Home Depot’s CEO-Size Tip

I’m not upset by the $210 million golden parachute Robert Nardelli just received as a send-off from Home Depot. Not at all. To those critics who see it as one more step in the slide from free-market capitalism to wholesale looting, I say: What do you really know about Nardelli’s circumstances? Maybe he has a dozen high-maintenance ex-trophy wives to support, each with a brood of special-needs offspring. Ever think of what that would cost?

Or he may have a rare disease that can be held at bay only by daily infusions of minced fresh gorilla liver. Just try purchasing a gorilla a day for purposes of personal consumption, or any endangered species for that matter. There are the poachers to pay, the smugglers, the doctors and vets. I’m just saying: Don’t start envisioning offshore bank accounts and 50,000 square foot fourth homes until you know the whole story.

Another reason I’m not troubled by the $210 million payoff is that the Home Depot board may see it as a kind of tip for its fired CEO, and like me, they may see no reason to link tips to performance. I don’t tip as a reward for good service; I tip because it’s part of the tipped person’s living. Waitstaff, for example, earn about $2 or $3 an hour – a bit more now in certain states – so a tip is just my contribution to their wage. Sloppy waitress? Surly cabdriver? I’m not their damn supervisor-- they get their 20-25 percent anyway.

So what if Home Depot’s stock fell from $50 to $41 on Nardelli’s watch? Maybe the board should be commended for their generous tipping policies. Possibly they’re trying to send a message to us stingy 20 percent-ers: that 300 percent (based on Nardelli’s $64 million earnings over his six year tenure) is more like it.

Or it could be that Home Depot has a more profound philosophical message to impart. The board may have decided to flout the very principle of capitalist exchange: that what you get paid should in some way reflect the work that you’ve done—or the “value added,” as they say in the business. If that seems unlikely, consider that Pfizer has just rewarded its own failed CEO with an exit package of – and this can’t be coincidental --$200 million.

Picture the board members sitting cross-legged on the floor in a circle, munching S’mores and giggling about how cleverly they’ve undermined the basis of our capitalist economy. Home Depot sales clerks get about $8-10 an hour for lifting heavy objects and running around the floor all day; the CEO gets a total of almost $300 million for sinking the stock. We’re not talking about a rational system of rewards – just random acts of kindness, vast sums of money alighting when and where they will, generally in the outstretched hands of those who already have far too much.

Now, could anyone in this store please tell me where to find the little doohickeys that hold up shelves? Oh well, I guess you have to scrap a lot of sales associates to come up with a decent CEO tip these days.

Comments

[That Girl]

Thanks for the laugh.

[Rhea]

Just more evidence of the topsy-turvy world we live in. What a lesson for kids: do badly, reap enormous reward. Why bother to do the right thing?

[chris]

It doesn't hurt to review a few FACTS regarding Nardelli's parting package.

The following is from the latest HD 8-K filed with the SEC. An 8-K is a document submitted to announce unscheduled changes such as resignations of principal corporate officers.

"Mr. Nardelli and the Company have agreed in principle to the terms of a separation agreement which would provide for payment of the amounts he is entitled to receive under his pre-existing employment contract entered into in 2000.

"Under this agreement, Mr. Nardelli will receive consideration currently valued at approximately $210 million (including amounts which have previously been earned or vested).

"This consideration will include a cash severance payment of $20 million, the acceleration of unvested deferred stock awards currently valued at approximately $77 million and unvested options with an intrinsic value of approximately $7 million, the payment of earned bonuses and long-term incentive awards of approximately $9 million, the payment of account balances under the Company's 401(k) plan and other benefit programs currently valued at approximately $2 million, the payment of previously earned and vested deferred shares with an approximate value of $44 million, the payment of the present value of retirement benefits currently valued at approximately $32 million and the payment of $18 million for other entitlements under his contract which will be paid over a four year period and will be forfeited if he does not honor his contractual obligations."

The terms of Nardelli's departure were established in the year 2000. In other words, the package is not "tip" awarded after he performed his expected tasks.

And the pay-out to Nardelli will occur over FOUR years. He doesn't collect the entire balance in a big fat check at the end of this month.

Meanwhile, there's something else missing from this one-sided slam. In 2000 and 2001, the stock market was on fire. Stocks were soaring to new peaks, many for no sound reasons. Those were largely internet-related stocks. Many of those went over $100 a share and some went well past $200 a share. From there, most of them went to $0 per share.

Why not focus on the absolute madness of the crowds that flocked to stocks of companies with NO earnings? Those companies were headed by CEOs who further promised that earnings, if they were ever to arrive, wouldn't do so for several years. Yet the stocks flew into the stratosphere. That's madness on the part of investors.

Meanwhile, under Nardelli's leadership, HD's earnings rose 150%. Not bad. But not good enough to move the stock above the tulip-mania levels seen in 2001 when most market averages hit highs that remain unsurpassed.

Yes, HD stock is trading at lower prices today than when Nardelli took over. But this has more to do with the nature of the stock market than with operational failures at HD.

HD is nothing more than a massive hardware store. Its existence will never revolutionize anything. As a business, it has no transformative power like, say, Microsoft once had. It's just a simple business that must exploit every angle to nudge its profits up an inch.

It's also a company at the end of its fast-growth cycle. It is now a much more mature, slow-growing business. And it's hardly news when stocks of relatively mature, slow-growing businesses drop back from the peak days of high-speed expansion and profit growth.

If you want examples of huge waste among public companies, look at the Internet companies and review the stories investors swallowed from 1995 to 2001.

Those stories were whoppers.

[Different]

Baby boomers old boys club.

[Elizabeth]

$200 million, $210 million -- maybe we're in the midst of a CEO minimum-wage hike. While I keep reading in the op-eds that giving poor people more money per hour is a bad, bad idea, maybe it works the other way around for rich people. I'm sure the WSJ could make us understand.

[Ron Davison]

Nardelli did one really amazing thing. He got those self-checkout cash registers installed, ones where the customer uses the barcode and card swipe without need to interact with a live cashier.

There are two really marvelous things that can flow from this. One, given they can avoid cashiers and their small talk, now even introverts and agoraphobics can shop at Costco. Why should only extroverts have nice homes? Two, this may be a bold step towards eliminating those low-paying jobs like cashier. Nardelli may not think of this as extravagant pay; he may just be trying to set an example for the rest of us, pointing out what is possible once we've all let go of our paltry paying jobs. In the future, maybe we’ll all have our chain of retail stores, we’ll all be CEOs and no one will need to work those low paying jobs done away with by automation.

[chris]

Ron Davison wrote:

"Nardelli did one really amazing thing. He got those self-checkout cash registers installed, ones where the customer uses the barcode and card swipe without need to interact with a live cashier."

Hey Ron. Where have you been?

I pumped gas in high school. Every gas station in America had a crew of part-timers, mostly high school kids, pumping gas afternoons and weekends.

Where is that job today? Gone.

Why? Because the job requires no skill except collecting the payment from the customer. And that part of the transaction required honesty on the part of the employee.

Credit cards and credit verification changed everything. Customers pump their own gas because anyone can do it, and advancing technology was able to take care of the payment issue.

Today, instead of working for a small wage pumping gas in a generally grimy environment where gas pumpers inhale possibly dangerous gas fumes while they work, high school boys now work in video stores and a hundred other venues that have arisen in the years since the demise of the gas-jockey job.

[lc2]

chris,

Will you do me and everyone else here a favor? Will you never, ever again tell all of us that you pumped gas for a spell, self-serve is now the norm and that you therefore have a unique and insightful perspective on the value of labor and technology?

BTW, I've had my gas pumped by others in the past few weeks, and neither of them were high-school boys or girls. They were a middle-aged man and woman.

