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Executive pay

This house believes that on the whole, senior executives are worth what they are paid


About this debate

Overthe past few decades executive pay has risen dramatically. Bosseswhowere once paid ten times as much as shopfloor workers are nowsometimespaid as much as 300 times as much. This trend was neverpopular, even during good times. But today it is becoming radioactive(辐射的),as governments step in to rescue failing companies and ordinary peopleare forced to tighten their belts.

Is the anger justified? Some argue that executive pay is along-standing disgrace. Pay is often not tethered(系链) to performance. Hugerewards for the few demotivate(失去动力) the rest of the workforce. Others aremore sanguine(乐观).Successful executives, such as Jack Welch, former CEO ofGeneralElectric, can add hugely to a firm's profitability, benefitingworkers,managers and shareholders alike. The growing pay of executiveshas to bebalanced against the growing difficulty of their jobs,particularly as turnover(营业额) in the boardroom increases.

Opening statements

Defending the motion

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

In the United States, the United Kingdom and elsewhere, CEOs are routinely criticised for being overpaid.

Against the motion

Nell  Minow  Editor and Co-founder, The Corporate Library

Excessive executive compensation of the past decade is both a symptom and a cause of the current economic mess.

The moderator's opening remarks

Oct 20th 2009 |   Adrian  Wooldridge

Oneof the few things that anti-globalisation campaigners andstockmarketinvestors agree upon is that executive pay is out of control.
Itis not hard to understand this shared outrage: executive payhas explodedsince the 1980s. For most of the postwar era executivesearned a fewmultiples of the median pay. But thereafter, starting inAmerica andslowly spreading to the rest of the world, the multiplesincreased exponentially. Today many American workers earn in a year whattheirboss takes home in an evening.
Isn't this a disgrace? Critics ofexecutive pay worry that even mediocrebossesare given outsized rewards. Robert Nardelli received a $20mpay-off whenhe left HomeDepot even though the share price had fallenduring hissix-yeartenure. Carly Fiorina was $180m better off whensheleftHewlett-Packard despite a lacklustre tenure(任期).Defenders of executivepay argue that great bosses such as LouisGerstner, the former boss ofIBM,and Jack Welch, the former boss ofGeneral Electric, are worthevery penny because they create huge amounts of wealth for bothshareholdersand employees.
The debate about executive pay, though never cool,is particularly hotat the moment. Workers have been squeezedby the recession. Unemploymentis approaching 10% in the United Statesand much higher numbers in manyother countries. Numerous governmentsare planning to deal with theirrising deficits by freezingpublic-sector pay. And yet many bosses andbankers continue to make out like bandits—or so lots of people think.
Weare lucky to have two ofthe best people in the business to debatethissubject. Steven Kaplan,who proposes the motion, teaches attheUniversity of Chicago's BoothSchool of Business. Nell Minow,whoopposes it, is a long-time shareholder activist and chairwoman oftheCorporate Library, are search company. (For people who want to knowmoreabout her she is also the subject of a profile in a recent issue ofthe New Yorker.)
MrKaplan starts off by making two fundamentalpoints. CEO pay hasnot gone up in recent years; indeed, it has beendropping since2000,particularly in relation to other well-paid groups,such as hedgefundmanagers, lawyers, consultants and professionalathletes. Nor isCEOpay unrelated to performance. Boards areincreasingly willing tofireCEOs for poor performance.
Ms Minow focuses heavily on the relationship between pay and the recentcredit crunch（困境）. She points out that executive pay helped to create themess in thefirst place:Countrywide's CEO, Angelo Mozillo, made morethan $550m during his timein office（在职期）.She also points out that the factthat many companies that were bailedout by the government continue topay their CEOs huge salaries andbonuses is damaging the credibility ofthe system.
Suchbold opening statements raise questions galore（很多。用于名词之后）. Is Mr Kaplanjustified in starting his accountin 2000 rather than 1980, whenexecutive pay exploded. And is Ms Minowright to concentrate so heavilyon the financial sector? These are onlya couple of the questions thatwe need to thrash out（反复讨论） in the coming days.


The proposer's opening remarks
Oct 20th 2009 |   Steven N. Kaplan

In the United States, the United Kingdom and elsewhere, CEOsareroutinely criticised for being overpaid. Critics argue that boardsdonot respond to market forces, but, instead, are dominated by orareover-generous to their CEOs. Boards are criticised for not tyingCEOs'pay to performance. These criticisms have been exacerbated bythefinancialcrisis and the desire to find scapegoats.
I argue belowthat the critics are wrong and that there are manymisperceptions of CEOpay.While CEO pay practices are not perfect, theyare driven by marketforces and performance. Contrary to publicperception,CEO pay has not gone up in recent years. In fact, theaverage CEO pay(adjusted forinflation) has dropped since 2000, whilethe pay of othergroups hasincreased substantially. Similarly, the viewthat CEOs are notpaid for performance is wrong. In fact, the oppositeis true and boardsincreasingly fire them for poor performance. And,mostrecently,consistent with market forces driving pay, the US andUKgovernmentseach hired a new CEO (of AIG and the Royal Bank ofScotland)for pay exceeding that of the median large company CEO.
Itis useful to understand how CEO pay is measured. It includesthreecomponents:salary, bonus and stock-based pay. It is usuallymeasured intwo ways.The first is the sum of salary, bonus, restrictedstock andthe expected value of stock options. I call this expected pay.Expectedpay measures what boards believe they awarded the CEO. This isthebest measure of what a CEO is paid each year. Note that the CEOdoesnot actually walk away with this money. The second measurereplacesexpected stock option values with values actually realized andrealisedpay measures what CEOs walk away with.
The first graph shows averageand median expected CEO pay forS&P500 CEOs since 1994 (adjusted forinflation). It shows thatmedian CEOpay has been stable since 2001; ithas not increased. Andaverage payhas declined substantially. In fact,average CEO pay in2008 is belowthe average in 1998.


WhileaverageCEO pay has declined, the pay of other highly paid groupshasincreased.The second graph shows S&P 500 CEO pay relative totheincome of thetop 1% of US taxpayers. Relative to those othergroups,CEOs are nobetter off in 2008 than in 1994. Strikingly,relative CEOpay is a halfof what it was in 2001, a huge decline.


