IN DA CLUB

The mantra of pay-for-performance is a cornerstone of the free market religion – people should get paid for what they accomplish, not merely for showing up. Shouldn't we pay teachers based on what percentage of their students make the grade? Of course we should! That's how the rest of the world works. Unless you happen to be un- or self-employed the odds are good that your job is subject to a number of performance-based caveats, as this kind of thinking has permeated the economy in every field from fruit-picking to medicine. True, we're not all working piece rate yet, but the Paul Ryans and Rick Scotts of the world are clearly pushing in that direction.

Performance-based salary and job evaluation schemes are popping up everywhere except, of course, among the people pushing to implement them. Congressional or state legislative salaries remain based on the divine right of kings, and CEO/Job Creator pay has been uncoupled completely from performance under the mantra of rewarding Producers in a manner that will continue to give them incentives to bestow their wisdom upon us. One of the most hilarious examples from the Bush years was General Motors' continued lavish rewarding of the executives who were running the company in the ground. Of course we have to pony up top dollar for brilliant talent like Rick Wagoner, a guy who managed to make Roger Smith look like Bill Gates while pocketing about $100 million in compensation. Talent like that doesn't come cheap.

One of Obama's brief Wall Street love interests, Jaime Dimon, just pocketed $23,000,000 in extra compensation for leading JP Morgan to a $2 billion quarterly loss. And the kicker is that the compensation package was approved in a shareholders' vote. I guess that whole "maximizing shareholder value" thing, the Commandment that has done more to turn this country into Dogpatch than anything else in the last three decades, doesn't apply when it comes to doling out money at the top.

We might expect that the shareholders would be inclined to save money rather than spend it, and certainly to avoid rewarding people who perform so poorly. But a stockholders' meeting is little more than a boys' club operating under the pretext of a transparent process of corporate governance. The kind of heavy-hitting institutional shareholders who decide these votes – mutual fund managers, fellow banking executives, and so on – are either in Dimon's position or expect to be there someday if they can make it to the other side of the shark tank. Perhaps getting to the top, into a position like Dimon's, is so difficult and unpleasant that the people who manage to do it feel entitled to endless compensation to make it all seem worth it.

Or maybe it's just a bunch of assholes born into money, rooming together at prep school, getting the same Gentlemen's B at Harvard or Yale, and using Old Money and family connections to land jobs for which they are woefully unqualified, emerging from their life of privilege with a profound sense of entitlement and a belief in their own greatness that borders on sociopathy. In either case, like so many aspects of our political, economic, and social systems the idea of performance-based compensation and employment standards apply only to the little people.

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49 Responses to “IN DA CLUB”

  1. Both Sides Do It Says:

    Whenever the excessive CEO pay / effectiveness of shareholder control questions come up I love linking to this article which comprehensively summarizes the major facets of whether nor not CEOs are overpaid, why, and whether and how to bring them back down under control.

    http://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=1394&context=dlj (pdf)

    It's rilly gr8, as the kids today say.

    And it's by Richard Posner. It's like reading a competent take-down of revolutionary violence which makes an effective case for the need for respect of human rights and democratic institutions by Pol Pot.

  2. HoosierPoli Says:

    Ed Conard, another Bain Capital asshole, has been making the rounds pimping his new book. He was on On Point yesterday and I almost punched my radio it was so stupid. His argument is that egregious levels of compensation are necessary to make people want to take risks; you'll only "cross the grand canyon on a tightrope" if you can become a billionaire by doing so.

    The fact that the safety net under that tight rope is a major part of the decision to walk escaped him entirely, as did the proposition that perhaps our society might want to worry about the body count at the bottom.

  3. Elle Says:

    [Y]ou'll only "cross the grand canyon on a tightrope" if you can become a billionaire by doing so.

    If the tightrope involves things like credit-default swaps, or signing off on strategies to off-shore quality jobs, then I'm happy for people to get off it and do something useful.

    Is there one scrap of evidence to suggest that those people who really have an idea, or want to solve a problem, will flat-out refuse to do it unless there's a possibility that they will become as rich as Croesus?