I heard a labor analyst on NPR's Marketplace recently say that self check-out is increasingly popular b'c retail cos. can't find people to fill those jobs. Huh? My spouse who is a retail mgr. turns away people every single day who will do anything for work and would love to be cashiers. I'm not looking to start a debate over whether a company has every right to install self-checkouts. Of course it does, and I'm not one to stand in the way of progress. But I also don't understand how an expert on a nat'l news show can say something that everyone in the trenches would say is completely untrue. Is it because no one cares what the people in the trenches have to say?

[Ceci]

I'm back in college after getting "downsized" by my former life partner. To say that I've experienced a drastic reduction in money is an understatement. For months I couldn't even find a minimum wage job that would consider me...they were swamped with hundreds of applicants. But I lucked into a job at a university and a "perk" is 2 classes per semester paid for (not to mention health insurance). So the salary isn't a living wage, but the other benefits give me a way out of it.

Now, I post my response here to recommend a book that I've gotten for my American Gov't class. It's called "The Irony of Democracy" and can be found at Amazon.com here http://www.amazon.com/Thomson-Advantage-Books-Democracy-Introduction/dp/0534601669/sr=8-1/qid=1168456081/ref=pd_bbs_sr_1/102-0481970-5284960?ie=UTF8&s=books.

This book discusses how the US is governed by an elite class who will logically stay with the status quo to protect their lofty position in society. There's nothing wrong with an elite class perse...if they continue to remember the lives of the masses in their decisions(IMHO). The US has always been ruled by an elite society, but the number used to be smaller (less bureacracy anyone?), and they had an ethic/moral belief that recognized that their own welfare was linked to the welfare of the masses. (you're ultimately only as strong as your weakest link).

The book is a text book, so it does have purely factual elements such as gov't organization, the constitution and ammendments etc. But it's whole focus is how these elements are wielded by the elite class.

[chris]

lc2, you wrote:

"I heard a labor analyst on NPR's Marketplace recently say that self check-out is increasingly popular b'c retail cos. can't find people to fill those jobs. Huh?"

Imagine my surprise at reading that NPR sent forth a story that was totally false. Oh, the perfidy. The heartbreaking disappointment that a ultra-lefty "news" venue behaved like the finest media source the Soviet Union, Cuba, North Korea or the middle east has ever known.

Hopefully the lesson you will learn is the one about how "trusted" sources have an agenda.

[chris]

ceci, you wrote:

"The book is a text book, so it does have purely factual elements such as gov't organization, the constitution and ammendments etc. But it's whole focus is how these elements are wielded by the elite class."

Really? The book is a textbook, therefore it contains only truth and facts? Wow. That's quite a statement.

[Ceci]

Actually I've read many text books that state opinion quite frequently and provide little supporting evidence to corroborate their conclusions. The textbook I mentioned does state quite a few opinions, but they're supported by factual evidence and often referrals to raw data versus massaged data.

There are portions of the textbook thought that are the typical dry facts, such as the sections I mentioned in my previous post.

[Anarcissie]

It's pretty obvious that the United States is governed by a elite class. You have only to ask how things get done, and follow the money, or look at the CVs of our great leaders.

I don't agree that 'they had an ethic/moral belief that recognized that their own welfare was linked to the welfare of the masses.' That was true in the later New Deal period and during and just after World War II, and may become true again when our present debacle matures, but before and after the New Deal the upper classes were as unconcerned with the general welfare as they are today. Only great disasters seem to awaken them to their aristocratic responsibilities.

Are elites a good thing? I don't think so, but most people seem to want to play follow the leader, so there's not a lot one can do about it. Exploit the fatuities and idiocies of the rich and powerful for entertainment, I guess; but as we see in Iraq and elsewhere, left to themselves they often wind up killing a lot of people and breaking a lot of stuff.

[chris]

Anarcissie wrote:

"It's pretty obvious that the United States is governed by a elite class. You have only to ask how things get done, and follow the money, or look at the CVs of our great leaders."

More nonsense from the glass-is-half-empty crowd.

Come to Brooklyn, city of 2.5 million -- more than many states -- and you will find that most city councilmen/women are anything but "eilte".

In Brooklyn, most were born in other countries, many of them Caribbean countries.

Meanwhile, NY state senators and state representatives also emerged from roots that were anything but "elite".

Our two senators representing us in Washington were not born to the aristocracy either.

However, both worked hard in school and were accepted at two of the most prestigious colleges in the country. But they didn't get into Wellesley and Harvard based on their parent's last name.

Of course if we confine our discussion to the Democratic Party, perhaps "elite" is the term that describes many of those elected under that banner.

The Kennedys come to mind. It doesn't bother the people who re-elect Ted every year that he's guilty of a crime that led to the death of Mary Jo Kopechne.

John Kerry, Mr Heinz, also comes to mind.

On the other hand, who was Jimmy Carter besides a lousy president? Did he get into Annapolis for reasons other than merit? Where was his silver spoon?

He didn't have one.

Clinton may have developed elitist sensibilities, but he certainly wasn't raised in the country-club and horse-farm set. He got into Yale on merit and he became governor of Arkansas by winning the popular vote.

Of course he has to thank Ross Perot for helping him defeat Bush 41 n 1992. Without Perot siphoning off 15% of the popular vote, Bush 41 probably would have won re-election.

If the US were "governed" by the "elites", Bush 41, a member of the elite, would have won. He didn't.

Neither did John Kerry, who was probably the crown prince of the political elites.

Here in NY City the last mayor who could be described as a member of the "elite" is probably John Lindsay. Even Bloomberg is a self-made billionaire.

Giuliani? There couldn't be a person of less elite origins than Rudy, except maybe David Dinkins.

On the other hand, the very elite Ronald Lauder, of the Estee Lauder family, ran in the mayoral primaries a couple of elections back. Despite his enormous wealth and the amount he spent in the primaries, he got crushed.

Steve Forbes once had presidential ambitions. He got crushed because almost no one responded to his eliteness.

John Kennedy and FDR were two presidents who would fall into the "elite" class. So might both Bush presidents.

But Bush 41 lost to a non-elite, and Bush 43 defeated two other elites.

Is John McCain a member of the elite? No.

Is Hillary? No.

[TZB]

Hey, what's wrong with a CEO making a few bucks?

[chris]

For whatever it's worth, a shareholder suit has been filed against Nardelli and HD over his severance agreement.

Unfortunately, the plaintiffs should have filed this suit when HD agreed to the severance plan, which occurred when Nardelli was hired.

The details were available in the proxy statement filed for that year -- 2000 -- and every year since.

Because shareholders are the owners of every public company, they should focus on executive pay issues. But most shareholders believe that managerial talent is not cheap.

And despite lackluster stock-market performance of HD's shares, earnings rose from $2.5 billion to $5.8 billion (2005 net income) under Nardelli's guidance.

But investors were not impressed. That's how it goes sometimes.

[Tommy T. Payne]

"CEO-Size Tip" made me laugh-out-loud several times.

Chris, your Jan. 11 posting re the power elite made a cogent point that many non-elite members gain public office. Yet leaving it at that alone paints a grossly inaccurate picture, because two crucial factors are left out of the picture: 1) Government is not the only center of power shaping our lives; 2) "Commoners" are permitted to achieve high office ONLY if they demonstrate they will NOT seriously threaten the privileged position of the corporate elite.

As to "1)": Financial institutions and corporations have much more power than government. The power to deploy capital - which is the accumulated productive capacity we've inherited from the labor of ALL our ancestors - determines who and how many work, how much they're paid, what gets produced, etc. I'd say the Fed Chair (formerly Alan Greenspan, now Ben Bernanke) has way more power over our lives than the president - unless you're in the military.

As to "2)" - Consider the example of Bill/Hil. Bill Clinton lost his bid for a 2nd term as Arkansas Governor in 1980 because he supported bill against the interest of one of Arkansas' richest guys. I believe the bill had something to do with trucking weights on the highways and would have cut into the profits of the Tyson chicken king. The rich schmuck organized his fellow big dogs to defeat Clinton. Ever since the Clintons have been wary of arousing the ire of the corporate elite. Thus, the '93-4 proposed health care plan gave a cut of the action to 5 of the biggest insurance companies, making it such a cumbersome, complicated plan that no one understood it, and the political support evaporated.

