Ask HN: Economic Recession and Executive Salaries

[pandamaniac]

In respect to the current situation where the economy is starting to slow down and will only get worse, do you think that we have been living in an age of 'luxury' where executives are paid exorbitant sums and the future sustainability of businesses are not thought about through the lens of survival but through that of profiteering?

[funkulation]

Yes, I don't think that's even debatable.

The preservation of power right now is just egregious beyond comprehension. The Fed & Washington, for the service of the banks & corporate America, are going to add an immense amount of fragility to hold up an already fragile system with all of the Fed actions so far + $6 trillion in spending.

Ultimately, I believe how Central Banks operate these days cannot be sustained because to sustain them would defy the Laws of Thermodynamics. Their goal is perpetual low vol, but thats obviously not how volatility works. Vol suppression just leads to more explosions of volatility that are now having dangerous implications in the real world.

The latest actions by Congress & the Fed, if they pull it off, I suspect will lead to the next wave of volatility in violence, in a country with 400 million guns. Even if they pull this off, they're exposing the US to just an immense amount of pressure on the inflationary side. The political fallout of these actions I suspect will be a true rise in authoritarianism because violence will lead to chaos which leads to more violence, which leads to authoritarianism to suppress violence. Hitler rose to power as a reactionary force to the hyperinflationary failures of the Weimar Republic. The big difference now is that the tools at the hands of the government have never been more powerful.

This is not a moment where everyone is sacrificing, the managerial class of America & the executive class can maintain their pay, while 30% of Americans probably go unemployed, and every single small business in America has lost everything. The idea of America, this idea that anyone can make it, is totally lost in these circumstances. That is a far more powerful effect on society than anyone even realizes right now. So while these executives don't make a single sacrifice while so many do, I predict their lack of awareness to such extreme selfishness will ultimately be their downfall.

[ploika]

Finance and central banking don't operate according to the laws of thermodynamics. It's hard to argue that finance is a closed system in the physics sense because wealth can absolutely be created and destroyed.

You're kind of getting at Hyman Minsky's work - the notion that stability in financial markets is inherently unstable. But otherwise you're not really quoting any evidence for some pretty wild predictions.

[pandamaniac]

This makes a lot of sense, not just for the American case but across the world. How would you suggest that us (common citizens) push for change or change our behavior to change this?

[funkulation]

Well, for one, I recently heard a podcast from a guy named Charles Marohn, he runs this organization called Strong Towns, and wrote a book by the same title. I haven't read it yet but I think he's onto something. His thesis is we need to do a bottom up rebuild of America, not a top down one. It's all about advocacy for a return to localism as a way to solve America's problems.

This is off their website:

The Strong Towns approach is a radically new way of thinking about the way we build our world. We believe that in order to truly thrive, our cities and towns must:

- Stop valuing efficiency and start valuing resilience;

- Stop betting our futures on huge, irreversible projects, and start taking small, incremental steps and iterating based on what we learn;

- Stop fearing change and start embracing a process of continuous adaptation;

- Stop building our world based on abstract theories, and start building it based on how our places actually work and what our neighbors actually need today;

- Stop obsessing about future growth and start obsessing about our current finances.

Otherwise, as an individual, I think it's about maybe insulating yourself from the impacts from what you can't control. I recently thought about growing my own vegetables, building a home hydroponics system. Had me thinking too about investing in solar power. I think the idea of teaching resilience is a better way to go, because we clearly have a way too fragile system that is susceptible to forces we can't control. As individuals it's up to us to build communities of people at the more localized level to create the world we want.

[notlukesky]

Shareholders are to blame for lack of oversight on executive compensation.

[sloaken]

I only half agree with you. I think the real problem is the board votes for people who are not in attendance. How many of you have been to a stock holders meeting? Nor have I. Nor do I want to. I think rules need to be put into place:

1) where if stock holders do not send in proxies, there shares are not counted.

2) if you are on a board for a company. The other members and CEO cannot be involved in any other company that you are a CEO or board member of. I feel it has become too much of a 'I will give you a raise, if you give me a raise'

3) proxies to member cannot have open ended 'and other issues as they occur' clauses. Typical proxy lists a bunch of things, but mostly 're elect xyzzy', with a clause at the end allowing the board to vote your shares as they seem fit. Like #1 above they do not need this.

Maybe they should have the shareholder meetings online so the people can vote.

You know for crazy salaries, do you ever see not public companies (privately held) paying such ridiculous salaries?