Whichare those groups that have earned increasingly highcompensation?Hedgefund, private equity and venture capital investorshave increasedtheir assets and fees substantially, translating into high pay.Byone estimate, the top three hedge fund managers earned more in2007thanall 500 S&P 500 CEOs combined. Professionalathletes,investmentbankers, consultants and lawyers also have benefitedgreatly.For example, from 2004 to 2008, the inflation-adjusted pay ofpartnersatthe top 20 law firms increased by 12% while that of S&P500CEOsdropped 12%. Those law firms had over 3,000 partners makinganaverageof $2.4m each.
One can look at the Obama administration forother examples. LarrySummers made $8m (more than the median S&P 500CEO)giving speechesand working part-time for a hedge fund. EricHoldermade $3.5m as a lawpartner.
So, while CEOs earn a lot, theyare not unique. The pay of people in theother groups has undoubtedlybeen driven by market forces; all arecompensated in arm's-length markets（A financial market in which parties engaging in transactions are separate and have no contact with each other outside of the buying and selling of securities. In the case of the stock market, most investors will never know from whom they are buying securities or to whom they are selling them.）,not by cronies（密友）.Technology,globalisation and scale appear to have increased the marketvalue ofthese groups. CEOs have not done better and, by some measures,have doneworse. Those who argue CEOs are overpaid have to explain howCEOs can beoverpaid and not subject to market forces, when the othergroups arepaid at least as well and are subject to market forces.
Whyis the pay of these other groups relevant for CEOs? Topexecutivesregularly leave to work for private equity firms and hedgefunds. Lawpartners and consultants leave to work for public companiesas generalcounsels and executives. Relative pay matters and all thesegroups arepaid according to market demand.Markets are the driving forceforsenior executives in all these industries and talented peoplejumpacross industries, based on market perceptions of their worth.
Critics also argue that CEO pay is not tied tostock performance. Again,that is not true. Looking at what CEOsactually receive—realisedpay—Josh Rauh and I found that firmswith CEOsin the top decile ofrealised pay earned stock returns 90%above those ofother firms intheir industries over the previous fiveyears. Firms withCEOs in thebottom decile of realised pay under performed by almost 40%.The typicalCEO is paid for performance.
This was reinforced in2008, when average realised CEO pay declined by25%(according toS&P's Execucomp). And Equilar, another providerof CEO pay data,estimated that the typical CEO experienced a networthdecline of over40%.
The final myth to bust（砸碎）is that CEOs control their boards and earn highpay through this controland notperformance. In fact, CEO tenure hasdeclined, from ten years inthe1970s to six years today, and boardshave got tougher on theirexecutives when they do not perform.
In sum, market forces governCEO compensation. CEOs are paid what theyare worth. Talentedindividuals, who are perceived to be valuable, canmove betweenindustries to be compensated well. The clearest example ofthis is thateven governments have to pay highly for talentedexecutives.Recently,the Royal Bank of Scotland (under UK governmentcontrol) hireda CEOwith a package worth up to $16m; AIG (under USgovernmentcontrol)hired a CEO with a package worth up to $10.5m. Forthesecritical jobs,both of these executives received compensationexceedingthe pay of themedian S&P 500 CEO.


The opposition's opening remarks
Oct 20th 2009 |  Nell  Minow

Excessiveexecutive compensation of the past decade is both a symptomand a causeof the current economic mess. And the post-meltdown awardsare all butguaranteed to continue to create perverse（任性的） incentives thatwill reward management and further damage the interests of shareholdersand everyother participant in the economy.
Incentivecompensation rewarded executives for the quantity oftransactions ratherthan the quality of transactions. It inevitably ledto failures like thesubprime disaster and the dominoes it toppled as ittook the economy down with it.Worstof all, the avalanche ofpost-bailout bonuses and departurepackageslike the $53m Ken Lewis gotfrom Bank of America have severelydamaged the credibility of WallStreet and the American financialmarkets as awhole. The billions ofdollars of losses do not come closeto the reputational hit to Americancapitalism, which will increase thecostof capital for all US companies.
Panglossian（乐观） observers will always be able to find some metric to justifyany level of pay. But the results speak for themselves.The decisionsthat led to the meltdown were made by executives who knewthat theywould be paid tens, even hundreds of millions of dollars nomatter howsuccessful the consequences of those decisions.
Let us look at ground zero（起点）of the subprime mess, Countrywide, whereAngelo Mozilo made morethan$550m during his time as CEO. When thecompensation committee triedto object to his pay levels, he hiredanother compensationconsultant,paid for by the shareholders, to pushthem into giving himmore. He also pushed for, and was given,shareholder subsidies, not justfor his wife's travel on the corporatejet but for the taxes on theimputed income from that travel. Instead oftelling Mr Mozilo that hehad no business asking the shareholders tosubsidise his taxes, the boardmeekly signed off（正式认可某件事的开始执行） on it, making it clearto everyone in the executivesuite that the pay-performance link was nota priority.
Bythe end of 2007, when Countrywide finally revealed the losses ithadpreviously obscured, shareholders lost more than 78% oftheir investmentvalue. Meanwhile, in early 2007 Mr Mozilo sold over$127m in exercisedstock options before July 24th 2007, when heannounced a$388m write-downon profits. Before the bailout, Countrywidenarrowly avoided bankruptcyby taking out an emergency loan of $11billion froma group of banks. MrMozilo continued to sell off shares,and by the end of 2007 he had soldan additional $30m in exercised stockoptions.There is the definition ofoutrageously excessive compensation.
Countrywide responded to ashareholder proposal that year asking for anon-binding advisory vote onits pay plan by urging shareholders tooppose it because "Countrywidehas been an outstanding performer" andbecause"The Board's CompensationCommittee has access to the bestinformationon compensation practicesand has a thorough process inplace to determine appropriate executivepay." They could hardly havedon worse. And it is likely that somemarket feedback on the structureofthe pay plan could have givencompensation committee members HarleyW.Snyder (chair), Robert J.Donato, Michael E. Dougherty and OscarP.Robertson worthwhile guidance.
MichelleLeder of theindispensable Footnoted.org website discoveredthat Frank A.Keating,Charles T. Maxwell and Frederick B. Whittemore,thecompensationcommittee at Chesapeake Energy, not only paid theCEO,AubreyMcClendon, $100m, a 500% increase as the stock dropped 60%andthe profits went down 50%, they spent $4.6m of the shareholders'moneyto sponsor a basketball team of which Mr McClendon owns a 19%stake,they purchased catering services from a restaurant which he ownsjustundera half of, and they took his collection of antique maps off hishandsfor $12.1m of the shareholders' money, based on a valuation fromtheconsultant who advised Mr McClendon on assembling the collection.Theboard justified this by referring to Mr McClendon's having to sellmorethan $1 billion worth of stock due to margin calls, hishaving concludedfour important deals and the benefit to employee moralefrom having themaps on display in the office. A market-based responsewould be: (1)that was his risk and it is inappropriate to the pointofmisappropriation to force the other shareholders, alreadysubstantiallyout of pocket with their own losses due to his poorleadership oftheorganisation, make up for his losses (2) if the dealsare good ones,he will be adequately rewarded when the benefit of thosedeals isreflected in the stock price; and (3) you have got to bekidding. Ifthis is pay for performance, what exactly is the performancewearepaying for?
These may be anecdotes, but they are illuminating ones. The numbers anddetails may be at the extreme, but the underlying approaches arerepresentative.Even as outliers, they still demonstrate the failure ofthe system toensure a vigorous, arm's-length system for determining payand theinability of the system to require an effectiveincentiveprogramme witha genuine downside as well as an upside.
In my comments, I will discuss the seven deadliest sins ofexecutive compensation,the two key elements that are essential for anyplan that merits supportfrom investors and the only metric that mattersin looking at pay.

COMMENT:
WhileKaplan defends the motion, Minow vetos it. It's quite weird to declarethat both of them make sense to their own idea, their focus is none theless, not alike.

Kaplan is keen on numerical analysis andpresents us an all-rounded reasonsing. As he puts it, executive pay isunexpectedly contrary to the public perception and below other topjob's pay. What allures us is top CEO's pay rather than the averageones. Meanwhile CEO do get fired, as boards is getting tougher; whatdetermines the length of CEO'S tenure is his performance.

WhatMs Minow pays attention to is huge leaving pay regardless an economiccrisis and some extreme example of bandit alike CEO. She states whattortures the economic is indeed this kind of paying system.

Each of them justify for their ideas. I'd rather take my stand as well, which is combined with them two.
CEO,does deserve a well pay and their pay is related to the market price.As an chief exercutive manager, he's facing a much tougher pressure andgreat risk. What's more, what and how he performs is closely related tothe development of company. Meanwhile, the huge leaving pay do makesense either, according the contract, board cannot fire its employee soeasily, as a result ,leaving pay sometimes equal a month's pay or more.Failed as he was, he is worthy a legal leaving pay as well. Inaddition, a realized  regulation in paying system can avoid the extremephenomenon as Ms Minow points out.

