ASU seeks to end staff contracts

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As usual, my two or three cents before you jump into the article (20130116_ASU_Contracts):

The president of Arizona State University along with the administration are proposing ending one-year contracts for roughly 1/3 of benefits eligible employees.  Make no mistake, this means less job security combined with the already below-market wages for those employees.  Allow me to draw a parallel to corporate America:

Corporate America: Executives including presidents, CEOs, board members, etc. all look out for one another.  They take actions to maximize their compensation (big stock packages) and job security (expensive golden parachutes) while also taking actions to minimize pay of the labor force (anti-competitive agreements) and reduce their job security (little to no contracts).  Executive job security and high compensation come at the expense of the broader labor force.

ASU’s recent push: same thing.  Replace executives with “higher level university administration” and labor force with everyone else.

I hope everyone is beginning to see the trend in our current state of capitalism.  The few (1%) extract wealth from the many (99%) be it in a public-good taxpayer funded university (ASU), or a private industry company like HP (see recent post on Meg Whitman’s $30M+ in compensation while losing money for HP).  In both cases the 1% are able to maintain their high compensation and job security while suppressing the pay of the 99%.

The ASU president thinks it is a great idea to go performance-based and eliminate contracts.  Fine, why doesn’t he lead by tearing up his own contract and going performance based?    There is one problem: who evaluates the 1%?  In corporate america it is other 1%ers.  Will we see the same environment that we do in corporate america where “performance” is defined by those who are being evaluated?

HP’s Whitman Earned $15 Million in 2012 After Target Miss – Bloomberg

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Before I begin, this post is nothing personal against Meg Whitman or any other executive.  They are acting in their best interests.  This post is about exposing the systematic problems we face where, put simply, the rich get richer and the poor get poorer.  I hope to continue shedding light on the truth about compensation and “performance.”  I hope to show that wealth is being transferred from the many (stockholders, which may be you via your pension funds, mutual funds, 401k plans, etc.) to the few (executives like Meg Whitman).  Now, on to the Meg Whitman and HP article…

Based on information in the article below, shares of HP declined 39% the past year. During that time Meg Whitman earned $15.4 million.  In the prior fiscal year Meg Whitman earned $16.5 million while serving on HP’s board of directors. Don’t be fooled by her $1 salary.  If you have a choice of paying yourself with dollars taxed at 39% (salary) or dollars taxed at 15% (stock and options) which would you choose?

Now, let me add a little more data.  To begin, mergent online’s data on Whitman’s compensation is consistent with the article ($16.5 million in fiscal 2011). Using stock prices from Yahoo Finance, let’s look at Whitman’s time at HP:

  • 2011.01.24, Whitman on board at HP, stock price $45.51
  • 2011.09.26, Whitman CEO of HP, stock price $22.45
  • 2012.10.01, one year anniversary of Whitman as CEO, stock price $14.73
  • 2012.10.31, end of FY2012, stock price $13.76
  • 2013.01.11, stock price $16.16

So, the stock has declined from $45.51 upon Whitman’s arrival at HP as a board member to $16.16 now as CEO.  Yet she received $15.4 + $16.5 = $31.9 million dollars in compensation?  I suppose she needs that money to feed her family.  Speaking of that, why are professional athletes villainized for demanding $15 million to feed their families and executives like Whitman praised as “smart”?

Speaking of “smart,” let’s look at a some of Whitman’s other accomplishments.  Starting with Ebay, Whitman was CEO while the stock price dropped more than 50% to the tune of $30 billion in lost market value.  How about that Skype purchase and loss of $1 billion?  How about the nearly $9 billion loss on the purchase of Autonomy?  How about her campaign for governor of California?  Whitman spent $177 million, outspending her competitor Jerry brown by a factor of 4, and still lost.  That “performance” is good enough to be on the board of HP and even the CEO.  Before I forget, Meg Whitman is also being sued by the Feds for anti-competitive practices that effectively increased her compensation while reducing labor force pay.

I could go on but I hope you see the point.  Once you are part of the 1% you stay there even if you mess up.  You remain there as long as you play the game of transferring wealth from the masses (stockholders) to yourself (executive) via $1 salaries and $16 million stock option packages.  Don’t forget to lobby and convince the public not to raise dividend and capital gains taxes so you can extend the wealth gap.  That is the real sad part.  Executives essentially “pimp” the 99% to vote for policies that benefit the 1% (at the expense of the 99%) all based on the promise of “in America you can be the 1%.”  A reggae artist once said “a promise is a comfort to a fool.”

I better stop.  Finally, the article referenced in the title of this post:

http://www.bloomberg.com/news/2013-01-12/hp-s-whitman-earned-15-million-in-2012-after-target-miss.html

Benmosche: AIG Paid America Back, But We Still Have To Consider Suing – Forbes

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Let me get this straight. AIG was going bankrupt and out of business. The federal government, with our taxpayer dollars, bailed AIG out and in return received 79% of a company that would have been worth less than $0 without intervention. Now AIG is considering suing the government because 79% represents a “wrongful taking” of the company? And the execs have and will continue to get their bonuses regardless?
I propose the largest possible boycott of anything related to AIG. If you have insurance with any AIG related company, switch to another company. If you own any AIG stock, sell it. If you have a mutual fund with any AIG holdings, sell it. http://www.forbes.com/sites/steveschaefer/2013/01/08/benmosche-aig-paid-back-taxpayers-but-we-still-have-to-consider-suing-them/

NYT: Too Much Wishful Thinking on Middle class taxes

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As you read this New York Times piece keep the following in mind:

  1. What about non wage income, that is, financial income from stocks, bonds, and other investments? Of the top 1 or 2 % wage income can be insignificant compared to the financial income. How many ceos “sacrifice” and receive salaries of $1?
  2. Stating the top 1% pay a larger percentage of taxes is incomplete. What percentage of total income does the top 1% receive? If you receive 50% of all income shouldn’t you pay 50% of all taxes?
  3. The author is a Harvard professor and advisor to the losing campaign of Mitt Romney. The fiscal cliff will cost Mitt Romney more dollars than any of us.
  4. No discussion on corporate welfare programs that are likely orders of magnitude larger than the social welfare programs criticized in the article.

http://mobile.nytimes.com/2012/12/30/business/on-middle-class-tax-rates-too-much-wishful-thinking.xml

Was Benjamin Graham Skillful or Lucky? | Anirudh Sethi Report

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This is an interesting article that points out something that has been in print for roughly 40 years: Benjamin Graham’s success as a portfolio manager is likely due to one lucky stock purchase.  The implication is that a passive strategy probably did just as good or even better than Mr. Graham’s approach once you remove the one lucky stock (apparently the predecessor to GEICO).  Also note that one lucky stock was not purchased on the open market.  Rather, it was purchased directly from one of the founders.  How many of us get to purchase at a low price directly from founders?

Here is the article:

http://www.anirudhsethireport.com/was-benjamin-graham-skillful-or-lucky/

Here are the actual pages from Benjamin Graham’s The Intelligent Investor book:

Intelligent_Investor_Postscript

By the way, the notion of Benjamin Graham applying his “rock solid” approach to investing and getting lucky on one stock is consistent with the Charles Schwab “Core and Explore” approach.  In “Core and Explore” you place 75% of your holdings in passive index funds.  The remaining 25% is where you take your gambles.

Food for thought…