A clever but off-the-mark sign

"Politicians are like diapers, they need changing often".

This sign has been on a signboard for a business on Woodland Avenue in Duluth for sometime.  I'm not sure if the sign belongs to the auto repair business or to a small office that seems to be attached to the auto repair building.  Google street view is a bit blurry on the details.

I didn't double check, but many references attribute it to Mark Twain with the added phrase "and for the same reason."

We could also apply this slogan to CEOs.  They get entrenched and get the board they selected to give them larger and larger compensation.  Boy, talk about a stinky deal!

The problem with this slogan is that it assumes that a frequent turnover of politicians will ensure new ideas.  It might on occasion, but like all serious jobs, being a politician requires a lot of effort and learning.  If we had the turnover as the sign implies, then the politicians would be at the mercy of their staffs or lobbyists.  The degree that they do depend on these two groups is bad enough, but a greater number of new politicians would make the situation even worse.

Besides, we do get to vote against politicians.  We have a hard time voting against CEOs.  And we want neither our politicians or CEOs to be like diapers.

An afterthought!  A complaint about politicians is a bit of elitism.  The people get to choose the politicians; the plutocrats get to choose the CEOs.  This phrase then implies that the people are ignorant and not to be trusted with governance.

Let's Look at Entitlements

Political reporting is full of stories about the need to rein in entitlements, mostly meaning Social Security and Medicare.  Remember these are insurance programs for which people pay premiums.

Consider auto insurance.  Suppose you buy a car and buy collision insurance for it.  The day after you pay your annual premium of, say $1,000, you are involved in a crash that totals your car.  Is the insurance reimbursement an entitlement?  Of course it is.  Is it an unjustified entitlement.  Well, if you've been paying car insurance payments for years and never had a claim, you might think so.  It's your premiums that are giving the owner who had made only one payment the reimbursement.

The question with Social Security and Medicare is if enough premiums are being paid in to cover the payouts, not whether those who paid in are entitled to the benefits or not.  One can question the level of payouts but not the fact that payouts are made.

In both the auto insurance and Social Security cases, the recipients are not determining the benefits.  It is either the insurance companies or the Federal Government.

However, there are other benefits that are being determined by the recipients, not some "disinterested" second party.

Consider CEO salaries.  It is not an independent group of shareholders that are determining the ever increasing CEO salaries.  It is a board often picked by the CEO!

Consider board member salaries and fees.  Who determines that board members will get $100,000 plus for five or six board meetings a year plus expenses?  The board members!  Who determines the stock benefits given to executives and board members to "align their interests with those of the shareholders"?  It's certainly not the shareholders.

Consider the "golden parachutes" given to fired executives.  Do you think a laid-off worker would receive a few million dollars and lifetime high-value health insurance?  If the worker receives any benefits at all, they are often considered entitlements, especially if part of a union contract.  Why don't more supporters of "capitalism" recognize the golden parachutes as undeserved "entitlements"?

Consider that corporations depend on employees  and customers to succeed.  Employees are often treated as costs rather than investments.  Customers are often treated as annoyances rather than supporters and free advertisers.  And too often, executive pay is inversely related to customer satisfaction.  See "Executive Pay and Customer Satisfaction".  That certainly smacks of entitlement on the part of the executives.

Consider that the owners of professional sport teams strong-arm cities and states to provide a larger portion of their increasingly expensive stadiums.  They argue that the newer, bigger stadium will be an investment in the local economy.  I wonder how many of these owners are willing to pay for all the schools, roads, sewers, and so on that modern communities need and provide.  Oh, the stadium will pay for those.  That sounds like a multi-million dollar entitlement to me.

My guess is that the "entitlement" of Social Security puts more money into a local economy than all the corporate entitlements.  My guess is that the "entitlement" of Medicare gives a lot of support to the local health care facilities than all the corporate entitlements, plus the employees of those facilities spend a lot of their wages in the local economy.

In short, an entitlement is something others receive, we only receive what is due us.

Greedy corporate boards

Eric Jackson, The Street wrote "How Do You Slow Down Executive Pay?", Yahoo! Finance, 2011-03-11.  He thinks that we don't need the gimmicks live shareholder advisories on pay.  He says shareholders should simply throw the votes out.

I added the following comment to the article.

"I agree with Eric Jackson; vote the bums out.

I've felt like a lone voice for years.  I withhold my vote when the CEO gets over a million dollars a year or when the members of the board get over $100,000 a year.  The latter is nice work if you can get it; show up five times a year (not every board meeting!!!).  Many of us would be in the gravy with that pay.

And what is a CEO doing on the boards of other companies?  Isn't he or she being paid a lot of money to run one company?  Maybe the pay for being on other boards should be reimbursed to the company the CEO is running."

And later I added:

"Oh, I almost forgot about these boards gradually stealing the company from the shareholders that bought their shares on the open market.

To "align the interest of the board and the executives with the interests of the shareholders", they grant themselves stock, either directly or through options (the ability to buy shares at way below market value).  The net result is they are granting themselves more and more votes at a discount from what the regular shareholders paid.

In other circumstances, isn't this called skimming and either criminal or unethical?  Now, to put any kind of restraint on this behavior is called anti-business."

I didn't add that when I worked for Sperry Univac in the 70s, somebody published an article about attending a Sperry Board meeting.  The directors were served an elaborate meal that many hardly touched.  Some of the directors slept through parts of the meeting or said very little.

I've heard that in many companies, the board just agrees to what the company executives propose and go home.  Nice work if you can get it.