番茄斗斗UID: 2720914

圣诞节在图书馆呆过，赶作业啊赶作业～～想想元旦之后的5+5门考试，泪奔。。。再来轮17天看来是不实际了，每天一章？？阅读不能放松~

plukaUID: 2721764

5+5门考试！！！天……酱同学你是啥专业啊，忒变态了

番茄斗斗UID: 2720914

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Rebuttal（反驳;抗辩） statements

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.
Mr Kaplan argues that the most powerful criticism of executive pay-thatbosses get upside and no downside-issimply false. He points out thatthree of the most maligned bosses inthe financial services sector,Vikram Pandit of Citigroup, John Mack ofMorgan Stanley and KennethLewis of Bank of America, all lost smallfortunes in 2008. CEOs as agroup lost roughly 40% of their wealth in2008.
Ms Minow argues that her rebuttal is being written by theheadlines.Financial service companies are once again paying hugebonuses despitethe fact that their companies have been propped up bypublic money. Shepoints out that CEOs enjoy the unique privilege ofbeing able toappoint the people who decide their pay. She also reiterates the pointthat there are plenty of devices such as golden parachutes that cannotpossibly be justified by performance.
Inhis expert evidence Rakesh Khurana tries to focus onfundamentalquestions such as what the purpose of compensation is. Heargues thatthe market for CEOs is a highly distorted one because CEOsthemselvescan influence the process and performance is hard to measure.Hesuggests that extreme pay differentials can damage companiesbyattracting the wrong sort of bosses and demotivating the rank and file（普通成员）.He also worries about the legitimacy of the system. One survey suggeststhat only 13% of people trust what CEOs say.
Sofar the voting is going heavily against the motion. But I wonder howfarthis is driven by emotion rather than a reasoned assessment oftheevidence. I would urge the participants to pay close attention tothewording of the motion-particularly the key phrases 'one the whole'and'deserve'. We need to focus more on the overall picture, aroundtheworld as well as in the United States, rather than on a fewattention-grabbinganecdotes. And we need to think more closely aboutthe word 'deserve'.Mr Kaplan's best chance of turning the votingaround is to demonstratethat outstanding bosses can boost theperformance of the organisationsthat they head（引导）, not only earning theirpay 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 ofthe 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.And the data, that is thepay at a broad sample of financial companies,simply do not support herconclusion. Ironically, neither do her twoanecdotes.
Ms Minow makes the following claims. (1) Incentivecompensationrewarded top financial executives for the quantity oftransactions, notthe quality. (2) Top CEOs, like Mr Mozillo, took largeamounts of moneyout of their companies before their companies failed.(3) The CEOs knewthey were making bad investments, but did so anywaybecause they couldmake more money doing so. (4) CEOs get upside, but nodownside. (5) Thepost-meltdown awards create incentives that rewardmanagement, butdamage shareholders and everyone else.
These claimsare false. As David Yermack of NYU pointed out in a recentpiece in theWall Street Journal, Vikram Pandit of Citigroup, John Mackof MorganStanley and Kenneth Lewis of Bank of America:
"all lost smallfortunes in 2008. The 2008 compensation of MessrsPandit, Mack, andLewis was approximately minus $105 million, minus $40million, and minus$108 million, respectively, after taking account ofthe losses on thestock that each CEO owned in his firm. Other CEOs inthe financialindustry had similarly bad years. Kerry Killinger ofWashington Mutuallost more than $25 million before being ousted inSeptember, KennedyThompson of Wachovia lost more than $30 millionbefore being fired inJune, and Jeffrey Immelt of General Electric lostmore than $60 million... These CEOs' financial reversals（a change (as of fortune) often for the worse） were part ofa robust system of pay-for-performance widely used by most U.S.companies."
Yermackalso points out that James Cayne lost most of hisbillion-dollar fortunewhen Bear Stearns failed and Richard Fuld ofLehman Brothers losthundreds of millions of dollars.
The fact is that mostfinancial-company CEOs received the lion's shareof their pay in stockand options. And they kept most of that pay asshares in their companieswhich they never cashed in. When the crisishit and their stock prices sank, those CEOs lost a large fraction oftheir wealth and, in many cases, their jobs.
AsI wrote in my first entry, this is true, in general, of the overallCEOmarket. CEOs earn a lot and their stock appreciates when theircompaniesperform well. CEOs lose large amounts of wealth and theirjobs whentheir companies perform poorly. It is irresponsible to claimthat CEOsdo not bear any downside risk. In 2008, CEOs as a group lostroughly 40%of their wealth.
In direct contradiction to Ms Minow's conclusion,the financial CEOswere compensated in the end for the quality of theirtransactions. TheCEOs did not take much off the table.The CEOs had a substantial amountof downside risk. In fact, those CEOswould have been much better offif they had not engaged in thetransactions they did.
It is worth adding that David Yermack is anoted researcher on CEO paywho studies large samples over long periods.He has written severalarticles highly critical of specific CEO paypractices, like corporatejet usage. Nevertheless, his conclusion on therelation of CEO pay tothe financial crisis is diametrically opposed toMs Minow's (as is hischaracterisation of the CEO market in general).
Astudy of CEO incentives in a broader group of financialinstitutionsduring the crisis by Rudi Fahlenbrach and Rene Stulz ofOhio State (anda former president of the American Finance Association)confirmsYermack's analysis and also clearly refutes Ms Minow'sconclusion.
Ironically, even her two anecdotes about Angelo Mozilloof Countrywideand Aubrey McClendon of Chesapeake Energy fail to supporther case.
Unlike the other CEOs mentioned above (and mostfinancial-institutionCEOs), Mr Mozillo did manage to sell a lot of hisstock. Unfortunatelyfor him, the SEC has charged him with securitiesfraud and insidertrading. And it is unlikely to lead to a good outcomefor him. If foundguilty, he potentially will end up paying three timeswhat he took out.Clearly, he appears to have behaved badly, but he didnot get away withit.
As for Mr McClendon, he runs an energy company. How could he possibly have had anything to do with the financial crisis?
The preponderanceof the data and, even Ms Minow's "outlier""anecdotes," therefore, failto provide any evidence that top executivecompensation had much to dowith the financial crisis.
Top executive compensation did not causethe financial crisis. Instead,the crisis was caused by loose monetarypolicy, a global capital glut,over-high leverage （影响力)atinvestment banks, mandates from Congress toprovide mortgages to peoplewho could not afford them, flawed ratingsfrom the rating agencies andpoor incentives at mortgage origination(not the CEO) level. Consistentwith this, the financial crisis hasspread to financial institutions inother countries with very differentpay practices.（这一段解释了经济危机的起源，值得参考～～）