  4. Elle Says:

    It may be of interest to the G+T commentariat that the EU has proposed giving a binding vote to shareholders of Europe's listed companies on executive pay, including the maximum ratio of bonus to salary, and the ratio of the pay of the lowest to highest earners. Currently, of the EU-27, only Sweden, Norway, and the Netherlands have given shareholders power to do more than offer advice on pay regimes.

    The points about the boys' club are well made. In the UK, introducing remuneration committees seems to have increased executive pay, in real and relative terms. The whole thing is an escalating game of chicken, predicated on the hypermobility of executives and institutional ego.

  5. Middle Seaman Says:

    Fifty years ago, we had the poor, a decent size of comfortable people and we had a small group of rich people. In the 1950s the country grew fast and people in two classes were paid reasonable wages. The poor of course were always screwed. The poor simply under-perform.

    Regun became top dog in 1980. He was a financial genius. He discovered that the poor and the middle class have way too much money, or under perform, and decided to take their money and give it to the ultra performing rich.

    The Clinton boy decided that the poor and the middle class perform well enough; he was impeached for that crime. Bush and Obama put a stop to this travesty. Both handed over lumps of money from the poor and the middle to the rich. They both knew that "performance" is a godly measure predetermined and assigned to classes.

    Every religious code makes clear that the rich are synonymous with great performance. The bible does.

  6. Mike S. Says:

    Yo, check out my new-ish invention, I call it the 'pitch-torch' b/c I rock synergy harder than any six-sigma black belt.

    P.S. This weekend in my hometown (aka Gotham City or, if you prefer, Real Americaville) we're partying like it's 1789, and yes, there will be cake.

  7. Neal Deesit Says:

    How come corporations aren't rushing to outsource those CEO jobs to countries where the CEO/worker pay ratios are a fraction of the obscene multiple here in the USA? Save a buncha dough! More for shareholders!

  8. Arslan Says:

    So the miner, who literally risks his or her life(unlike the CEO on the imaginary tightrope) must be expecting to become a billionaire.

  9. c u n d gulag Says:

    We've allowed for the creation a "Casino" economy over the last 30+ years, and now we're shocked, SHOCKED!, that there's gambling going on here?

    End Corporate Welfare, and Socialized corporate losses.
    If Welfare and Socialism isn't good enough for us flesh-and-blood little people, then you shouldn't be able to have it, either.

    Take away their tax-payer funded ATM card, so if they want to gamble at the casino's of their own making, let them play and pay with THEIR own money, and not ours.

    You fecked-up, and lost money?
    You, ya feckin' git, and your feckin' shareholders pay for the feckin' mistake.
    And NO more bonuses from tax-payer funded bail-out money!
    'Cause there ain't gonna be no more bail-out money. Not unless you want to chip in your savings, and the shareholders want to dip into theirs, to cover your mistakes. Bail-out money comes from inside, like it used to.

    Cap CEO pay, allow for modest, attainable bonuses at ALL levels – not just the top, and go back to JFK level tax rates.

    And CEO's, and the rest of you 1%ers, including you 4th (de)degeneration trust-fund babies, we're not doing this to punish you.
    NO!
    Trust us.
    We're doing this to save your lives.

    You 1%ers, are now warned:
    See, "Revolution, French."
    You can't get ahead, and stay ahead, if you ain't got a head!

  10. comrade x Says:

    Silly peons… socialism is for the Rich.

  11. Tim H. Says:

    I heard that many of the J. P. Morgan stockholders voted before the 2 billion dollar loss became known, I don't believe they'll be offered the opportunity to change their vote.

  12. Xynzee Says:

    "So the miner, who literally risks his or her life (unlike the CEO on the imaginary tightrope) must be expecting to become a billionaire."

    Gold!!

    The story I love is how the head of the division that crashed a burned gets to resign with all of her payouts intact. In my job, we either have to pony up money missing from the till or we get the sack depending on the situ.

  13. Major Kong Says:

    I'm an airline pilot.

    How many CEO's have their boardroom turn into a smoking crater in the ground in any given year?

  14. Will Says:

    How many CEO's have their boardroom turn into a smoking crater in the ground in any given year?

    Not enough?