Or take Jimmy Carter, who was, yes, merely fabulously well-to-do, not tippy-top elite. Carter took care to serve on Rockefeller's Trilateral Commission and in other ways hob-nob with The Masters to assure he wouldn't rock the hierarchical boat.

Chris, don't you think we really think we have government "of the people, by the whores, for the corporate elite?

As to your posting Jan. 9 re the FACTS of Nardelli's compensation, you convinced me Nardelli can't be reasonably faulted for the lackluster performance of Home Depot's stock. But can you tell me what he DID do to "earn" that $210 million? Assuming the median wage of HD workers to be $12.50/hr., and that we're talking a 5-year period, NARDELLI WAS PAID IN SEVERANCE 3,200 TIMES AS MUCH AS THE AVERAGE COMPANY WORKER EARNED DURING HIS TENURE. What magical quality did Bob contribute that was worth more than the efforts of the people who actually serve the customers? If Bob could have squeaked by on a paltry $10 mil severance, the other 200 mil could have been used to give a $5/hr. raise for 16,000 employee-years!

It would seem Nardelli was REwarded for being a good contract negotiator.

[Ceci]

I find it interesting that there was an assumption that the word 'elite' meant being born into priviledge. Nowhere did I mention that the average person can't become part of the elite class. If they weren't allowed to bureaucracy wouldn't have ballooned to such a high degree. The head count at the top of the pyramid is seriously out of proportion. We no longer have a pyramid. Anyway, I digress.

The bottom line is that when one becomes an elite member, you have to check your empathy at the door or you'll get your head handed back to you on a platter. ...like what happened to Carter and the Clintons.

I don't have one negative feeling toward those with riches and power. (Only people who are abusive, manipulative, and self centered...and those types can also be poor.) But if you're rich, it would be wise to remember "to whom much is given, much is expected"...and have a broader sensibility than your own personal pocketbook and status/job protection.

[lc2]

chris,

Give me a little credit. I never listened to NPR like it was gospel -- do you really think that I turned to NPR for reliable news about labor issues? Two years ago they devoted Labor Day coverage to Italian hip-hop artists' interpretations of Bob Dylan tunes. No, I'm not making that up.

It's just that it was so completely out of left field (no pun intended) I was a little surprised. It's not every day that any self-respecting "expert" gets away with that kind of statement without citing a shred of data. Save me the lecture about textbooks too.

[chris]

lc2, you wrote:

"It's not every day that any self-respecting "expert" gets away with that kind of statement without citing a shred of data."

Right. It's not once a day. I'd say it's at least TWICE A DAY that "experts" make unsupported and unchallenged statements. That's one of the perks of living in "expert-land".

[chris]

lc2, you wrote:

"Will you do me and everyone else here a favor? Will you never, ever again tell all of us that you pumped gas for a spell..."

You're joking, right? I'd say you've mentioned "that my hubby works in retail" twice as often as I've cited my high school job.

Meanwhile, many readers of blogs don't read every entry or leave comments. My statements about various experiences of mine are in support of my points and made with the new reader in mind.

[chris]

Tommy T Payne, you wrote:

"Chris, your Jan. 11 posting re the power elite made a cogent point that many non-elite members gain public office. Yet leaving it at that alone paints a grossly inaccurate picture, because two crucial factors are left out of the picture: 1) Government is not the only center of power shaping our lives; 2) "Commoners" are permitted to achieve high office ONLY if they demonstrate they will NOT seriously threaten the privileged position of the corporate elite."

The post to which I had responded made the point that only "elites" obtained government power. This is clearly false and an insult to all those who have worked since the founding of the country to give anyone and everyone a shot at political leadership.

Meanwhile, your claim that government representatives are "permitted" some time in office as long as they don't rock the corporate boat is pretty silly. It would be political death in local elections to seem beholden to corporate interests. No one could get elected to any post whatsoever in The Peoples' Republic of Brooklyn if it appeared they were on speaking terms with an oil company, unless it was the one headed by Caesar Chavez.

Meanwhile, the economy of Brooklyn -- 2.5 million people -- has long shown the impairment of the socialist ideology at work.

You wrote:

"As to "1)": Financial institutions and corporations have much more power than government. The power to deploy capital - which is the accumulated productive capacity we've inherited from the labor of ALL our ancestors - determines who and how many work, how much they're paid, what gets produced, etc. I'd say the Fed Chair (formerly Alan Greenspan, now Ben Bernanke) has way more power over our lives than the president - unless you're in the military."

The preceding is somewhat true. A Fed without the free economy it hopes to steer through various and hazardous economic waters is not much of anything.

It takes the right balance of public and private effort for prosperity to arrive and stick around.

You wrote:
"As to "2)" - Consider the example of Bill/Hil. Bill Clinton lost his bid for a 2nd term as Arkansas Governor in 1980 because he supported bill against the interest of one of Arkansas' richest guys. I believe the bill had something to do with trucking weights on the highways and would have cut into the profits of the Tyson chicken king."

Tyson was the rich schuck who told Hillary to buy chicken futures a day before his firm made a large purchase that gave Hillary an instant $100,000 profit.

Meanwhile, the chicken business is highly competitive. Higher taxes or higher expenses for Tyson could very likely mean lay-offs for employees. In my view, it's always a mistake to impose taxes if the likely consequence is unemployment.

You wrote:
"Thus, the '93-4 proposed health care plan gave a cut of the action to 5 of the biggest insurance companies, making it such a cumbersome, complicated plan that no one understood it, and the political support evaporated."

Believe what you want, but we can bankrupt the nation with a generous national healthcare plan. If we go national, then we must impose limits and rationing on the care or our expenditures will skyrocket to destructive levels. Moreover, a generous national plan would be a magnet for every citizen of an impoverished nation. Our illegal alien problem would multiply many times as pregnant women surged into the country hoping to cash in.

You wrote:

"Chris, don't you think we really think we have government "of the people, by the whores, for the corporate elite?"

With unemployment around 5% and the vast majority of Americans living decently, you can call it what you want, but it works.

Would you prefer the economic programs in place in North Korea, Cuba, the islamic theocracies of the middle east, or Zimbabwe?

Chavez has pretty much declared himself dictator of Venezuela. He says Castro is his god. In other words, Venezuela will soon became another economic backwater despite having substantial oil reserves. It is now officially on a downhill slide. Bolivia too.

You wrote:

"As to your posting Jan. 9 re the FACTS of Nardelli's compensation, you convinced me Nardelli can't be reasonably faulted for the lackluster performance of Home Depot's stock. But can you tell me what he DID do to "earn" that $210 million?"

He raised corporate profits from $2.5 billion to $5.8 billion in five years. That's a pretty good showing, but not good enough to move the stock.

You wrote:
"Assuming the median wage of HD workers to be $12.50/hr., and that we're talking a 5-year period, NARDELLI WAS PAID IN SEVERANCE 3,200 TIMES AS MUCH AS THE AVERAGE COMPANY WORKER EARNED DURING HIS TENURE."

His "severance" was not $210 million. That amount included all compensation up to the time of his departure. It included many deferred incentives and bonuses. In other words, compensation already earned but not collected.

You asked:
"What magical quality did Bob contribute that was worth more than the efforts of the people who actually serve the customers?"

He told them what to do. His guidance raised net income from $2.5 billion to $5.8 billion. If he hadn't changed the way the company did business, it might have continued to earn $2.5 billion a year. Or perhaps earnings would have fallen. Though there may be a clerk in the organization who has the capacity to become CEO and introduce similar or greater improvements, Nardelli was th guy who did it and he was paid according to his contract, which was approved by the board of directors before he showed up for work.

You wrote:
"If Bob could have squeaked by on a paltry $10 mil severance, the other 200 mil could have been used to give a $5/hr. raise for 16,000 employee-years!"