The opposition's rebuttal remarks
Oct 23rd 2009 |  Nell Minow

The headlines are writing my rebuttal for me.
GoldmanSachs set aside $16.7 billion for compensation and benefits inthe firstnine months of 2009, up 46% from a year ago. While its netincome hastripled, its core investment banking business is down 31%.The TorontoStar quotes Goldman'sCFO, David Viniar, using an unforgivable oxymoron(矛盾修辞法)in a conference callwith reporters: "Our competitors are paying peoplequite well [and are]very willing to pay employees guaranteed bonuses ofvery high amounts." (emphasis added)
Mr Viniar also showed that hehas a very short memory, arguingthat Goldman is operating without anygovernment guarantee, ignoringthe reality of the government guaranteethat kept the system going justa year ago.
These bonuses havenothing to do with paying for performance. How muchof Goldman'sbouncing back is due to the government's guarantees and thehundreds ofbillions of dollars it poured into Goldman, Wall Street, andothersubsidies and outright welfare payments to the very institutionsthatcame close to bringing down the entire economy? Shouldn't theAmericanpeople expect some sort of discounted calculation of thebonuses thatreflect a market-based assessment of performance? Onceagain, WallStreet is all about capitalism when it comes to the upside,but allabout socialism when itcomes to the downside, that is, fromeach,according to his ability, to each, whatever he can get away with.
Alsothis week, we had the testimony of Neil Barofsky, the specialinspectorgeneral for the government's financial rescue programme beforethe HouseCommittee on Oversight and Government Reform. The serialoffender AIGhas promised$198m in bonus pay to its employees nextMarch, according tothe testimony, and there is very little thegovernment or anyone elsecan do about it. Because the bonus agreementswere entered into beforethe bailout, the government has no legalauthority to stop them. AllSpecial Master Kenneth Feinberg can do isask the company not to pay thebonuses and rattle his sabre（炫耀武力，吓唬） about thepay he can control goingforward, hoping that the threat of clampingdown on（强加）the 25 executives at each of the covered companies he doeshaveauthority over will be enough of an incentive to force a change. In themeantime, once again,pay is uncoupled from performance.Even thecompany has given up on trying to make that case, relyinginstead onopportunity costs to justify the bonuses and arguing thatthese kinds ofpayments are necessary in order to keep the employeesfrom leaving.Based on their past performance and their unwillingness totie futurepay to genuine measures of sustainable growth, I suggest thatthe bestchoice for shareholders is to let them  leave.
Mr Barofksygave the committee a Treasury Department report on the lastset ofoutrageous AIG bonuses. It concluded in part that "Treasuryinvested $40billionof taxpayer funds in AIG, designed AIG'scontractualexecutivecompensation restrictions, and helped manage theGovernment'smajoritystake in AIG for several months, all withouthaving any detailedinformation about the scope of AIG's verysubstantial, andverycontroversial, executive compensationobligations." If a privateentity had been asked for emergency funds, itis unthinkable that anymoney would have been advanced withoutestablishing some controlovercompensation. There are two reasons forthis. The first is agencycosts. Anyone (other than Secretary HenryPaulson, apparently) puttingmoney at risk will want to ensure that itwill not be inappropriatelyappropriated. The second is the highlikelihood that the previousincentive structure was a significantfactor in the bad decisions andcatastrophic risk management thatcreated the need for the funds inthefirst place.
And really, that is all the argument one needs. Bydefinition, theincentive compensation was badly designed, as provedbythe results.However, I will respond to some of the points raised byProfessor Kaplan.
First, we disagree on the calculations thatsupport the conclusion thatCEO play has been declining. Ourfigures,based not on theoretical paybut on realised pay, are as follows.

Clearlyactual pay is the better measure of pay effectiveness. I alsoquestionthe validity of the Equilar survey figures. They are based onthereported total compensation in the summary compensationtable, whichiseven further from reality than the "expected pay", as it is justanaccounting cost.
I do not understand why he brings up the networth of CEOs; that has norelationship whatsoever to their pay, itsrelationship to performance,or its effectiveness at aligning CEOs'interests with shareholders'.
Second, ProfessorKaplan states, "Thetypical CEO is paid forperformance. Board sincreasingly fire CEOs forpoor performance." Thesecond sentence has no relationship to the first.Boards may fire CEOsfor poor performance, but they pay them boatloads of money for thatperformanceon the way out of the door.Just look at Ken Lewis'sdeparture fromBank of America. Disastrousperformance that apparentlyincluded lying(about what else? bonuses) andan unprecedented vote ofno confidence from shareholders that removedhim as chairman, may indeedhave caused him to be fired (though theboard did not use that term).But his $53mretirement package does notfeel like pay for performanceto me.
ProfessorKaplan tries toobscure the point by bringing in law firmpartners,athletes and otherhighly-paid professionals. Partners in lawfirms are paid according toformulas set by the partnership. As in anyother private firm, there areno agency costs to worry about and theycan do whatever they like.Athletes, movie stars and recording artists,whohave a much greaterrange and far greater elasticity incompensation,engage in vigorousarm's length negotiations on pay; theirpay is notset by boards theyappoint, as CEOs' is.
And it is hard for me to understand howanyone could point to the US orUK government authorising excessive payas a validation of the system.As noted above, the government hasrepeatedly failed as regulator or asproviderof capital in curbingoutrageously destructive executivecompensation.
Here are seven deadly sins found in executive compensation plans.Eachof them is conclusive evidence that the system is out of whack(运行不正常）.
1.    Making up for losses in stock value with other grants of cash or stock.
2.    Imputed years of service to 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.
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.

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扫盲区：
1.golden parachute:A golden parachuteis an agreement between a company and anemployee (usually upperexecutive) specifying that the employee willreceive certain significantbenefits if employment is terminated.Sometimes, certain conditions,typically a change in company ownership,must be met, but often thecause of termination is unspecified. Thesebenefits may include severance pay, cash bonuses, stock options, or other benefits. They are designed to reduce perverse incentives—paradoxically (and ironically) they may create them.

2.oxymoron：矛盾修饰法
A rhetorical figure in which incongruous or contradictory terms arecombined, as in a deafening silence and a mournful optimist.
　　矛盾修饰法：一种把互相矛盾或不调和的词合在一起的修辞手法，如在震耳欲聋的沉默 和 悲伤的乐观
　　所谓矛盾修辞法(Oxymoron)是指将语义截然相反对立的词语放在一起使用，来揭示某一项事物矛盾性质的一种修辞手法。换言之，它使用两种不相协调，甚至截然相反的特征来形容一项事物，以增强语言感染力。在阅读理解解码过程中，矛盾修辞法可以产生出两种强烈的修辞效果。第一，出人意料。由于两部分语义相互矛盾，合并使用有悖常理，所以矛盾修辞强烈碰撞读者的神经思维，起到意想不到，启发思维的作用，为进一步深化理解奠定了基础。例如英语的cruelkindness,汉语的“真实的谎言”和“甜美的复仇”便是矛盾修辞法的具体表现。读到上述那样的矛盾词语组合读者肯定会有出乎意料的感觉。第二，引人入胜。矛盾词语的冲击会激发读者进一步深化理解的欲望。在仔细推敲这种看似矛盾的语言表达之后，读者会发现矛盾修辞法所表示的语义矛盾不仅符合逻辑，而且使文章更加形象生动，意蕴丰富且深刻。

回到文章的这句话："Our competitors are payingpeople quite well [and are]very willing to pay employees guaranteedbonuses of very high amounts."

首先Mr Viniar的基调是不认同这样的制度。这从后文的'MrViniar also showed that he has a veryshort memory, arguingthat Goldmanis operating without any governmentguarantee, ignoringthe reality ofthe government guarantee that keptthe system going justa year ago."可知
再看这里的competitor与pay quite well and willing to pay的语义截然（后者是肯定，前者自然是相对的）
我的理解是这里的competitor是假想的,即MrViniar调侃说他们的对手可能给了很多的compensastion和benefit，所以GoldmanSachs调高benefit是合理的。这讽刺了goldman sachs不顾公司核心投资的下降，调高benefit的不妥。

3.WallStreet is all about capitalism when it comes to the upside,but allabout socialism when itcomes to the downside, that is, fromeach,according to his ability, to each, whatever he can get away with.
这句话有点难理解，联系金融危机以来美国政府将大多数企业国有化，难道是说华尔街在繁华时期施行资本主义，低谷时期施行社会主义？还望经济小牛来解释下～～
没有找到相关的材料，不过看到篇很有意思的文章，链接如下：美国救市是拯救还是摧毁资本主义        



-----------------
COMMENT：
Theproposer and opposition above present us a fierce and excellentargument, as both of them pinpoint the weakness of the statement givenfrom the other side.

