The biggest problem in the corporate bailouts seems to be the corporate mindset, from which has come the "Corporate Culture". Lavish parties, excessive - and frequent - bonuses, Golden Parachutes, private jets, corporate cars, and out-of-control expense accounts, are just a few of the perks offered by most major corporations.
As enjoyable as these things may be to the recipients, they are extravagances that few major corporations can realistically afford in these hard economic times. If we are to save the economy, and the jobs of the wage earning employees (as opposed to the salaried white-collar management-types), we must change the Corporate Culture. Without the workers there is nothing to support the upper level liabilities. But, here's the rub - everybody wants those perks! Where does the wanting begin? That's hard to say. The marketing department wants to offer "incentives" to prospective customers, as do the outside sales people. Whether it's a pair of pantyhose given to the manager of a 7-11 by a vendor for better exposure space in the store, or a new car given to a fleet buyer for - say Hertz or Enterprise - it is nonetheless something that both buyers and sellers have come to expect. It's just a different part of the "entitlement culture" that has been growing like an insidious cancer since the 1960's. They see such incentives as investments rather than expenses. These things are given with the implied understanding that they will result in increased sales and productivity for the company providing them. Interestingly, our culture does not seem to see this as corruption. "Corruption" is an all-inclusive concept:
a: impairment of integrity, virtue, or moral principle : depravity
b: inducement to wrong by improper or unlawful means (as bribery)
c: a departure from the original or from what is pure or correct
What is "pure or correct" in a free-market economy is that a product either succeeds or fails on its own merit. It must be of sufficient quality and affordability to attract a large percentage of buyers, thereby generating enough income to survive in the marketplace... that would apply primarily to tools and other practical merchandise. When it comes to unnecessary, but desirable items (cars, clothing, entertainment items) you can add "attractiveness" to the short list of characteristics a "pure or correct" item should have. (I realize that these are substantially idealistic thoughts on my part.) Retailers - when left to their own devices - can easily determine which products/services are generating the most profit, and assign available exposure space accordingly.
The most egregious corruption comes from the ranks of "lobbyists" - people who are armed with corporate money for graft, and are paid primarily to pimp products and services to various government officials and agencies. Why is that? Because the best place to peddle corruption is to those who find corruption not only an acceptable business practice, but a desirable one! This practice gave us some amazing government issue items, such as: $800 toilets seats, $400 glass ashtrays, and $200 screws.
Eliminating the "Corporate Culture" may be impossible, for as long as there are people involved - and people are fallible - who prefer those outrageous benefits to the rewards of a solid work ethic, there will always be corruption, mismanagement, malfeasance, and backroom deals in both the corporate and political worlds. I should probably stop now... I'm beginning to convince myself that there are some benefits to a Marxist government-controlled society, and I know the trade-offs make that untrue!
I could be totally wrong about this... what do you think? Or, is thinking an activity you prefer to avoid?
Showing posts with label golden parachute. Show all posts
Showing posts with label golden parachute. Show all posts
Tuesday, April 21, 2009
Sunday, November 16, 2008
Automotive Industry Bailout? The UAW Should Bail Out!
We have the UAW to thank for the decreasing revenues of the Big 3 U.S. automakers. Some illiterate Bozo pushing a broom in a Detroit auto plant is making $20+ per hour! Here's a breakdown of actual labor costs per hour at the Big 3, this is for hourly workers only, and does not include extremely overcompensated white-collar salaries -
Labor cost per hour, wages and benefits for hourly workers, 2006. (Correction to the below information: I have just discovered on Nov 19, 2008 that, since 2006, the average laborer's compensation package for American owned automobile manufacturers has increased to slightly over $81 per hour! Therefore the following figures for the "Big 3" are about 12% low.)
Ford: $70.51 ($141,020 per year)
GM: $73.26 ($146,520 per year)
Chrysler: $75.86 ($151,720 per year)
Toyota, Honda, Nissan (in U.S.): $48.00 ($96,000 per year)
(source: Forbes)
Is it any wonder that American auto manufacturers cannot compete in the open market? They're being strangled by labor costs! That, coupled with the fact that, across the board, Chrysler, Ford and GM produce an inferior product, when compared to the quality and durability of competing Japanese imports.
As credit availability has tightened - to the point that it should always have maintained - consumer spending has slowed to a crawl. As a result, major U.S. automakers have seen their profits fall. Severe adjustments must be made in order to bring this industry back from the brink of extinction.
1. American auto manufacturers must return to the business of building a durable product. It seems that competitors in foreign countries produce products that can last for years with little need for maintenance. Many American made vehicles often have major mechanical problems within the first year or two of usage. In order to remain competitive in an emerging global market, the auto industry must produce vehicles that are more reliable and can attain optimum gas mileage.