When the hourly-wage employees are in charge they can institute the pay practices you suggest.

It's obvious that workers prefer to shoot themselves in the foot by ignoring their opportunity to acquire meaningful ownership stakes when they work for public companies.

Even in companies where workers receive some stock compensation, the hourly people usually sell it and take the cash. They would do themselves a favor if they held it and built up enough of a group position to throw a little weight around. It doesn't take much.

You wrote:

"It would seem Nardelli was REwarded for being a good contract negotiator."

He raised profits a lot. You seem to suggest that doesn't count for anything. Meanwhile, US autoworkers, steel workers and many other union workers have seen their ranks shrink a lot because they negotiated big wage-and-benefit packages that gave off-shore competitors all the advantage they needed to underprice our products on world markets.

The auto-worker Job Bank program pays auto-workers full pay to sit at home. That was one of the great contract bamboozlements of all time. Meanwhile, Nardelli more than doubled profits at HD.

Personally, I don't think I would have given Nardelli the contract he got because I think there are others capable of doing the same job for less.

But, like sports stars, business stars are not hired cheap. HD is not an early-stage company. As a maturing company it needs the leadership of someone who knows what works at that stage of a corporation's life.

[Ceci]

...quoted from http://slashdot.org. Similar discussions have been discussed on this unix/tech forum over the past day or so.

(by dtjohnson)
"1) Extremely high executive compensation attracts people for management who are extraordinarily greedy and selfish. These traits lead them to make business decisions that are both self-serving and short term in outlook; exactly the opposite of what any business needs to grow and prosper.

2) A top management receiving pay that is so much higher than most of the people working in the business allows them to live in ways far beyond the means of most other employees. As a result, they lose touch with the day-to-day problems and issues of their workforce and consequently make poor decisions.

3) People who are paid far above others soon begin to think that they are somehow wiser, more intelligent, more creative, harder working, etc than others and begin to devalue their contributions and opinions. This can have disastrous consequences for any organization."

[Anarcissie]

If paying top management so much leads to bad results -- and Slashdot certainly isn't the first to make this claim -- we have to explain why shareholders are so willing to do it. In theory, the owners of Home Depot thought it was worth contracting themselves to give Mr. Nardelli hundreds of millions of dollars of their money (and, ultimately, our money) because of something he was going to do for Home Depot or at least its shareholders. What did they think, and why did they think it? Remember, everyone in this situation is supposedly well-informed and acting voluntarily. They may be delusional, but we should at least understand the delusion so that we can dispel it.

[realpc]

The only reason we have all this stuff that progressives love -- computers, air conditioning, cars, electronic entertainment, medical technology, useless nasty treatments for AIDS and cancer -- all that stuff you want every poor person to have -- the only reason we have it is free enterprise.

Yes, the Soviet Union did a remarkable job blah blah blah and if only the United States had cooperated with its noble mission of world revolution and kill the rich bastards blah blah there would be no poverty on earth today and everyone in Africa would have a hot tub and a hybrid car.

If you got the nicest, smartest, most progressive group on earth and put them in charge of creating and managing a peaceful, just, and prosperous society -- without free enterprise -- the result would be slavery, poverty and corruption.

[realpc]

CEOs get outrageous compensation for the same reason as movie stars and top athletes. Organizations compete for the best talent by out-bidding each other.

Only the best (or luckiest) actors can live on what they make by acting. And the very very best (or very very luckiest) make outrageous salaries. The same for musicians, artists, writers, fashion models, etc.

We could go back to the 90% tax bracket, but that would probably just inflate the salaries even more.

[Ceci]

Hmmm, good question Anarcissie. I can't ponder it from the point of view of the shareholders and executive types since I've never been in their shoes. I've always been a wage earner and the amount I can save (zero per month now) has never been enough to consider investing.

But, speculating is fun. :) The method of *how* investors and executives earn their money from a company is different than how a wage earner does. They can move their interests out if they cludge things up, but an actual person earning a wage is more "trapped" in a company. From their point of view, really large returns paid out to a certain class of people undermine the long term survivability of their job.

Perhaps to an investor, all this is is a natural boom and bust...milk a company for lots of cash quick, move on and *if it survives*, it'll eventually regrow to a point being worth investing in again....sort of like cutting a plant back to the ground and it regrowing next spring. Some plants thrive with severe pruning, others don't. I guess you could further say that the long, cold winter is more than many wage earner feel they (or the company)can keep surviving. If you prune incorrectly, you can kill your plant also.

To carry the metaphor a step further (and I'm probably reaching here), other than storms, mother nature doesn't prune. Plants don't use up all of their energy in a brief season, nor do they compete with each other to make spring more bountiful or colorful each year. If they did, they might not have the resources to survive the natural die back in the winter.

So I don't argue that the waxing and waning of business success isn't natural, but I think these exhorbitant executive salaries are the equivalent of too much energy being expended. A "short winter" is one thing (a time to retool, shift priorities etc). But if you go too far in milking the company (insert killing the cow metaphor here :) ...ya gotta feed said cow), you risk being in a winter phase so long that you may never get out of it.

Now...from an investor point of view..so what. You kill a cow, buy another cow. You over prune and kill a plant, buy another plant. But from an employee standpoint, someone killed a perfectly good cow because they opted not to feed her, provide her shelter etc. From their point of view, the cow could have lived many more productive years before it was time for a natural death.

[BTW...to go over the top on these metaphors :), death of anything (companies included) is natural and *must* happen. In the body, if cells don't die when they're supposed to it's called cancer.]

Ok...whee...I need some coffee. I'm sorry about such a long metaphoric comparison.

[Ceci]

Ok..at the risk of really overstaying my welcome here, I just had another idea.

To me these huge executive salaries are like someone buying a garden or grove and intending to just harvest. They don't intend to fertilize, learn to prune correctly, prepare for a freeze, etc.

Theoretically, our business schools are supposed to be teaching them how to be good caretakers of the garden, but it's just not translating into actual action.

It appears that people's idea of investing is buying said grove at a good price (better if the seller is between a rock and a hard place so it yields good advantage). After purchase they harvest once and move on. The grove must grow back with little or no "real" investment in anything that will maintain it. So I'd contend that despite the education that executive types likely received in college, their definition of the word investment is utterly different than the working person. They're willing to spend lots of money to get something, harvest it once, but *not* to maintain it with reinvestment of capital in training, salaries etc. Employee churn and losing skill sets is just part of doing business (ever try to get help desk answers that are really helpful?)...so the harvest will get leaner every year.

Ok...now I'm off to get coffee...and likely look back on these posts later and cringe.

[chris]

Ceci,

In short, you know absolutely nothing about finance and business.

Your speculations are groundless and the usual stuff of naive minds afflicted with some mis-informed idealism.

Meanwhile, regarding the lifespans of corporations, well, some are quite short.

In those cases the post-mortem explains their demise.

Other's live on like giant redwoods. There are several banks in the US today that were around when the country was founded. There are also newspapers that have been continuously published since those same early days.

[chris]

realpc, you wrote:

"If you got the nicest, smartest, most progressive group on earth and put them in charge of creating and managing a peaceful, just, and prosperous society -- without free enterprise -- the result would be slavery, poverty and corruption."

Exactly. Right on the nose.

[chris]

Anarcissie, you wrote:

"If paying top management so much leads to bad results..."

What bad results? Nardelli led HD to much higher profits.

You have started with a false premise. Your argument goes downhill from there.

You wrote:

"...and Slashdot certainly isn't the first to make this claim..."

Implicit in statements like these is the notion that some obvious but modest individual knows the secret path to unbridled success for a specific enterprise. But he's been overlooked in the stampede for the top job. What nonsense.

You asked:
"...we have to explain why shareholders are so willing to do it."

Shareholders are not consulted about much unless they own enough stock to swing decisions on matter that come before the board of directors. And then they are not consulted.

The big shareholders have to confront the board. Like Kirk Kerkorian, who owned about 10% of GM stock and put Jerome York on the board to force management to repair the company by making some very painful moves.

