL（National Football League美国国家足球联盟） players or other superstars. Again, in addition to the fact that NFL players' salaries are capped using team caps, President Obama's comments suggest an inaccurate understanding of the CEO pay-setting processes. Well-functioning markets are characterised by large numbers of buyers and sellers transacting anonymously（匿名的）. CEO pay is a small-numbers market, with little transparency（透明度）. When a movie star or sports star sits down to negotiate a multimillion-dollar contract, they are usually sitting across from who is motivated to pay them the least amount possible. By contrast, when a company is paying a CEO, he or she is usually sitting across from a board of directors he or she has a hand in selecting.（类比，应该学学！） Moreover, when an athlete or a movie star's performance is measured, it is difficult to manipulate（控制） the results. How many goals a footballer scored or how much money a Tom Cruise movie opens with is not easily hidden, obscured or backdated（回溯）. The same cannot be said of financial reports or many elements of CEO compensation.（类比）

The third reason is that if you don't pay these amounts, you won't get the executive talent you need. Again, this flies in the face of research. When workers are surveyed, pay as a motivator ranks fourth. People want to be paid fairly. But what they rank first or second is the challenging work; feeling as if they are part of something bigger than themselves and making a positive contribution to the world. In fact, the greater the gap between the leader and other team members, the greater the level of distrust and the lower the sharing of information. Correspondingly, high ratios of CEO pay to other executives' correlates with lower levels of investment in management training, lower likelihood of internal succession and weaker governance. An extraordinary amount of evidence from social science suggests that in fact pay for performance schemes that are geared toward using extrinsic motivators to behaviour rarely have their desired effects. In numerous laboratory studies by social scientists ranging from Harvard psychologist Teresa Amabile to Cornell economist Robert Frank to careful field studies on organizational culture and resilence（韧性） by Harvard psychologist Michael Beer, it was found that many of these incentive schemes do not create the desired effect. Indeed, what they do find is that extrinsic rewards do not create lasting commitment. They merely, and temporarily, change what we do. Indeed lab experiments show that rewards come to be seen as punishments when withheld（停止）. Inside organizations, high levels of inequality tears the organizational fabric. （这个拟人很经典）

Now some people may argue that CEOs and executives are not like other people. The individuals attracted to these positions are a distinct type. I think there is some truth to this point. But I am not sure it necessarily attracts the kinds of people who build long-lasting enduring institutions. Research also highlights that certain types of compensation systems attract certain types of individuals. If you pay people like mercenaries（佣兵）, you attract mercenaries. You will not attract people whose primary loyalty is to others, rather than to their self-interest. In other words, you do not attract leaders. This is perhaps why business is now among the least trusted institution in society. The 2009 Edleman survey which examined the attitudes of educated elites toward institutions of society found that only 13% of people trust what CEOs say. The current pay system does not attract or reward economic stewardship（职务） or fiduciary（信托的） behaviour. Moreover, for those who care about the free enterprise system, the cynicism that executive pay generates may be its greatest threat.