  15. Charles Says:

    Middle Seaman,

    The Bible certainly does not equate wealth and great performance. If some guys say it does, that's their interpretation and one unsupported by serious thought. This is one of the only places on the internet worth reading the comments. Don't make it just another blog where believers automatically get equated with the rubes who say they love Jesus and Money and Bombs at the same time. I'm a progressive Catholic and it absolutely kills me to see otherwise tolerant and open-minded liberals pile on religion. If you want to give conservatives some culture-war capital and force believers that you share common ground with away, then continue knee-jerk attacks on religion. Ok, sorry, rant over.

  16. Da Moose Says:

    The shareholder vote to throw Dimon out of the Chairmanship thus reducing his compensation was about 40%. Most proxy voters don't even vote. When proxy voters don't vote, their vote is automatically tallied in favor of the default positions as recommended by the board. The fact that 40% of shareholders voted to throw him out of the chairmanship is not insignificant. Most proxy votes for any publically traded firm end up being in the realm of 95% or 100% in favor of board recommendations. CALPERS, which owns at least 400 million in JPM stock, voted to throw him out of the Chairmanship.
    Also, the 2 billion speculative position loss does not qualify as a quarterly loss. The loss occurred in April which is the first month of the second quarter. They have until the end of June to make up the loss or at least break even. Given that their first quarterly revenues were in the neighborhood of 27 billion, it is doubtful that JPM will have a quarterly loss in the second quarter as a result of their London office buffoonery.

  17. c u n d gulag Says:

    Major Kong,
    You mean, you don't get a bonus for crashing your plane into the ground, or the side of a mountain?

    Does your widow?

    You need a stronger union.
    Call the CEO one.
    They must have a great one!

  18. bb in GA Says:

    @Charles

    Although we agree on little politically, we agree that Christianity, in particular, is a blind spot for many Liberals. They selectively read history and the Bible "to strain at a gnat and swallow a camel whole."

    BTW – Middle Seaman has declared that he doesn't reads comments after he posts on a subject.

    //bb

  19. Major Kong Says:

    @bb

    As opposed to most conservatives, whose Bibles seem to stop at Leviticus and pick up again at Revelation?

  20. Rosalux Says:

    It wasn't always this way. The money shot…

    http://www.forbes.com/lists/2011/12/ceo-pay-20-year-historical-chart.html

  21. JazzBumpa Says:

    Back to pay for performance . . .

    I was a supervisor for 19 years and had the privilege of rating the people on my team, and also being rated by my boss, so I got to enjoy all the nuances of this wonderful process. I called it getting it in both ends. Even giving somebody a great review is pretty painful.

    Then, on top of reducing everyone to a god-damned number, we had a forced rating system – which HR refused to acknowledge as a forced rating system (seriously) – which meant a session of horse trading with all the other sups, so our entire dept fit the forced curve.

    It's enough to make you eat glass.

    Meanwhile, you see somebody like Bob Nardelli – you remember him, the guy who fucked up the hardware store – get payed $212 million to fucking go the hell away.

    Then the brilliant minds at Cerberus (Dan Quayle is on their board!) brought him in to run (or should I say ruin) a car company.

    Is it any wonder the whole world is one huge fucking mess?

    WASF!
    JzB

  22. Charles Says:

    BB,

    I don't agree that Christianity is a blind spot for liberals. Have you been to a black church or spoken to any nuns? It's just that when one ideology claims the exclusive right to speak in the name of Christ, atheists and agnostics would tend to gravitate away from that ideology and occasionally forget that there are believers that agree with them on the gamut of other things. I simply try to remind everyone that there are other human beings on the other side of your computer screen with feelings and opinions that deserve respect. I also like to think I'm doing my own small part in evangelizing by pointing out that God transcends our ideological divide. Catholic Social Teaching as a powerful means of reaching out to people who are concerned with justice but have their ears closed to the Good News by the political positions and actions of our brothers and sisters on the right. Ok, off the soapbox for today. To any readers, I love you all and may the Lord bless you and keep you.

  23. JazzBumpa Says:

    Charles –

    You have misread middle seaman. May I introduce you to the concept of irony?

    bb –

    I don't think you have a clear understanding of "most liberals."