The contract that exists between shareholders and management grants management autonomy over virtually all aspects of running the company. Shareholders vote for members of the board and can appoint and elect people of their choosing.

But few shareholders ever become activists. However, with the growth of hedge funds, this is changing. More and more hedge funds are battling boards and demanding strategies that will raise the stock price.

Nardelli was known as a leader who didn't care to spend a lot of time explaining HD plans to hedge fund managers. Therefore, the hedge funds have remained aloof from the stock.

The price of HD stock declined from its 2001 peak. Big deal. That happens. Even though Nardelli more than doubled HD's profits over his tenure, competition heated up in the last couple of years

Now Lowe's builds its stores around the corner from HD. And Lowe's offers a somewhat friendlier environment. Lowe's stores have a warmer feel and look less like aircraft hangars than HD stores.

Since the stock market is all about the future -- which no one predicts very well -- it's clear the HD stock price suggests that even though HD prifts doubled in the last 5 years, they might not double again in the next 5 years. Therefore, investors should consider other stocks. After all, as HD and many other companies have proven, even rising profits are no guarantee of a rising stock price.

You wrote:
"In theory, the owners of Home Depot thought it was worth contracting themselves to give Mr. Nardelli hundreds of millions of dollars of their money..."

The money and the assets of a public company are not the personal property of shareholders. Buy some stock in HD and then go to a store and try walking out with a hammer and nails. Tell the security guys you own stock and you're just taking what's yours. Tell that to the judge, too.

Owning stock gives you the right to vote on certain matters as well as buy and sell as much of the stock as you can afford. But stock ownership does not grant you the right to claim the physical and financial assets of the corporation.

You really need to learn basic finance and economics.

You wrote:
"...(and, ultimately, our money)..."

Unless you own stock or bonds in the company, you have a claim on exactly nothing.

You wrote:
"...because of something he was going to do for Home Depot or at least its shareholders."

He did. He more than doubled profits. That's a big deal. A very big deal.

YOu asked:
"What did they think, and why did they think it?"

The board hired Nardelli because he had a proven record of success at GE. He convinced the board he could produce significant profit gains at HD. In fact, he did.

You wrote:
"Remember, everyone in this situation is supposedly well-informed and acting voluntarily. They may be delusional, but we should at least understand the delusion so that we can dispel it."

Are you suggesting that certain people know exactly when and how much a stock will rise?

Are you suggesting a board of directors can identify the perfect candidate to become CEO?

Are you suggesting there was another obvious candidate for the job who would have increased profits more than Nardelli AND caused HD stock to rise of 2001 levels?

If boards were that good, they'd pick stocks instead of CEOs.

The hiring process is not a crapshoot. Nardelli performed well. But that's not a guarantee of a higher stock price, and it doesn't mean he was overpaid.

[Ceci]

Hahahaha! :) I may know little of finance and business, but I do know about ethics and morality.

One thing this "naive" brain has noticed is that the only people aggressively arguing for the maintenance of this present economic system are those who are vested in it. Either by already being part of the elite class or thinking that they are. Some people may even think they've finally figured out the "rules of the game" and they don't want the game changed yet because they haven't gotten their "share".

It all depends on your perspective. But slinging judgments of naivete, idealism, ignorance, etc is as old as civilization itself. And it's a tired objection.

The bottom line is that philosophers/intellectuals many civilizations ago had already figured out how a gov't and industry *could* run, be flexible, and not so harmful to it's citizens. These theories are the only ones that have never been tried. So round and round we all go on a hamster wheel to nowhere doing the same things that compromised every civilization before us.

The tendency to ignore issues that don't affect ourselves is basic human nature, but it does remind me of an event that happened when I lived in IL. I turned on the news one night to discover that a woman had frozen to death in her garage. She was sitting in a lawn chair and the TV she was watching was still on when she was finally found days after she'd died. It turned out that she'd begun hording and even shi*ting in her own home. She started at the very back so it didn't bother her up in the front. So she persisted in this behavior to such an extreme that she ran herself out of her own home.

Sure...we call people like that "crazy...insane". But just what kind of people are any of us if we ignore the crap we're spewing into our own "home". Our greed is not only harming our planet, but we're harming our populous by trivializing their concerns. They are the canaries and they're telling you something is wrong. Many of them are intellectuals and are publishing from our own universities. Ignore them or trivialize them at all of our peril.

[Tommy T. Payne]

Chris, Realpc - You guys are of course far from alone in buying the myth that we live under a free enterprise system. The reality is that "free enterprise" quickly devolves to monopolistic/ologopolistic dominance.

U.S. industrialization in the 1800's post-Civil War is a classic example. J. D. Rockefeller pioneered the monopoly way to mountains of money with the Standard Oil Trust. Soon all key industries were dominated by trusts with their ability to set prices free of competition.

Similarly, 20th century industries all seemed to end up with a "Big 3" who tacitly agreed to avoid price competition. Steel is a good example. in the 50's & 60's, U. S. Steel was the leader in determining pricing: they would anounce a price change and the other 2 of the big 3 would follow.

Or look at Warren Buffett. Part of his formual for success is to invest only in companies that dominate their market, i.e., have monopolistic pricing power.

There's a fascinating trilogy "Capitalism & Civilization: 15th to 18th Century" by the French historian Fernan Braudel. Braudel was arguably the greatest economic historian of the 2oth century.

Braudel, who was not ideological at all, concluded that at the tippy-top of the social pyramid of capitalism, you ALWAYS find capitalists who have achieved dominant wealth & hegemony through MONOPOLY. A prime example is the merchant oligarchy of Venice which maintained a virtual lock on the spice trade.

So please never equate capitalism with "free enterprise." Our Gates and Waltons today tower above us peons thanks to MONOPOLY, i.e., ANTI-free enterprise.

Chris, you are one tenacious disputationist, and a tad supercilious.

You write, "Would you prefer the economic programs in place in North Korea, Cuba, the Islamic theocracies of the middle east or Zimbabwe.?"

Chris, this specious rhetorical jab is beneath you. Those are all pre-industrial economies mis-shapen by remaining shackles of feudalism. I would prefer the economic programs in place in countries like Finland, Sweden, Germany, Denmark, etc., which, thanks to century + long SOCIALIST movements, have healthcare for all, at least a month's vacation anually for all workers, a generally much more economic security for the general population.

By the way, Chris, you may HOPE Venezuela "will soon become another economic backwater," but currently the economy under Chavez is booming.

You write, "With unemployment around 5% and the vast majority of Americans living decently, you can call it what you want, but it works."

First of all, correlation doesn't mean causation. I suggest that if we're living decently today, it's in SPITE of, rather than because of capitalism. Why shouldn't we live decently the exponential increase of technical know-how accumulated from past generations?

The question is: is our quality of life what it should be given the productive
capacity available. You seem to find
5% unemployment acceptable. That's 6-7 million people in economic duress, Chris. And it doesn't count the discouraged who have stopped seeking work, and the working poor, and the homeless. I mean, have your READ "Nickel & Dimed," Chris? Have you no heart for people who aren't shareholders?

I wish I could go on to some of your other points, but I've got to , you know, go to work.

But I can't let this go: "A Fed without the free economy it hopes to steer..."

If the Fed is steering the economy, in what sense is it "free?"

[Different]

In capitalism:

You are a man named Ives Thor. You buy two cows. You make "good friends" with the cows, because you are greedy and love the money milk brings.

You name one cow "company 1", and the other, "comapny 2".

You then proceed to milk the cows to death, leaving a stinking rotting corpses for everyone else to clean up after.

However, due to producing/selling milk so quickly, you then have enough money to buy 3 cows, and move your farm to China, away from all the rotting corpses. You then repeat this process over and over again.

[Ceci]

..from Barbara's own website.

http://www.barbaraehrenreich.com/decent_wages.htm

You can follow the link in the article to the original pdf.