2. Our auto industry must not continue to give in to the crushing demands of the auto workers union. A key advantage that foreign auto makers have is they do not have to pay outlandish wages and benefits when they can simply expand or relocate to areas that do not bow to union pressures. Foreign auto makers have consistently surpassed their American counterparts in production and profitability. It is now time that the auto behemoths stand up to the unions and demand their employees work for a fair wage and competitive benefits without jeopardizing the life of the company. How does it profit the unemployed worker to say, "I used to work for Chrysler (or Ford, or GM) when they were in business." Or the underemployed worker to ask, "Would you like fries with that, sir?"
3. They need to control spending at all levels of the corporation. Many auto executives revel in lavish luxury compensation packages, fail-safe "Golden Parachutes," and outlandish bonus incentives. The only people deserving of a Golden Parachute are those who save a failing corporation, not those who failed to save it! This is true for ALL industries, not just automotive.
The average UAW worker with a high school diploma earns 57.6% more total compensation than the average university professor with a PhD (who earns about $93,000 per year), and 52.6% more than the average worker at Toyota, Honda or Nissan.
The true bailout won't come about until the UAW either renegotiates the contracts to a reasonable level of compensation, or the UAW is eliminated as the bargaining entity for those employed within the automotive manufacturing industry.
I could be wrong .............................. but I'm NOT!
Labor cost per hour, wages and benefits for hourly workers, 2006. (Correction to the below information: I have just discovered on Nov 19, 2008 that, since 2006, the average laborer's compensation package for American owned automobile manufacturers has increased to slightly over $81 per hour! Therefore the following figures for the "Big 3" are about 12% low.)
Ford: $70.51 ($141,020 per year)
GM: $73.26 ($146,520 per year)
Chrysler: $75.86 ($151,720 per year)
Toyota, Honda, Nissan (in U.S.): $48.00 ($96,000 per year)
(source: Forbes)
Is it any wonder that American auto manufacturers cannot compete in the open market? They're being strangled by labor costs! That, coupled with the fact that, across the board, Chrysler, Ford and GM produce an inferior product, when compared to the quality and durability of competing Japanese imports.
As credit availability has tightened - to the point that it should always have maintained - consumer spending has slowed to a crawl. As a result, major U.S. automakers have seen their profits fall. Severe adjustments must be made in order to bring this industry back from the brink of extinction.
1. American auto manufacturers must return to the business of building a durable product. It seems that competitors in foreign countries produce products that can last for years with little need for maintenance. Many American made vehicles often have major mechanical problems within the first year or two of usage. In order to remain competitive in an emerging global market, the auto industry must produce vehicles that are more reliable and can attain optimum gas mileage.
2. Our auto industry must not continue to give in to the crushing demands of the auto workers union. A key advantage that foreign auto makers have is they do not have to pay outlandish wages and benefits when they can simply expand or relocate to areas that do not bow to union pressures. Foreign auto makers have consistently surpassed their American counterparts in production and profitability. It is now time that the auto behemoths stand up to the unions and demand their employees work for a fair wage and competitive benefits without jeopardizing the life of the company. How does it profit the unemployed worker to say, "I used to work for Chrysler (or Ford, or GM) when they were in business." Or the underemployed worker to ask, "Would you like fries with that, sir?"
3. They need to control spending at all levels of the corporation. Many auto executives revel in lavish luxury compensation packages, fail-safe "Golden Parachutes," and outlandish bonus incentives. The only people deserving of a Golden Parachute are those who save a failing corporation, not those who failed to save it! This is true for ALL industries, not just automotive.
The average UAW worker with a high school diploma earns 57.6% more total compensation than the average university professor with a PhD (who earns about $93,000 per year), and 52.6% more than the average worker at Toyota, Honda or Nissan.
The true bailout won't come about until the UAW either renegotiates the contracts to a reasonable level of compensation, or the UAW is eliminated as the bargaining entity for those employed within the automotive manufacturing industry.
I could be wrong .............................. but I'm NOT!
Monday, September 15, 2008
FreddieMac and FannieMae, Doodah, Doodah ...
Why is it, that corporate CEO's who (mis)manage the corporation for which they are ultimately responsible into bankruptcy or government bailout, always get a multi-million dollar departure gift? This is especially true when the product being managed is MONEY!
Let me see if I can figure this process out ...
1. I have been appointed as the CEO of XYZ Financial Management Group. The "job" pays me $22M simoleans per year.
2. In return for that outrageous sum of money, I am responsible for insuring that the corporate assets are invested in such a fashion that the corporation receives a statistically reasonable return on said investments.