    And, since you're a conservative, I also have to question your understanding of Jesus. Where would he stand on capital punishment, health care reform, care for widows, orphans and the poor, violence as a first option, a political and economic structure that is strongly tilted toward the rich?

    Remember what he had to say about the rich? Is that a conservative view?

    Cheers!
    JzB

  24. Charles Says:

    JazzBumpa,

    I think you are right. Stupid internet; I read a certain tone where obviously it was not meant. My apologies to Middle Seaman and thanks to JB. At least we might get some interesting discussion from my mistake.

  25. cromartie Says:

    Jazzbumpa

    Meanwhile, you see somebody like Bob Nardelli – you remember him, the guy who fucked up the hardware store – get payed $212 million to fucking go the hell away.

    Then the brilliant minds at Cerberus (Dan Quayle is on their board!) brought him in to run (or should I say ruin) a car company.

    Is it any wonder the whole world is one huge fucking mess?

    Compounding matters, there's the job he did ruining GE's Transportation division to begin with. If he ever sets foot in Erie, PA again he'll be shot on site, and deservedly so.

  26. HoosierPoli Says:

    The Bible can be in read two ways: selectively or not at all.

  27. Major Kong Says:

    @HoosierPoli

    Which is why there are literally thousands of Christian sects – each of which will gladly explain in great detail how the others are all wrong wrong wrong.

  28. Sarah Says:

    @bb:

    Although we agree on little politically, we agree that Christianity, in particular, is a blind spot for many Liberals. They selectively read history and the Bible "to strain at a gnat and swallow a camel whole."

    ::sigh:: And you have the nerve to wonder why I remain convinced that you cannot fucking read. The christian bible CONTRADICTS ITSELF. One MUST read it selectively. As has been pointed out above, there are many many sects whose members take their own interpretation from their own particular selected piece which they consider important.

    And also, you and your ilk seem to have missed the part which says "judge not, that ye not be judged." Selectively, that is.

  29. Elle Says:

    I simply try to remind everyone that there are other human beings on the other side of your computer screen with feelings and opinions that deserve respect.

    I respect the right of individuals to manifest their religion, and I think that it's desirable that people be treated with courtesy, but I disagree that the content of the opinions themselves deserve to be respected.

    I don't respect the way that the Catholic church, in many countries, inserts itself into the public policy process around sexual health. I am not someone who cleaves to the French version of secularism, but I think there is a chasm between that and stopping faith groups from preventing others from realising their human rights.

    I'm a progressive Catholic and it absolutely kills me to see otherwise tolerant and open-minded liberals pile on religion. If you want to give conservatives some culture-war capital and force believers that you share common ground with away, then continue knee-jerk attacks on religion.

    This is kind of similar from the discussion going on in the other thread about Obama and selling out one's socialist/left/liberal (there are multiple political identities in the comments section, apologies if I've missed one) principles.

    I am pleased that you feel you have carved out some progressive niche within Catholicism. I've known a bunch of people attempt that, from several countries, and all except one have walked away. They were unable, despite significant efforts, to reconcile their politics with the church's stance on SRHR, the place of women within the church, and the systematic collusion in the rape and physical abuse of children. If believers are forced away from solidarity or social justice because they are asked to account for the more problematic elements of church teaching and practice, then so be it.

    On knee-jerkiness: leaving your religious tradition is a painful process. I'm not sure to whom you're addressing your comments, but please don't mistake flippancy or sarcasm for a superficial understanding. Just because someone doesn't dump their whole life story on you doesn't mean that their obnoxious one-liner about communion wafers isn't the product of half a decade of soul-searching.

  30. Elle Says:

    @bb

    They selectively read history and the Bible "to strain at a gnat and swallow a camel whole.

    In this analogy, I'm assuming that Christianity is the gnat. What is the camel?