For some reason our society thinks it's ok to tell 25% of it's citizens that they don't need a salary high enough to buy the basics of life. So we point them to welfare, food stamps, hud housing etc. Why in the world would we need so many social programs if we just paid a living wage?

I know my posts are gross oversimplifications. But this forum isn't the correct venue to pull out equations and post citations. Dissertations and scholarly works are continually published in this field. To me, this is a forum for people who either empathize with a group of people different than themselves or people who know what it's like on the "low side of the tracks". I've had the privilege to get to live on both...as a farmer's daughter, a neuroscientist in training, an executive's spouse, and now as a divorcee supplementing my less than living wage salary with students loans so I can find a way to rise up yet again. (at 42)

The bottom line is that there are many economists, political scientists, philosophers, etc that support Barbara's (and many others here) contention that the pendulum of the money cycle is swinging too high for the executive set and too low for the masses. There are also some who support Chris and RealPC's view.

No one should have their opinion trivialized. But the fact is that the *basics/fundamental characteristics* of the camp Chris is a member of, have already been the underpinnings of wave after wave of human societies that we have historical records that show us how they fared. This version of the "game" is as old as the hills. (BTW, I'm not talking about capitalism, that's just a manifestation of the fundamental ethos I'm talking about)

Many of the working class spend years in school being trained as to the rules of the game and indoctrinated in it's philosophies. There are basic "truisms" that you have to accept without question, or you just can't be a "member". But just like the shackled masses in the allegory of the cave, all we're doing is naming shadows and creating a false sense that we know what's going on. The answer is to listen to the person who's come back in and is telling you that this whole "life" is a game with the rules made up by an elite class...a class who'll keep changing the rules so as to keep you contentedly shackled.

Over and over, societies have chosen to "kill" the one who returns to help out the shackled masses. We kill them by trivializing their views..call them naive, crazy etc (or as in the past, literally killed them). Anything to shut them up so that the status quo can be maintained. The masses do it *themselves*. The elites quite often don't have to raise a hand. The real "game" is so utterly different than anything the masses have ever known that they'd rather silence the messenger than really consider the message.

Why any of us let elites create the "rules of life" then give our fielty to their service is beyond me. But then again, most of humanity just wants to be happy. To experience contentment interspersed with bouts of joy, moments of awe, and adventure, that's all they want. They get no joy telling anyone else what they should do. So we roll our eyes at these pontifications by the wealthy where they tell us the rules of the game yet again. But the reality is that we're all living and getting by despite these oligarchs.

The oligarchs are playing their game, and we're playing ours. It's just finally gotten to a point that their game has reduced our ability to achieve even our paltry goals. Any good elite should know that you gotta keep the masses happy or the game's kaput. If they get awakened from their contented shackles and start to look around, you're screwed. So ya gotta throw 'em a bone now and then.

I'll wrap up this monstrously verbose post by mentioning a saying I'm sure we've all heard before. "Insanity is doing the same thing over and over and expecting different results".

[Ceci]

Different, I wanna learn how to communicate as well as you.

Egads, I talk too much. :)

[realpc]

We have the most freedom of any society that ever existed on this planet. Anyone can become a member of the ruling class. Clinton, for example, did not come from a privileged family. Many highly successful politicians and business owners had middle class or poor backgrounds.

Every society has its rules and its mythology, and we are all programmed to some extent. But we are less programmed and less controlled than any other human beings that ever lived.

It's very hard to find the line between the elite and the masses here. Most of the people you call the masses do not feel oppressed at all. They feel they have great potential to live their dreams, because the society is not oppressive.

[Anarcissie]

realpc: 'CEOs get outrageous compensation for the same reason as movie stars and top athletes. Organizations compete for the best talent by out-bidding each other.

Only the best (or luckiest) actors can live on what they make by acting. And the very very best (or very very luckiest) make outrageous salaries. The same for musicians, artists, writers, fashion models, etc.'

There is one obvious difference between the entertainers you mention and the big-ticket CEOs -- the entertainers sell tickets, and it's not hard to see the connection. The willingness of stockholders to pay astronomically for CEOs is harder to figure, especially when we see cases where the CEOs seem to have lost money or otherwise failed to produce. Someone should look into their culture and psychology.

realpc: 'We could go back to the 90% tax bracket, but that would probably just inflate the salaries even more.'

You are right there. There is no use taxing the rich, since having more power than the rest of us, they will simply extract the money from those further down the economic food chain.

[Anarcissie]

Tommy T. Payne: 'I suggest that if we're living decently today, it's in SPITE of, rather than because of capitalism. Why shouldn't we live decently the exponential increase of technical know-how accumulated from past generations?'

I agree with Karl Marx on the inevitability of capitalism. Before capitalism you have almost nothing but slavery and feudalism (unless you count pre-civil societies, which were always small and dispersed). There really hasn't been any alternative; the 20th century's big suggestions, fascism and socialism, were respectively a reversion to feudalism and a reform of capitalism where the power still remained in the hands of an elite. As yet -- and this relates your question -- people in general replicate the values of capitalism in their daily lives, that is, the mainspring of their economic lives is a combination of accumulation and consumption, also known as "greed". As long as most people do that, then the best, the most efficient and most humane way they can organize themselves is in some version of capitalism. It is delusional to think we can concentrate on accumulating stuff and power in our daily lives without producing a society based on accumulating stuff and power. No political arrangement can do that.

[chris]

Tommy T Payne, you wrote:

"..J. D. Rockefeller pioneered the monopoly way to mountains of money with the Standard Oil Trust."

Yeah, Right. Oil was a godsend and Rockefeller and a few others who saw its promise delivered. They eventually approached bankruptcy when they over-produced and oil prices collapsed.

Had it not been for Henry Ford and the arrival of cars, Rockefeller would have seen his enterprise collapse. Meanwhile, even if there was a period when Rockefeller had monopoly pricing power -- and there's no evidence he did -- he would and did face competition from oil that was discovered in many parts of the world.

Oil became a global business a long long time ago. Companies from all over the world got into the game. Moreover, oil has never been terribly expensive. And it is unquestionably cheaper than its alternatives.

The Robber Baron crap is mainly myth. If it hadn't been for the decisive and bold moves by the original oil men, steel men, the car-makers and a few others, we would not have developed the prosperity we have today.

You wrote:
"Soon all key industries were dominated by trusts with their ability to set prices free of competition."

More spouting of myths from people with no grasp of free enterprise and the growth of competition.

You wrote:
"Similarly, 20th century industries all seemed to end up with a "Big 3" who tacitly agreed to avoid price competition."

Really?

You further undermined your own nonsense by stating:

"Steel is a good example. in the 50's & 60's, U. S. Steel was the leader in determining pricing: they would anounce a price change and the other 2 of the big 3 would follow."

And then foreign competition ate the lunch of American steel companies. By the 50s and 60s, the domestic steel companies were hostages of the unions that diverted cash flow to higher wages instead of improving the steel mills.

Or this doozy.

"Or look at Warren Buffett. Part of his formual for success is to invest only in companies that dominate their market, i.e., have monopolistic pricing power."

Not one of his companies has monopoly pricing power. That's part of the beauty of his investment style. He finds companies that make simple products better than the competition. He buys into companies that have copetitive advantages that do not depend on governmental favortism, which is required for true monopoly pricing power.

Show me even one company in which he's invested that has monopoly pricing power.

You wrote:

There's a fascinating trilogy "Capitalism & Civilization: 15th to 18th Century" by the French historian Fernan Braudel."

Who cares? At that time most of the world's population was illiterat, the US hadn't been formed at the real economic revolutions that brought true prosperity had not gotten underway.

You claimed:

"Braudel, who was not ideological at all, concluded that at the tippy-top of the social pyramid of capitalism, you ALWAYS find capitalists who have achieved dominant wealth & hegemony through MONOPOLY."

Capitalists ALWAYS seek government assistance to protect their markets.

