So why are more companies not yet hiring?

December 10, 2009 · Posted in Featured, Financial Crisis, Government, Political Issues, Politics, Rant, Social Change, Social Issues, Society, Things to think about, Thoughts on the economy, Topic Blogs · Comment 

unemploymentU.S. Workers are still filing a large amount of unemployment claims and this is after five weeks of declines in this area.

Where are the culprits and which industries are still hurting?  It’s apparent as we have seen over the last year is that a gradual stabilization of the economy does not naturally translate to a increase in the labor market stability.

The gripping effects of the recession have no indications of going into a double dip as economist like to call it, trade gaps are narrowing, imports and exports are up, and yet bottom line profits are not improving.

Where are the jobs going and why even after the influx of billions of dollars in stimulus funds…the unemployment rate still hovers around 9-10%?

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The Biggest Joke in Corporate America

October 23, 2008 · Posted in Big Business Ripoffs, Political Issues, Things to think about · 5 Comments 

In theory the Board of Directors of a corporation is supposed to look out for the shareholders, supposed to rein in excess risk taking, excessive executive compensation and act as a check on the strategic decision making of the executive managers.

In practice, this is the joke.  Unfortunately, it is not in the least bit funny.

As someone who believes in capitalism I have to point this out.  The system is not working.

An appointment to the Board of Directors of a publicly traded corporation is typically made through a nominating process over which the executive management has tremendous (and often times absolute) influence.

As a result of this, Board membership has become primarily a lucrative “side job” wherein directors offer little oversight lest they be seen by the CEO as a threat and thus excluded from the decision making process.  A director trying to promote a view different from that of the CEO is often handled much the way an opponent in a legislative body is – the CEO will work through the rest of the Board to isolate that member and ultimately to have him/her removed as soon as the term expires.

I have experience with Boards through my professional dealings – both from within corporations and as a shareholder who has participated in activist campaigns.  I can tell you from experience that this is the case.

What can we do about it?

I believe that free, working markets are the best means of allocating capital.  The key word in the last sentence is “working” markets.  For a market to work, the checks and balances within the system must work.

The Board of Directors is a critical check in the system and it is not working.

To make it work I believe that legislation at the national and state level must be enacted to do the following:

1) Change the nomination process for Boards of Directors.  The nomination process should be driven by shareholders through an independent director on the Board that has no affiliation with the company outside his / her role as independent director.  The executive management should not have influence over this process

2) State pension funds which control an enormous amount of capital and shares of American publicly traded companies must be compelled by their state legislatures to take a more active role in governance of the companies in which they invest the retirement savings of state public employees

3) Board members should be required to have a meaningful amount of their net worth in the Company over which they are governing.  If a director worth $100 million owns $1 million of stock in that company or, more likely, owns no stock outright and is on the Board with the intent of getting options as part of his/her package they have no “skin in the game”.

I think directors of major public corporations should be required to have 3-5% of their liquid net worth in the company on whose Board they serve.  A more meaningful level of “skin in the game” will make directors take their role as watchdog more seriously.

4) Bonuses to executives should be paid based on rolling multi-year performance of a company.  Paying a bonus based on one year of performance inserts to much randomness into the system.  Consider this, a mediocre CEO happens to be in the right business when some major trend develops or economic boom.  As a result the profits surge for a year or two.  The executive hires a consultant to justify an enormous paycheck based on this performance, which of course the executive takes credit for.  In fact, the performance was essentially random and had little to do with the executive if anything at all.  This is the problem with huge cash bonuses and stock options.  Executive compensation should be based on stock that an executive must hold for years after he/she leaves the position and a rolling multi-year performance criteria with respect to cash compensation.

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