According to Kalpan,the performances ofthe CEO win them various benefit and most of them are stocks,whoseprofit is close related to the situation of the company. As heillustrates by cases, the myth none-performance-related paying systemis busted. In addition, Mr Kalpan question on Nilnow's knowledge aboutthe economic crisis, which is rather linked to the monenary system.

However,Ms Nilnow is more likely to focus on the cases in the contex of theeconomic crisis. With all shared character, the increasing compensationand lowing income or invement of the quoted companys bring us atremendous shock. What's more, as she put it, theoretical pay,rather than relised pay, is ridiculous. If this is the case, it's irresponsible to conclude whether the pay has risen or not.

Strongas them claim, flaws are inevitable as well. Ms Nilnow emphasises toomuch on the current context, while Kalpan is making it obsolutedlyright to have the huge exercutive pay. As the debate more likely appearwith the advent of the economic crisis and with the arguable leavinigpay, we are obscuring the idea of an CEO. And this in turn brings usinto extreme knowledge about it. CEO is taking a great responsibilityof a company, as this is for sure, a great exposure is following alongwith his works. He's being examed every minute and every time,menwhile, his tenure is determined by the stock marcket. Even thoughthere's no comparison between CEO and other professional, we seethere's a similarity-talent decides the pay. If one is well-paid, hisability must be appreciated.

看晕掉了。。。COMMENT就到这儿吧

番茄斗斗UID: 2720914

5+5门考试！！！天……酱同学你是啥专业啊，忒变态了
pluka 发表于 2009-12-24 23:07

管理科学～～我们就这学期课最多，而且还都集中在期末才考。。

番茄斗斗UID: 2720914

[REBORN FROM THE ASHES][comment][12.26]

好词-结构-难句-生词-表达

Passwords aplenty
Dec 18th 2009 | LOS ANGELES
From Economist.com
How to stay sane as well as safe while surfing the web
AT THIS time of the year, your correspondent crosses thePacific to Japan for a month or so. He repeats the trip during thesummer. He considers it crucial in order to keep abreast of（跟上（某事物的发展）） all theingenious technology which, once debugged by the world’s mostacquisitive consumers, will wind up in American and European shops ayear or two later.

Each time he packs his bags, though, he is embarrassed by having toinclude a dog-eared（翻旧了的） set of notes that really ought to be locked up in asafe. This is his list of logons and passwords for all the websites heuses for doing business and staying in touch with the rest of theworld. At the last count（根据有关的最新消息）, the inch-thick list accumulated over the pastdecade or so—your correspondent’s sole copy—includes access details forno fewer than 174 online services and computer networks.



Alamy
He admits to flouting（蔑视） the advice of security experts: his failingsinclude using essentially the same logon and password for many similarsites, relying on easily remembered words—and, heaven forbid, writingthem down on scraps of paper. So his new year’s resolution is to set upa proper software vault for the various passwords and ditch thedog-eared list.

Your correspondent’s one consolation is that he is not alone in usingeasily crackable words for most of his passwords. Indeed, the majorityof online users have an understandable aversion to strong, buthard-to-remember, passwords. The most popular passwords in Britain are“123” followed by “password”. At least people in America have learnedto combine letters and numbers. Their most popular ones are “password1”followed by “abc123”.

Unfortunately, the easier a password is to remember, the easier it isfor thieves to guess. Ironically, the opposite—the harder it is toremember, the harder it is to crack—is often far from true. That isbecause, not being able to remember long, jumbled sets of alphanumeric（含有字母和数字的）characters interspersed with symbols, people resort to writing themdown on Post-it notes left lying around the office or home for all andsundry（不同的） to see.

Apart from stealing passwords from Post-it notes and the like,intruders basically use one of two hacks to gain access to otherpeople’s computers or networks. If time and money is no problem, theycan use brute-force methods that simply try every combination ofletters, numbers and symbols until a match is found. That takes a lotof patience and computing power, and tends to be the sort of thing onlyintelligence agencies indulge in.

A more popular, though less effective, way is to use commercialsoftware tools such as “L0phtCrack” or “John the Ripper” that can befound on the internet. These use dictionaries, lists of popularpasswords and rainbow tables（彩虹表：是一个庞大的、针对各种可能的字母组合预先计算好的哈希值的集合） (lookup tools that turn long numberscomputed from alphanumeric characters back into their original plaintext) to recover passwords.

According to Bruce Schneier, an independent security expert, today’spassword crackers “can test tens—even hundreds—of millions of passwordsper second.” In short, the vast majority of passwords used in the realworld can be guessed in minutes. And do not think you are being smartby replacing the letters “l” or “i” in a password with the number “1”;or the letter “s” with the number “5” or the symbol “$”. Crackingprograms check all such alternatives, and more, as a matter of course.

What should you do to protect yourself? Choose passwords that arestrong enough to make cracking them too time consuming for thieves tobother.

The strength of a password depends on its length, complexity andrandomness. A good length is at least eight symbols. The complexitydepends on the character set. Using numbers alone limits the choice tojust ten symbols. Add upper- and lower-case letters and the complexityrises to 62. Use all the symbols on a standard ASCII keyboard and youhave 95 to choose from.

The third component, randomness, is measured by a concept borrowed fromthermodynamics—the notion of entropy (the tendency for things to becomedisordered). In information theory, a tossed coin has an entropy of one“bit” (binary digit). That is because it can come down randomly in oneof two equally possible binary states.

At the other extreme, when you set the encryption of a Wi-Fi link, youare usually given the choice of 64-bit or even 128-bit security. Thosebit-numbers represent the entropy (or randomness) of the encryptionused. A password with 64 bits of entropy is as strong as a string ofdata comprising 64 randomly selected binary digits（二进制数字）. Put another way, a64-bit password would require 2 raised to the power of 64 attempts tocrack it by brute force—in short, 18 billion billion attempts. A 64-bitpassword was finally cracked in 2002 using brute-force methods. It tooka network of volunteers nearly five years to do so.

The National Institute of Standards and Technology, the Americangovernment’s standards-measuring laboratory in Gaithersburg, Maryland,recommends 80-bit passwords for state secrets and the like. Suchsecurity can be achieved using passwords with 12 symbols, drawn fromthe full set of 95 symbols on the standard American keyboard. Forordinary purposes, that would seem overkill（小题大做）. A 52-bit password based oneight symbols selected from the standard keyboard is generally adequate.

How to select the eight? Best to let a computer program generate themrandomly for you. Unfortunately, the result will be something like6sDt%k&3 that probably needs to be written down. One answer, onlyslightly less rigorous（谨慎的）, is to use a mnemonic constructed from the firstletters (plus contractions) of an easily remembered phrase like “MurderConsidered as One of the Fine Arts” (MCa1otFA) or “To be or not to be:that is the question” (2Bo-2b:?).

Given a robust 52-bit password, you can then use a password manager totake care of the dozens of easily guessable ones used to access variousweb services. There are a number of perfectly adequate products fordoing this. In an early attempt to fulfil his new year’s pledge, yourcorrespondent has been experimenting with LastPass,a free password manager that works as an add-on to the Firefox webbrowser for Windows, Linux or Macintosh. Versions also exist forInternet Explorer on Windows and Safari on the Mac.