US steel companies sought quotas on imported steel. They got the quotas. Then the Japanese painted the steel red, added tires and an engine and sent it over as a car. When Detroit sought quotas on imported cars, Japanese car companies began building cars here. The consumers spoke. They liked the Japanese cars, but not as much as they liked the American cars. They also liked the German cars, the Swedish cars, the Italian cars, the Korean cars, and a few quirky buyers even liked a couple of French cars. Pretty soon US buyers will show some love for Chinese cars, which will go on sale here possibly next year.

You wrote:
"A prime example is the merchant oligarchy of Venice which maintained a virtual lock on the spice trade."

Yeah, and exactly what percent of an economy did the spice trade amount to? Peanuts.

You wrote:

"So please never equate capitalism with "free enterprise." Our Gates and Waltons today tower above us peons thanks to MONOPOLY, i.e., ANTI-free enterprise."

Microsoft and WalMart have succeeded because they provide better products and lower costs. When I first got involved with computers in engineering school, I was writing my own simple programs.

The early word-processors I worked with were dedicated computers that cost a lot and ran primitive software capable of little.

Meanwhile, there are students at MIT, Cal Tech and elsewhere pondering great stuff in their dorms. And they have no trouble raising money to finance their ideas -- when their ideas are good. Happens every day on Wall Street. It's a goal of many to knock off Bill Gates and Microsoft -- and it will happen.

WalMart is a great place to shop if you want to save money. Meanwhile, it faces plenty of competition from Costco, Target, Sears/KMart and a long list of regional stores.

You wrote:

"Chris, you are one tenacious disputationist, and a tad supercilious."

Good for me.

You noted:

"You write, "Would you prefer the economic programs in place in North Korea, Cuba, the Islamic theocracies of the middle east or Zimbabwe?"...

"...Chris, this specious rhetorical jab is beneath you. Those are all pre-industrial economies mis-shapen by remaining shackles of feudalism."

The pathetic economies found in most African nations exist because the nations are not free and are controlled by tyrants. They are in the state they are in because brutal despots have hijacked the countries.

However, I detect in your comments a belief that the people who live in those countries are too primitive and perhaps incapable of participating in a modern US-style economy.

You wrote:
"I would prefer the economic programs in place in countries like Finland, Sweden, Germany, Denmark, etc.,"

Relatively homogeneous countries like Finland, Sweden and Denmark, which each have populations below 10 million, don't face the operational complexities that affect the US. They can ride the world's coat-tails with ease, and they do. Moreover, if the US economy wasn't as big and consuming as it is, to what countries would all the nations you mentioned export their stuff?

You wrote:
"which, thanks to century + long SOCIALIST movements, have healthcare for all, at least a month's vacation anually for all workers, a generally much more economic security for the general population."

Let me know when those countries have the same burdens as the US. Advanced nations that don't have to provide security for the world have many options not available to the US.

You wrote:

"By the way, Chris, you may HOPE Venezuela "will soon become another economic backwater," but currently the economy under Chavez is booming."

Obviously you are reading Chavez's press releases. He has nationalized the utility companies and the oil industry, and thus it is only a matter of time before those industries begin to suffer from the usual effects of bureaucracy and mismanagement. He has also arranged a lifetime presidency for himself. That's all it takes to guarantee economic collapse. Cuba is a good example.

You wrote:

"First of all, correlation doesn't mean causation."

Who said it did? It's more like taking the economic temperature. Low unemployment is a sign of balmy economic weather.

You wrote:
"I suggest that if we're living decently today, it's in SPITE of, rather than because of capitalism."

Good for you. But you're wrong.

You wrote:
"The question is: is our quality of life what it should be given the productive
capacity available?

Dumb question. No one knows EXACTLY what "should be." Moreover, people can shape their lives in many ways. I won't say options are limitless, but the main limitation lies within the individual.

You wrote:

"You seem to find
5% unemployment acceptable. That's 6-7 million people in economic duress, Chris. And it doesn't count the discouraged who have stopped seeking work, and the working poor, and the homeless. I mean, have your READ "Nickel & Dimed," Chris?"

I've read some of it. But I started to choke on what was written and had to put it down.

You wrote:
"Have you no heart for people who aren't shareholders?"

The only people for whom I have no heart are those who refuse to acknowledge that money does not grow on trees.

You wrote:

"If the Fed is steering the economy, in what sense is it "free?""

Ahh. Wordplay. There's a vast difference between people attempting to GUIDE a huge and wildly diverse economy so that it continues to deliver as much as possible to as many as possible, and a tyrant who COMMANDS an economy.

Our practice is wildly successful and the command strategy is a constant loser.

As they say, the proof is in the pudding.

[chris]

ceci, you wrote:

"Many of the working class spend years in school being trained as to the rules of the game and indoctrinated in it's philosophies. There are basic "truisms" that you have to accept without question, or you just can't be a "member"."

YOu really ought to get out in the world. At least the US. There are no "indoctrination camps" anywhere around here.

They make their unfortunate appearance when tyrants run the show and they're willling to kill anyone who's willing to challenge the dictator. Those not in need of killing get "re-educated" instead.

[Hattie]

Says Chris: The only people for whom I have no heart are those who refuse to acknowledge that money does not grow on trees.
And here I thought that was where those overpaid CEOs were getting all their money, from trees, that is, and now it appears they have been getting it from us!
Are there any conservatives who want to provide a reasonable defense for our present wage system? Rather than saying, basically, that CEOs are worth every penny they get?
And perhaps a conservative who has struggled to get an ungainly and heavy bunch of consumer goods-- say a piece of lumber, a lamp, a bag of cement, some cable-- through one of those automated checkouts will be able to explain to me why these labor savers are such a good idea? They certainly don't save the consumer much beyond perhaps exchanging a few (we hope) civil words with a cashier.

[realpc]

"the mainspring of their economic lives is a combination of accumulation and consumption, also known as "greed""

Anarcissie,

It's also known as the instinct for survival, common to every living thing. The hunting-gathering economies of early humans got what they needed to survive, and all members worked. Like the other animals, they could only get enough from nature to survive for the day.

The invention of agriculture allowed the more successful humans to acquire a surplus, and social inequality was born. (So was competition for good land, the main cause of many wars ever since.)

Capitalism, like agriculture, allows some to get ahead of others, and to pass the advantage along to their descendents. Only a subsistence economy can prevent inequality, since whenever there is a chance to acquire a surplus some energetic person will do it.

Capitalism is the natural result of freedom. When people are not oppressed or enslaved, they will strive for success.

Socialists call it "greed," to make it sound bad. But the desire to excel can be good or bad, and is usually a mixture of both. The opposite of the desire to succeed is laziness.

The left tolerates and even encourages laziness, the right tolerates and even encourages greed. But we don't have to use these judgemental labels. We all need time off from striving -- call it relaxation instead of laziness. And we all need something to strive for -- call it motivation instead of greed.

[chris]

Hattie, you wrote:

"And here I thought that was where those overpaid CEOs were getting all their money, from trees, that is, and now it appears they have been getting it from us!"

CEOs getting money "from us?"

What does that mean? Has someone from Home Depot passed a collection plate from house to house in your neighborhood? Is there a charity dedicated to raising money to over-compensate CEOs?

Your attitude suggests you are yet another among the crowd who believes business enterprises can be managed with mathematical certainty and that every person who mentions he might like a turn at running the company would perform as well as any other person moved by the same daydream.

You asked:
"Are there any conservatives who want to provide a reasonable defense for our present wage system? Rather than saying, basically, that CEOs are worth every penny they get?"

The market for goods and services determines the rate of pay for industry employees. Not CEOs. Not unions, though they both try.

The world's auto industry is many times larger today than it was in 1960 when GM produced about half the world's cars. However, even though there many successful car companies have come into existence since 1960 and competition has gotten much much tougher, GM makes more cars today that it did in 1960. But now its share of global production is much smaller than it was in those days of its leadership. Today, I think GM makes about 15% of the world's cars.

Meanwhile, the United Auto Workers union has seen its membership plummet.

