Are We Having Fund Yet?

Here’s trick question: in 2009, out of the list of the nation’s top hedge fund managers, what was the annual compensation for the CEO of the fund ranked 25^th? $10 million? Wrong! $50 million? Wrong, and remember there are 24 managers who made more! The guy who’s last on that list pulled out a mediocre $350 million!!! How can you live on that?! OK, according to the April 1^st New York Times, the top fund manager, David Tepper who bet heavily on financial institutions that were crashing through the floor in 2008 believing that the government would be forced to bail them out, dragged down $4 billion!!! There are whole countries that don’t even have GDPs at that level. A lot of these funds lost piles in 2008, but they bet right on what was going to move in 2009.

And while that extreme level of pay exceptionally rare in the general industrial corporate world, the notion of paying senior managers excessive compensation that is not linked to performed appears to be standard operating procedure in the hallways of large publicly traded companies. The pressure from the government and even activist shareholders to connect executive pay with performance ain’t workin’ folks. The April 1^st Washington Post: “‘I see no indication whatsoever that the business community is paying any attention to the administration's suggestions,’ said Nell Minow, co-founder of the Corporate Library, an independent corporate governance research firm. ‘On the contrary, I think pay is worse this year than it's ever been.’… American Express, for example, shifted much of chief executive Kenneth I. Chenault's compensation to cash. Even though his overall pay for 2009 dropped from the year before, Chenault received $11 million, or two-thirds of it, in cash. By contrast, more than two-thirds of his compensation in 2008 was in stock and stock options. His cash payout was $7 million… At Wells Fargo, the company more than tripled the cash salary this year of chief executive John Stumpf, and Corning, a glass and ceramics maker, restructured its long-term incentive pay program -- previously centered on stocks and stock options -- to focus more heavily on cash.”

While the Obama administration is not trying to cap executive pay, they clearly would like to see some reality to how pay is determined. “Kenneth R. Feinberg, President Obama's special master for compensation, wants to change pay incentives, giving executives a greater stake in the long-term performance of their firms. That would mean, for example, smaller up-front cash salaries and fewer perks, more compensation in the form of company stock and a longer wait to receive it.” The Post. Lots of luck, stud-muffin, but executive recruiters are telling boards of directors everywhere that you can’t get top managers without the cash, the perks and whatever else the spoiled children demand. And boards succumb to that sweet talk, because “everybody’s don’ it.” Corporate jets. Club memberships.

And where there are circumstances where shareholders are demanding a vote on executive compensation for the top earners, companies like General Electric, IBM and McDonald’s are fighting to prevent such outrageously – reasonable – demands. In the financial world, federal administrators were trying to discourage high-risk-taking (the kind of risks that aren’t risks when the government bails out your failures, but the kinds of risks that tanked our entire economy) as the primary driver of pay for revenue-generating senior managers. Yeah, right, that worked! And we still don’t have any real body of new statutes aimed at curtailing insane derivatives trading, stupid risk-taking, stopping serious real conflicts of interest or even credit rating veracity! So let’s see, Wall Street has taken over and run Washington, D.C. at the expense o f the voters for how many years now? Oh, did I say years? I meant decades.

I’m Peter Dekom, and if ever wonder why this country’s a mess, remember, it isn’t being run for your benefit, so shut up!