  31. John Says:

    There are piles and piles of charts and graphs out there that will tell you the exact same story a million different ways: Since old Saint Ronny usurped the nation's way of thinking about the economy, the executives have been openly robbing the company coffers for their own personal benefit without remorse. Real wages (that is, wages adjusted for inflation) for the average American worker have been stagnating for damn near 30 years, while executive compensation has skyrocketed on a nearly geometric arc. Executives that were once paid 20 or 30 times the salary of the average company worker are now paid upwards of 500 times the salary of the average company worker. An executive lays off 500 workers, putting them out of their livelihoods, in the name of saving the company money — the company then pays the exec as much money as it would have taken to pay those 500 workers.

    The only thing that has sustained the illusion of prosperity is debt. Each year the average American family gets deeper and deeper into debt — home loan debt, car loan debt, credit card debt, student loan debt. The only thing keeping the average American from living in conditions that would shock and appall them is the fact that their banking overlords have allowed them to borrow beyond their means, usually for usurious rates. People only believe things are as good as they are because they have been allowed to pretend that they own things. They don't own their house. They don't own their car. They don't own their television. They don't own their appliances. They don't own their degree.

    This economy needs to fail. Americans have to be hit directly in the gut with the understanding of the theft and fraud they have been subjected to for three decades. It is unsalvagable. It is irreparably corrupt. It is time for it to end.

  32. Xynzee Says:

    @elle: start with why why you as a woman can have equality (ok I concede a semblance thereof, and more or less improving), now work yourself backwards.

    Why are widows no longer burnt on their husbands pyres in India? Work yourself backwards.

    Why can there even be a discussion abt ssm? Work yourself backwards.

    You'll come to Genesis, and being created male and female in God's image.

    A societal revulsion towards Pol Pot, Hitler, Stalin, Rwanda, slavery, apartheid. Even the godless activity of war needing rules: mutilation of bodies after a battle, Mi Lai's, resolutions on landmines, cluster bombs…

    You'll find that these and many more of our societal "norms" are couched in Christianity.

  33. Xynzee Says:

    Why don't my tags close? I use a /b no joy. I use \b no joy. Yes use open close angle brackets. :-/

  34. Major Kong Says:

    @Xynzee

    Christianity has also been used to justify slavery, apartheid, colonialism, genocide and numerous other offenses too numerous to list.

    Case in point – the Southern Baptists were founded as a pro-slavery denomination.

    It's a two-edged sword at best.

  35. Celynne Says:

    @Ed
    emerging from their life of privilege with a profound sense of entitlement and a belief in their own greatness that borders on sociopathy.

    *borders*!! oh stop it!! I snorted some very nice Merlot through my nose at that.

    @Charles
    it may be a matter of semantics for you, but many wouldn't view you as a progressive Catholic, but rather a cafeteria Catholic in the spirit of what @HossierPoli says: The Bible can be in read two ways: selectively or not at all.
    Because, with all due respect to your right to your beliefs, god does not transcend our ideological divide. I, speaking only for myself and my own experience, can only hope you'll eventually come to the insightful enlightenment put forth in @elle's comments. There's really no point re-inventing the wheel.

    But as someone who lives daily with what my American friends consider extreme socilaism, @comrade x's observation: Silly peons… socialism is for the Rich, seems very relevant to the two-tier sociology firmly taking root here.
    Is there really any difference in ridiuculous compensation being endorsed by a self serving board of directors, or a self serving government?

  36. Celynne Says:

    ps I could spell ridiculous before I snorted the Merlot…

  37. Elle Says:

    Work yourself backwards. [...] You'll come to Genesis, and being created male and female in God's image.

    Actually, I came to feminism and queer activism. Go figure.

  38. Jimcat Says:

    I'm having a hard time understanding why some people, when dealing with a Catholic of liberal inclination, seem more inclined to attack their Catholicism than to embrace their liberalism.

    My own path led me to leave the Church, but before I did (and after, as well), I met many Catholics who dedicated themselves to doing good in the world, and credited their faith as their inspiration. I didn't try to convince them that they were tools of a corrupt and evil organization. They let me make my choice, I leave them to theirs.

    Whoever is not against us is with us. Jesus said it, but nonbelievers would do well to keep it in mind.

  39. Charles Says:

    Thanks, Jimcat. Your first sentence is exactly what I meant.