Once installed and given a strong password of its own, plus an e-mailaddress, LastPass encrypts all the logons and passwords stored on yourcomputer. So, be warned: forget your master password and you could bein trouble—especially if you have let the program delete (as it urgesyou to let it do) all the vulnerable logons and passwords on your owncomputer.

Thereafter, to visit various web services, all you have to do is loginto LastPass and click the website you wish to check out. The toolthen automatically logs you on securely to the selected site. It willeven complete all the forms needed to buy goods online if you havestored your home address, telephone number and credit-card details inthe vault as well.

Your correspondent looks forward to using the service while travellingaround Japan over the next month or so. To be on the safe side,however, his dog-eared list of passwords will still go with him.

---------
SUM-UP:
Today, netizen are using comparatively-simplified password online.Jumble sets of alphanumeric or confusing alternation are no longer safeenough, for they can be easiy cracked by minutes. As a result, securityonline involves high-tech. Length, complexity andrandomness ,as determinations of the strengh of a password, isenpowered by binary bits, computer programe generation. In addition,the giving password can be guarded by password manager, while you aresurfing the net.

COMMENT：
With the advent of high-tech, business has vastly shifted to onlinemarket. This enables the possibility of increasing crimes ,which mainlyfocus on stealing the online information, and what's more, may squeezethe wealth in your bank account.

This is what high-tech brought us, a promising convience as well ashigh insecurity. Sticking to the old way,like what the correspondentdid in the given article, to avoid its weakness is none the lessunsound. On the contrary, an advanced way is appreciated,as there'salways a solution given after the burst of a mess.

We have heard boundless complaints about information age, including theinsecurity of it. Contrary to the public perception, insecurity sharesno difference in before and after information age, and what allurs usto the misunderstanding is the convenience brought by information age.Online business for example, as tranction increased, so is the exposureto risk. Meanwhile, we have to admit the chance of risk iscomparatively shrinking as well.

番茄斗斗UID: 2720914

REBORN FROM THE ASHES][comment][12.27

好词-生词-表达

1.Buyers in every sector of the art market, from Chinese porcelain（瓷器） to Old Masters, now seem to follow a pattern.
2.They are happy to pay over the odds for top-ranking pictures
3.the picture that fetched the highest sum was “The Old Dealer”
4.underbidder低价提供者，knickknack小摆设


COMMENT:
Artcomes from life and beyond life, as a result, it confuses the outsidersin certain ways. How to judge the value of it and by which way can youappreciate it keep us away. Without revelent knowledge, we arefollowing the trend, objectlessly and unconditionally. Mostly, itshares the same signal with other goods, that is, money it has fetched.

As numerous cases were given from the article, i'm more likelyshocked by the doubled or tripled price of a painting at acution.According to Mason, an active buyer, inflation enables the prosperityof the art market. In addition,he determines the art as quality ones,however, i see it in an irony way. Art today, is brewed by outsiders,who are more concerned about its value of potential price rather thanof art itself. No wonder Vincent Van Gogh were getting famous longafter his death.

番茄斗斗UID: 2720914

果然还是很喜欢写计划！！今天呆图书馆，想到后面的考试，想想有计划性点比较好，结果一不留神，画了个甘特图。。。嘿嘿，知道每天该干嘛，知道自己是一步一步往前走的，这样心里就踏实了好多～～
今天开始，寝室12点熄灯，完成了单词，精读，COMMENT，这下该把精华贴好好过几篇下来～

海王泪UID: 2673613

38# 番茄斗斗

果然还是很喜欢写计划！！今天呆图书馆，想到后面的考试，想想有计划性点比较好，结果一不留神，画了个甘特图。。。嘿嘿，知道每天该干嘛，知道自己是一步一步往前走的，这样心里就踏实了好多～～
今天开始，寝室12点熄灯，完成了单词，精读，COMMENT，这下该把精华贴好好过几篇下来～

甘特图。。果然学管理的··呵呵
你10门课··太可怕了吧··比我们多一门。

plukaUID: 2721764

= =甘特图是啥
甘蔗俺就知道……很甜很好吃的……甘蓝也知道……饿了……

番茄斗斗UID: 2720914

精华贴之AW考后一点感想：Read and Recite by Genev
1. 熟悉topic列提纲比看北美范文重要
2. 要善于运用Wikepedia和网络
3. 多读英文原版书--西方哲学史
4.可以借鉴GMAT作文书

最近要攒例子了，来看看ISSUE--introspect into our own minds】 about examples by 草木也知愁
例子要找精良的，而且例子要深挖，永远注意一点——深度>广度>>泛度

文章逻辑的贯穿，不仅仅要通过ideas，如果做得好，一个素材的不同角度不同层面也可以完成烘托一个topic。如果怕这样会被认为知识面单一，就太吹毛求疵了，总共六百余字，你写的再多也不过四五个浅浅的例子。AW看的是analytical，logical。rater想要的是一个acceptable insight。


------------
精华贴看到一半，看到小九的评论，马上丢下手上的活ARGUE去了，嘿嘿，AW果然无处不在哈～～
看到又八的楼，惊叹！！其实以前也有背文章的习惯，可是一段时间不背，写文章起来就手生的厉害，刚刚的文章用词贫乏的囧了。恩恩，我也要加入又八的队伍！！好好背文章去了
貌似从今天开始是不熄灯了，不过还是要自觉早睡，恩，为了寝室同学，也为了明天早起好好复习～～

-----
补充的今天的COMMENT如下，欢迎大家来ARGUE:
Thanks to dealers, we have an opportunity to see masters' works.However, dealer himself is a business man rather than a critic. Apple in his eye is the potential value rather than art itself. I have been long informed that Vincent Van Gogh's brother is a dealer, and he can hardly sell Vincent Van Gogh's paintings until his death. Ideas like"why after?" keep haunting me.I'm not familiar with the running system of art market, but what i see in this field is that fate of anartist is determined by merchant rather by expertise.

You may argue, Vincent Van Gogh was not lucky enough to meet the right guy. I'd rather to take my stand from the article above. As the author put it，“They are happy to pay over the odds for top-ranking pictures,but leave the rest untouched.” If dealers boost the art market, they shrink it as well. Choosen ones fetch a great amount of money, while the unpicked ones can only stand aside. Who is judging the rules?Merchant only."Mr Mason said he bought the picture forstock, with noparticular collector in mind.“To them, art is only a goods to invest, a better investment under the economical crisis.

When animal bronze heads from Old Summer Palace appears in the auctionhall, we are lost under mere patriotism. What kind of art they are?Being entitled with the heritage of Old Summer Palace alone,enables these kind of heads valve themself millions. Ironical, they are only faucets,even not a delicate decoration comparatively to the other lost heritage. What indeed make it valuable is the merchant, because they are known it by heart, Chinese will buy it someday out of patriotism.