3. I achieve the above by managing the human resources immediately below me in the Corporate Senior Management hierarchy - the Chief Financial Officer; the Chief Operating Officer; the Chief Administrative Officer, etc. - and I am responsible directly to the Chairman of the Board of Directors (or I may, in fact, BE him ... in which case I am responsible to the stockholders).
4. I play golf Monday, Wednesday and Friday mornings, drop by the office about 11:30am, then have a "business lunch" with my corporate cronies at "The Club" from around 1:00pm until ... oh, 2:30-ish. After such a sumptuous meal, a good massage is always in order, and I get back to the office around 4pm and waste the next 15 minutes waiting for my chauffeur to arrive so he can drive me home.
5. On Tuesdays and Thursdays, the only change to my routine is that I play racquet ball in the mornings.
As you can plainly see, my job is one of responsibility, as opposed to effort. I get paid for accepting responsibility for those beneath me, who have a more realistic level of responsibility. Their jobs require that their respective divisions actually accomplish something! Using a stagecoach analogy; they are the horses that pull the coach ... I am the coachman who chooses the direction in which they travel. I do proportionately little, but then, I don't work for hay. However, if the stagecoach doesn't reach the appropriate destination, can I blame the horses?
How many of us have held jobs where we were rewarded for our failures? Let's have a show of hands ... just one hand! (Okay Barack, you can put your hand down now.) These "Golden Parachutes" are ridiculous. (Basically, a A golden parachute is a contractual agreement between a company and an employee (usually an upper executive) specifying that the employee will receive certain significant benefits if employment is terminated. Sometimes, certain conditions, typically a change in company ownership, must be met, but often the cause of termination is unspecified. These benefits may include severance pay, cash bonuses, stock options, or other benefits. They are designed to reduce negative incentives should the company change hands, not to protect some corporate Phoenix who burns his company nest! There should be federal regulations allowing corporations or receivers to negate a Golden Parachute clause when the company fails due to the action/inaction of any, several, or all executive officers. If XYZ Financial Management Group can't file criminal charges against me, and/or my subordinates, they should at least be able to refuse any further compensation. I have destroyed their company through my own mismanagement/non- management of available resources!
But, that's just the way I see things ... am I wrong?
Let me see if I can figure this process out ...
1. I have been appointed as the CEO of XYZ Financial Management Group. The "job" pays me $22M simoleans per year.
2. In return for that outrageous sum of money, I am responsible for insuring that the corporate assets are invested in such a fashion that the corporation receives a statistically reasonable return on said investments.
3. I achieve the above by managing the human resources immediately below me in the Corporate Senior Management hierarchy - the Chief Financial Officer; the Chief Operating Officer; the Chief Administrative Officer, etc. - and I am responsible directly to the Chairman of the Board of Directors (or I may, in fact, BE him ... in which case I am responsible to the stockholders).
4. I play golf Monday, Wednesday and Friday mornings, drop by the office about 11:30am, then have a "business lunch" with my corporate cronies at "The Club" from around 1:00pm until ... oh, 2:30-ish. After such a sumptuous meal, a good massage is always in order, and I get back to the office around 4pm and waste the next 15 minutes waiting for my chauffeur to arrive so he can drive me home.
5. On Tuesdays and Thursdays, the only change to my routine is that I play racquet ball in the mornings.
As you can plainly see, my job is one of responsibility, as opposed to effort. I get paid for accepting responsibility for those beneath me, who have a more realistic level of responsibility. Their jobs require that their respective divisions actually accomplish something! Using a stagecoach analogy; they are the horses that pull the coach ... I am the coachman who chooses the direction in which they travel. I do proportionately little, but then, I don't work for hay. However, if the stagecoach doesn't reach the appropriate destination, can I blame the horses?
How many of us have held jobs where we were rewarded for our failures? Let's have a show of hands ... just one hand! (Okay Barack, you can put your hand down now.) These "Golden Parachutes" are ridiculous. (Basically, a A golden parachute is a contractual agreement between a company and an employee (usually an upper executive) specifying that the employee will receive certain significant benefits if employment is terminated. Sometimes, certain conditions, typically a change in company ownership, must be met, but often the cause of termination is unspecified. These benefits may include severance pay, cash bonuses, stock options, or other benefits. They are designed to reduce negative incentives should the company change hands, not to protect some corporate Phoenix who burns his company nest! There should be federal regulations allowing corporations or receivers to negate a Golden Parachute clause when the company fails due to the action/inaction of any, several, or all executive officers. If XYZ Financial Management Group can't file criminal charges against me, and/or my subordinates, they should at least be able to refuse any further compensation. I have destroyed their company through my own mismanagement/non- management of available resources!
But, that's just the way I see things ... am I wrong?
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