  40. John Says:

    @Jimcat:

    I suspect it has to do with folks having a difficult time wrapping their heads around the idea of a person that agrees with the fundamental premise of christianity as presented in the new testament ("love thy neighbor", "do unto others", etc.) while rejecting the tendency of organized religion to select parts of the supposedly-annulled (depending upon who you talk to) old testament to justify bigotry against various Others.

    To use an admittedly poor analogy, it would be similar to meeting someone who claimed to espouse the nobler parts of the Mafia's mentality (loyalty and dedication to one's family, the focus on respect, etc.) while rejecting the violent and criminal parts. Not impossible, but hard to imagine.

  41. Bitter Scribe Says:

    A guy I regularly debate with elsewhere was carrying on about how Jamie Dimon is this great banking genius, and anyone who criticizes him is an ignorant fool. I finally asked him how much money he had with JPMC, and why was he wasting time calling me ignorant on the Internet when he could be scraping up his last dollar to send to Dimon? He prissily informed me that his money was "carefully invested" elsewhere and he didn't need to pay for advice from JPMC. Translation: Either 1) he doesn't have the courage of his own asinine convictions, or 2) his wife or someone else managed to talk some sense into him.

  42. Bitter Scribe Says:

    Jimcat: Don't you have it backwards? IIRC, Jesus said "Whoever is not with me is against me."

    The man had an ego, but when you're the Son of God, I guess that comes with the territory.

  43. Elle Says:

    I'm having a hard time understanding why some people, when dealing with a Catholic of liberal inclination, seem more inclined to attack their Catholicism than to embrace their liberalism.

    I'm not sure that 'attack' is the right word here; I might have gone with 'challenge'. It is the case that membership of an organisation buttresses it. Faith groups are represented in public life in the countries I work in on a roughly commensurate basis to their membership numbers, member commitment, and ability to use the usual channels to pursue their policy priorities.

    However much someone is a liberal Catholic (or liberal member of any faith group that takes a hard line on social issues), and is active in pursuit of liberal policy outcomes, the church whom they lend implicit support by participation is profoundly and damagingly illiberal. Many organisations who might otherwise support the church's economic lines, are prevented from coalition by its other activities.

  44. Elle Says:

    Sorry, wrote the above on my phone and it's screwed with the formatting.

  45. Jimcat Says:

    Bitter Scribe: Mark 9:38-41

  46. Jimcat Says:

    Upon further reflection, I see an analogy to my situation in Bitter Scribe's story of the Dimon supporter. I no longer have anything "invested" in the Catholic Church, so perhaps I'm not the proper one to be defending it.

    Don't know if that was intended, but it did strike a chord.

  47. Redleg Says:

    I am a management professor who studies pay-for-performance. Here's what we know about it from research:
    1. PFP tends to work best for motivating narrow task performance in tasks with relatively short cycle times and having clear measures of performance.
    2. Relating to point 1, PFP doesn't work as well when a person's work involves complex and non-routine tasks, requires much creative thinking, or requires a great deal of collaboration and teamwork.
    3. PFP can inhibit contextual performance. Contextual performance includes important behaviors such as helping others, solving unexpected problems, collaborating with others and so forth. When people have a strong PFP for their individual work performance, they tend to spend less time collaborating and developing new ideas. PFP can therefore have a detrimental impact on unit performance when the work requires much teamwork, collaboration, and creative action.
    4. When PFP is not done properly, and especially when it is seen as systemically unfair, it can damage social relations in an organization beyond what we see in point 3 above.
    5. PFP often involves putting part of an employees wages at risk. This means that when companies put a PFP in place, they often have lower base pay for employees but with the possibility of performance-based pay. Employees tend to dislike this when they feel they don't have as much control over their performance or are concerned that the performance goals will be increased frequently.

    Just thought I'd give my 2 cents worth. I appreciate your attention to PFP and feel that it is often viewed by managers as a silver bullet to improve performance when the causes of poor performance may actually be due to factors other than pay.

  48. Karlo Says:

    Gentleman's B?! I always heard it was a Gentleman's C, which both W and John Kerry received. News alert: grade inflation is everywhere.
    Karlo