番茄斗斗UID: 2720914

果然不适合晚睡！！昨天1点多睡，结果今天整个人晕晕的，单词背了半天也没背进去多少。。。COMMENT是来不及完成了，还是早点睡，养好精神明天补上！～

plukaUID: 2721764

正在锻炼自己实施每天6-7小时睡眠计划，结果每三天就要饱睡一场才能继续，泪目……

番茄斗斗UID: 2720914

[REBORN FROM THE ASHES][comment][12.28]

好词-表达-生词-结构-难句

----Mumbai,Banglore...miss India now....!~---
A special report on entrepreneurship

Global heroes

Mar 12th 2009 From The Economist print edition

Despite the downturn, entrepreneurs are enjoying a renaissance the world over, says Adrian Wooldridge
IN DECEMBER last year, three weeks after the terrorist attacks inMumbai and in the midst of the worst global recession since the 1930s,1,700 bright-eyed Indians gathered in a hotel in Bangalore for aconference on entrepreneurship. They mob（成群围住）bed business heroes such asAzim Premji, who transformed Wipro from a vegetable-oil company into asoftware giant, and Nandan Nilekani, one of the founders of Infosys,another software giant. They also engaged in a frenzy of networking（a frenzy of activity,疯狂的活动）.The conference was so popular that the organisers had to erect a hugetent to take the overflow. The aspiring entrepreneurs did not just wantto strike it rich（（意外）发大财 ）; they wanted to play their part in forging a newIndia. Speaker after speaker praised entrepreneurship as a powerfulforce for doing good as well as doing well.
Back in 1942 Joseph Schumpeter gave warning that the bureaucratisationof capitalism was killing the spirit of entrepreneurship. Instead ofrisking the turmoil of “creative destruction”, Keynesian economists,working hand in glove（合作） with big business and big government, claimed tobe able to provide orderly prosperity. But perspectives have changed inthe intervening（介于其中的） decades, and Schumpeter’s entrepreneurs are once againroaming the globe.
Since the Reagan-Thatcher revolution of the 1980s, governments ofalmost every ideological stripe have embraced entrepreneurship. TheEuropean Union, the United Nations and the World Bank have also becomeevangelists（福音传播者）. Indeed, the trend is now so well established that it hasbecome the object of satire. Listen to me, says the leading characterin one of the best novels of 2008, Aravind Adiga’s “The White Tiger”,and “you will know everything there is to know about howentrepreneurship is born, nurtured, and developed in this, the glorious21st century of man.”
This special report will argue that the entrepreneurial idea has gonemainstream, supported by political leaders on the left as well as onthe right, championed by powerful pressure groups, reinforced by agrowing infrastructure of universities and venture capitalists andembodied by wildly popular business heroes such as Oprah Winfrey,Richard Branson and India’s software kings. The report will alsocontend that entrepreneurialism needs to be rethought: in almost allinstances it involves not creative destruction but creative creation.
The world’s greatest producer of entrepreneurs continues to be America.The lights may have gone out on Wall Street, but Silicon Valleycontinues to burn bright. High-flyers（ 有抱负有能力的人） from around the world still flockto America’s universities and clamour to work for Google and Microsoft.And many of them then return home and spread the gospel.
The company that arranged the oversubscribed conference in Bangalore,The Indus Entrepreneurs (TiE), is an example of America’s pervasiveinfluence abroad. TiE was founded in Silicon Valley in 1992 by a groupof Indian transplants who wanted to promote entrepreneurship throughmentoring, networking and education. Today the network has 12,000members and operates in 53 cities in 12 countries, but it continues tobe anchored in the Valley. Two of the leading lights at the meeting,Gururaj Deshpande and Suren Dutia, live, respectively, in Massachusettsand California. The star speaker, Wipro’s Mr Premji, was educated atStanford; one of the most popular gurus, Raj Jaswa, is the president ofTiE’s Silicon Valley chapter.
The globalisation of entrepreneurship is raising the competitive stakesfor everyone, particularly in the rich world. Entrepreneurs can nowcome from almost anywhere, including once-closed economies such asIndia and China. And many of them can reach global markets from the daythey open their doors, thanks to the falling cost of communications.
For most people the term “entrepreneur” simply means anybody who startsa business, be it a corner shop or a high-tech start up. This specialreport will use the word in a narrower sense to mean somebody whooffers an innovative solution to a (frequently unrecognised) problem.The defining characteristic of entrepreneurship, then, is not the sizeof the company but the act of innovation.
A disproportionate（不成比例的，太小的） number of entrepreneurial companies are, indeed,small start-ups. The best way to break into a business is to offer newproducts or processes. But by no means all start-ups are innovative:most new corner shops do much the same as old corner shops. And not allentrepreneurial companies are either new or small. Google is constantlyinnovating despite being, in Silicon Valley terms, something of along-beard.
This narrower definition of entrepreneurship has an impressiveintellectual pedigree(起源) going right back to Schumpeter. Peter Drucker, adistinguished management guru, defined the entrepreneur as somebody who“upsets and disorganises”. “Entrepreneurs innovate,” he said.“Innovation is the specific instrument of entrepreneurship.” WilliamBaumol, one of the leading economists in this field, describes theentrepreneur as “the bold and imaginative deviator from establishedbusiness patterns and practices”. Howard Stevenson, the man who didmore than anybody else to champion the study of entrepreneurship at theHarvard Business School, defined entrepreneurship as “the pursuit ofopportunity beyond the resources you currently control”. The EwingMarion Kauffman Foundation, arguably the world’s leading think-tank（智囊团） onentrepreneurship, makes a fundamental distinction between “replicative”and “innovative” entrepreneurship.
Five myths
Innovative entrepreneurs are not only more interesting than thereplicative sort, they also carry more economic weight because theygenerate many more jobs. A small number of innovative start-ups accountfor a disproportionately large number of new jobs. But entrepreneurscan be found anywhere, not just in small businesses. There are plentyof misconceptions about entrepreneurship, five of which areparticularly persistent. The first is that entrepreneurs are “orphansand outcasts”, to borrow the phrase of George Gilder, an Americanintellectual: lonely Atlases battling a hostile world or anti-socialgeeks inventing world-changing gizmos（小发明） in their garrets(阁楼). In fact,entrepreneurship, like all business, is a social activity.Entrepreneurs may be more independent than the usual suits who merelyfollow the rules, but they almost always need business partners andsocial networks to succeed.
The history of high-tech start-ups reads like a roll-call（点名） of businesspartnerships: Steve Jobs and Steve Wozniak (Apple), Bill Gates and PaulAllen (Microsoft), Sergey Brin and Larry Page (Google), MarkZuckerberg, Dustin Moskovitz and Chris Hughes (Facebook). Ben andJerry’s was formed when two childhood friends, Ben Cohen and JerryGreenfield, got together to start an ice-cream business (they wanted togo into the bagel（一种硬面包） business but could not raise the cash). RichardBranson (Virgin) relied heavily on his cousin, Simon Draper, as well asother partners. Ramana Nanda, of Harvard Business School (HBS), andJesper Sorensen, of Stanford Business School, have demonstrated thatrates of entrepreneurship are significantly higher in organisationswhere a large number of employees are former entrepreneurs.
Entrepreneurship also flourishes in clusters. A third of Americanventure capital flows into two places, Silicon Valley and Boston, andtwo-thirds into just six places, New York, Los Angeles, San Diego andAustin as well as the Valley and Boston. This is partly becauseentrepreneurship in such places is a way of life—coffee houses inSilicon Valley are full of young people loudly talking about theirbusiness plans—and partly because the infrastructure is already inplace, which radically reduces the cost of starting a business.
The second myth is that most entrepreneurs are just out of shorttrousers. Some of today’s most celebrated figures were indeedastonishingly young when they got going: Bill Gates, Steve Jobs andMichael Dell all dropped out of college to start their businesses, andthe founders of Google and Facebook were still students when theylaunched theirs. Ben Casnocha started his first company when he was 12,was named entrepreneur of the year by Inc magazine at 17 and publisheda guide to running start-ups at 19.
