Potential Facebook revenue stream or distraction from underlying economic problem?

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A recent article by The Economist describes how microlenders are using social media to assess creditworthiness.  However a prior article also by The Economist suggests microlending has been discredited.

The real problem, as outlined in Aftershock by Robert Reich, is that lending has expanded because wages of the 99% have remained stagnant or declined. More efficient lending and credit analysis is not what this world needs long term. What we need is wages of the 99% to rise so they do not have to borrow so much.

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