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TMFPostOfTheDay (< 20)

Granny Suffers from Cronies on the BOD



October 31, 2011 – Comments (2)

Board: Macro Economic

Author: notehound

Methinks perhaps our OP doesn't quite understand capitalism (and appears to be in numerous company.)


I almost always agree with you 100%, but I understand why the earlier poster asserts that the "capitalists" broke the system.

The way I look at it, capitalism should benefit those with the actual cash at risk - i.e., the beneficial owners of the company and providers of the capital.

An awful lot of these generous compensation & severance packages are negotiated by a board filled with cronies of the potential hire on the opposite side of the table. Many of the board members are CEOs of other companies where the potential CEO hire also sits on that board. They have a vested interest in keeping each other in jobs & board positions. The perqs (corporate jets, concerts, golf games, junkets, free trinkets & high-society invitations) are pretty appealing. Buddies who serve on each other's boards can keep a steady stream of fees, perqs, bonuses & golden parachutes almost indefinitely.

That's not the capitalism most people identify with. That's what many people consider another facet of crony capitalism.

The fiduciary interests of the beneficial owners/ultimate shareholders are often far from any of the elite board members' and company executives' minds - except to the extent that they might have unexercised stock options or receive share compensation.

People have begun to suspect that the boards of the big shareholders (pension funds, insurance companies, etc.) get nice perqs courtesy of the crony board member's clubs and therefore often don't really look out for their "own" interests, either. Otherwise, the big institutional shareholders would clear out the elite boards and put in some folks whose primary interest is that of the grannies, pensioners & small investors whose actual out-of-pocket cash funds the whole game.

During most of my life, I have socially interacted with a crowd that includes many of the Fortune 500 "corner office" bunch - and they include some of the most entitled-acting, smug SOB's you could ever meet. Common people intuitively recognize this and they resent it.

Yeah, I recognize that the common people don't mind if movie stars & athletes make tens of millions, yet they resent the poor CEO who only gets a $25 million severance after losing his company $$ millions. That's because stars & athletes only cost granny or granny's grandkids the price of an event ticket, while CEOs that run companies into the ground cost granny the retirement income she expects to get from the shares she funded through her pension fund, IRA, 401k, annuity, etc.

Common people are now thinking that the boards of the big pension funds, retirement systems, insurance companies, etc. aren't really looking after granny's interest. They're looking after themselves, just like all their cronies on the other boards.

People are starting to feel that they've been sold a bill of goods by their elected representatives, their brokers, their unions, their bankers, their insurance companies & their board representaitves.

To many people, the elite who run all these organizations just don't appear to understand their fiduciary duty to granny (the beneficial owner whose shares are held in street name).

/End of rant.

2 Comments – Post Your Own

#1) On October 31, 2011 at 1:15 PM, kirkydu (91.24) wrote:

Occupy This!


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#2) On October 31, 2011 at 2:54 PM, NajdorfSicilian (99.72) wrote:

Sounds like people who made poor investment choices feel entitled to whine about's always 'somebody else's fault.'

 FWIW, having spent almost my entire adult life working with said CEOs, corner offices, and pension funds, I've had the complete opposite experiece as you: 95% hard-working, salt of the earth, fairly paid execs, and the 5% that give everybody else a bad name. 

 I know far more entitled 21-25 yr olds than I do CEOs. And those CEOs that do feel entitled to golf course memberships and an EasyJet share have virtually all created $billions of dollars of wealth for taxpayers, employees, and shareholders. Not all, but almost all.

 I do agree that more and more people feel they've been sold a bill of goods by their elected reps. A hard rain's gonna fall when the 50-yr olds find out there's no pension money and HC funding left -- because it all went to Granny before they could retire. 


[Cf. Harrisburg, RI, most of CA, Illinois, et al, ad infinitum.]

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