But not all successful entrepreneurs are kids. Harland Sanders startedfranchising Kentucky Fried Chicken when he was 65. Gary Burrell was 52when he left Allied Signal to help start Garmin, a GPS giant. HerbKelleher was 40 when he founded Southwest Airlines, a business thatpioneered no-frills（没有装饰的） discount flying in America. The Kauffman Foundationexamined 652 American-born bosses of technology companies set up in1995-2005 and found that the average boss was 39 when he or shestarted. The number of founders over 50 was twice as large as thatunder 25.
The third myth is that entrepreneurship is driven mainly by venturecapital. This certainly matters in capital-intensive industries such ashigh-tech and biotechnology; it can also help start-ups to grow veryrapidly. And venture capitalists provide entrepreneurs with advice,contacts and management skills as well as money.
But most venture capital goes into just a narrow sliver of business:computer hardware and software, semiconductors, telecommunications andbiotechnology. Venture capitalists fund only a small fraction ofstart-ups. The money for the vast majority comes from personal debt orfrom the “three fs”—friends, fools and families. Google is often quotedas a triumph of the venture-capital industry, but Messrs Brin and Pagefounded the company without any money at all and launched it with about$1m raised from friends and connections.
Monitor, a management consultancy that has recently conducted anextensive survey of entrepreneurs, emphasises the importance of “angel”investors, who operate somewhere in the middle ground between venturecapitalists and family and friends. They usually have some personalconnection with their chosen entrepreneur and are more likely thanventure capitalists to invest in a business when it is little more thana budding idea.
The fourth myth is that to succeed, entrepreneurs must produce someworld-changing new product. Sir Ronald Cohen, the founder of ApaxPartners, one of Europe’s most successful venture-capital companies,points out that some of the most successful entrepreneurs concentrateon processes rather than products. Richard Branson made flying lesstedious by providing his customers with entertainment. Fred Smith builta billion-dollar business by improving the delivery of packages. OprahWinfrey has become America’s richest self-made woman through successfulbrand management.
The fifth myth is that entrepreneurship cannot flourish in bigcompanies. Many entrepreneurs are sworn（感情极深的，非常厌恶的） enemies of large corporations,and many policymakers measure entrepreneurship by the number ofsmall-business start-ups. This makes some sense. Start-ups are oftenmore innovative than established companies because their incentives aresharper: they need to break into the market, and owner-entrepreneurscan do much better than even the most innovative company man.
Big can be beautiful too
But many big companies work hard to keep their people on theirentrepreneurial toes（让员工保持创业者精神）. Johnson & Johnson operates like a holdingcompany（控股公司） that provides financial muscle（影响力） and marketing skills to internalentrepreneurs. Jack Welch tried to transform General Electric from aGoliath into a collection of entrepreneurial Davids. Jorma Ollilatransformed Nokia, a long-established Finnish firm, from a maker ofrubber boots and cables into a mobile-phone giant; his successor asboss of the company, Olli-Pekka Kallasvuo, is now talking about turningit into an internet company. Such men belong firmly in the pantheon（先贤祠） ofentrepreneurs.
Just as importantly, big firms often provide start-ups with their breadand butter（主要收入来源）. In many industries, especially pharmaceuticals andtelecoms, the giants contract out（订约把。。承包出去） innovation to smaller companies.Procter & Gamble tries to get half of its innovations from outsideits own labs. Microsoft works closely with a network of 750,000 smallcompanies around the world. Some 3,500 companies have grown up inNokia’s shadow.
But how is the new enthusiasm for entrepreneurship standing up to theworldwide economic downturn? Entrepreneurs are being presented withhuge practical problems. Customers are harder to find. Suppliers arebecoming less accommodating. Capital is harder to raise. In Americaventure-capital investment in the fourth quarter of 2008 was down to$5.4 billion, 33% lower than a year earlier. Risk, the lifeblood（命脉） of theentrepreneurial economy, is becoming something to be avoided.
Misfortune and fortune
The downturn is also confronting supporters of entrepreneurialcapitalism with some awkward questions. Why have so manyonce-celebrated entrepreneurs turned out to be crooks? And why has thefree-wheeling culture of Wall Street produced such disastrous results?
For many the change in public mood is equally worrying. Back in 2002,in the wake of(尾随而至) the scandal over Enron, a dubious energy-tradingcompany, Congress made life more difficult for start-ups with theSarbanes-Oxley legislation on corporate governance. Now it is busypropping up（支持） failed companies such as General Motors and throwing hugesums of money at the public sector. Newt Gingrich, a Republican formerspeaker of America’s House of Representatives, worries that potentialentrepreneurs may now be asking themselves: “Why not get a nice, safegovernment job instead?”
Yet the threat to entrepreneurship, both practical and ideological, canbe exaggerated. The downturn has advantages as well as drawbacks.Talented staff are easier to find and office space is cheaper to rent.Harder times will eliminate the also-rans and, in the long run, couldmake it easier for the survivors to grow. As Schumpeter pointed out,downturns can act as a “good cold shower for the economic system”,releasing capital and labour from dying sectors and allowing newcomersto recombine in imaginative new ways.
Schumpeter also said that all established businesses are “standing onground that is crumbling beneath their feet”. Today the ground is farless solid than it was in his day, so the opportunities forentrepreneurs are correspondingly more numerous. The information age ismaking it ever easier for ordinary people to start businesses andharder for incumbents to defend their territory. Back in 1960 thecomposition of the Fortune 500 was so stable that it took 20 years fora third of the constitutent companies to change. Now it takes only fouryears.
There are many reasons for this. First, the information revolution hashelped to unbundle existing companies. In 1937 Ronald Coase argued, inhis path-breaking article on “The Nature of the Firm”, that companiesmake economic sense when the bureaucratic cost of performingtransactions under one roof is less than the cost of doing the samething through the market. Second, economic growth is being driven byindustries such as computing and telecommunications where innovation isparticularly important. Third, advanced economies are characterised bya shift from manufacturing to services. Service firms are usuallysmaller than manufacturing firms and there are fewer barriers to entry.
Microsoft, Genentech, Gap and The Limited were all founded duringrecessions. Hewlett-Packard, Geophysical Service (now TexasInstruments), United Technologies, Polaroid and Revlon started in theDepression. Opinion polls suggest that entrepreneurs see a good as wellas a bad side to the recession. In a survey carried out in eightemerging markets last November for Endeavor, a pressure group, 85% ofthe entrepreneurs questioned said they had already felt the impact ofthe crisis and 88% thought that worse was yet to come. But they alsopredicted, on average, that their businesses would grow by 31% andtheir workforces by 12% this year. Half of them thought they would beable to hire better people and 39% said there would be lesscompetition.

Comment:
India,where bureaucratisation used to be a product of its own culturedotted around the market, is undergoing a shift to entrepreneurism.This happens to everywhere world over as well.  In the narrowedsense,entrepreneurship focus on the action of innovation, which enableit to fetch a promising venture capital. Unlike other start-ups,entrepreneurship is enpowed by money as well as technology and skillonce ideas is novel. As a result, age of the entrepreneurlist no moreis no more limited and draws everyone' attention.
As it for me, entrepreneurism is a result of information age. Boundlessinformation enriches people's mind and take them to the once forbiddenarea,which was mostly conquered by the millionair. Enpowered by capitalas well as skill, entrepreneurism, as a result, brews the blossom inthe economic market, along with the constant change of Fortune500.

番茄斗斗UID: 2720914

正在锻炼自己实施每天6-7小时睡眠计划，结果每三天就要饱睡一场才能继续，泪目……
pluka 发表于 2009-12-29 00:26

恩恩，其实按着自己的生物钟来学比较好，我现在一过12点半睡，第二天效率暴低！！！