Why? Because the wage and benefit costs the UAW now enjoys exceed the auto-companies ability to pay.

GM posted a loss of about $10 billion for 2005. It will post a loss of perhaps half that much for 2006.

To save the company from a trip through bankruptcy court -- which would put the court in charge of streamlining the business -- GM has sought voluntary retirements of thousands of employees. The cost of this "severance plan" is many many billions. The average GM worker will receive $140,000 to leave. About 38,000 workers accepted the offer. You can do the math.

Ford has taken the same step. Ford hocked the entire company to raise the money to restructure itself into a form that will survive. Ford raised $23 billion in its recent financing -- this capital is the "severance pay" for thousands of workers.

Thus, as a result of collective bargaining that compensated workers with high wages and gold-plated benefits regardless of the proftibility of the car company, we are witnessing the total collapse of unionism in the auto industry.

Had workers accepted a wage-plus-bonus pay scheme and not demanded that laid-off auto workers receive full pay as members of the Job Bank, we'd have a far healthier employment situation for unionized US auto workers.

Instead, Toyota and other foreign makers will build more and more cars here, keeping heavy competitive pressure on Ford, GM, and the quasi-US firm of Daimler-Chrysler.

You asked if CEOs are worth what they're paid. The answer: Some are. Some aren't. That's one reason turnover is pretty high at the top.

There are a number of reputable studies of CEO pay/performance. Jack Welch is rated near the top. Worth every penny. And there are names at the bottom. No different than professional athletes -- the guys who were unbelievable in high school and college, but finally met a lot of competition in the big leagues.

Once again, the CEO critics at this site show no awareness of business operations. It seems that only incorrect headlines -- like Nardelli of HD gets $210 million Severance Package -- catch anyone's eye.

YOu opined:
"And perhaps a conservative who has struggled to get an ungainly and heavy bunch of consumer goods-- say a piece of lumber, a lamp, a bag of cement, some cable-- through one of those automated checkouts will be able to explain to me why these labor savers are such a good idea?"

What the heck are you talking about? First, where did you shop for bags of cement before the arrival of HD?

Second, the D-I-Y market (Do It Yourself) emerged along with Home Depot. Before HD, very few weekend warriors were mixing cement and putting an addition on the house. However, HD and its competitors capitalized on this D-I-Y consumer trend. The company proved Say's Law -- that supply will create its own demand.

Low-cost construction goods available at huge stores inspired millions of would-be carpenters, bricklayers, etc, to pick up the tools and get to work themselves.

Meanwhile, if you think it's so tough to get a bag of cement through the self-checkout station, you'd better rethink your idea of actually building something with the cement. It's heavy, blister-producing work that leads to aching backs and very sore muscles. Those who are over-taxed by the checkout process are likely to collapse during the real work of the building process.

You wrote:
"They certainly don't save the consumer much beyond perhaps exchanging a few (we hope) civil words with a cashier."

They will prove their own merit. If customers use them, they are successful. If some people are incapable of putting the barcode in a position visible to the scanner and then inserting their credit cards into the pay slot, well, I'd say those people will have a lot of trouble hitting the nail with the hammer or putting the paint on the walls rather than themselves.

[chris]

realpc, you wrote:

"Capitalism is the natural result of freedom. When people are not oppressed or enslaved, they will strive for success...

...Socialists call it "greed," to make it sound bad. But the desire to excel can be good or bad, and is usually a mixture of both. The opposite of the desire to succeed is laziness."

How true!

[Anarcissie]

me: 'the mainspring of their economic lives is a combination of accumulation and consumption, also known as "greed"'

realpc: 'It's also known as the instinct for survival, common to every living thing.'

The problem here is that unlike other animals, human beings have collectively gotten the best of nature and no longer have to struggle for survival, except of course against one another, if they choose. But most of them still act, much of the time, as if they were in fighting for survival in a wilderness, which eventually will have the effect of putting them back in that wilderness, or worse.

[Anarcissie]

realpc: "Capitalism is the natural result of freedom. When people are not oppressed or enslaved, they will strive for success...

...Socialists call it "greed," to make it sound bad. But the desire to excel can be good or bad, and is usually a mixture of both. The opposite of the desire to succeed is laziness."

chris: How true!

I disagree with both remarks.

1. Capitalism is not the result of freedom, because if it were, we would observe capitalism among primitive tribes. Actually existing capitalism is always observed in conjunction with state power. The optimal mix of state power and personal liberty has long been a matter of debate, but no serious, rational fan of capitalism is an anarchist. Quite the contrary, many ardent capitalists, like the present American administration, promote war, imperialism, propaganda, and police repression; obviously they think these reductions of freedom serve the cause of capitalism.

2. When people are not oppressed or enslaved, many of them, probably a majority, will not strive for success but go fishing. It takes threats and punishments to make them work.

3. Socialists, of whom there are actually very few, often fetishize labor, effort, the desire to excel, and so forth. Most of them seem to basically have exactly the same values and ideas as capitalists. It's a family feud.

[chris]

Anarcissie, you wrote:

"1. Capitalism is not the result of freedom, because if it were, we would observe capitalism among primitive tribes."

Yeah, and if performing mathematical computations at high speed were of value to primitive tribes, they'd have developed computers two thousand years ago. You're always good for a laugh.

By the way, how did life go among those primitive tribes? How does it go among those primitive tribes we can still find here and there around the world?

Oh yeah, subsistence living and extremely high mortality rates due to the impact of impure drinking water, limited food supplies, painful nutritional shortcomings, and then there's that other problem -- tribal leadership.

How is labor divided in those primitive tribes? Oh yeah, the women are pretty much slaves and the men perform most of the hunting. There's also the issue of attacks launched by other tribes. Oh yeah, let's return to those days.

You cracked another one:

"Actually existing capitalism is always observed in conjunction with state power."

Yeah. The power of the state is mainly aimed at keeping the playing field as level as possible for all players. Obviously the playing field is never flat, but it's far flatter in a capitalist country than anywhere else.

You wrote:
"The optimal mix of state power and personal liberty has long been a matter of debate, but no serious, rational fan of capitalism is an anarchist."

Finally, a true statement.

But then:
"Quite the contrary, many ardent capitalists, like the present American administration, promote war, imperialism, propaganda, and police repression;"

This idiocy is repeated endlessly in liberal circles. But the facts never support these nutty claims.

There is no monetary profit that accrues to a nation at war. War is an enormous expense that is only borne by the US when it appears that opposing forces in the world are undermining the relative stability around the globe.

While one or two corporations might see profits rise during wartime, the increase due to heightened military spending is always temporary. The real profit comes later, when entire economies and countries have a chance to bloom.

Germany and Japan to name a couple. And all of Europe to name a few more.

Meanwhile, I see that attempting to create markets and trading partners around the world is mistaken for "imperialism."

It's ironic that in 1950, North Korea was the industrial half of the Korean peninsula, and South Korea was the agricultural half. Would the 22 million starving citizens of North Korea be better off if the country overthrew Kim Jong Il and reunited with South Korea, thereby opening the North to the benefits of advanced societies and trade with the US? Or should the national suffering continue?

And then more lunacy:
"...obviously they think these reductions of freedom serve the cause of capitalism."

I'm still waiting to read about someone whose freedoms have been abridged here in the US.

And more:

"2. When people are not oppressed or enslaved, many of them, probably a majority, will not strive for success but go fishing."

Really? While their children go without food? Well, yes, this happens. But when adults don't contribute to the well being of their families, their value to the social structure is pretty low.

And more:
"It takes threats and punishments to make them work."

Oh really? Chain gangs? Forced labor? Enslavement?

The vast majority of employed people understand that if they perform their appointed tasks they get paid, and if they fail to perform them for too long they get fired.

Meanwhile, even fishermen realize if they catch enough fish they can sell them for enough money to sit at home and watch some TV for at least part of the week. Or they can go fishing, when they're not fishing to earn a living.

[realpc]

"human beings have collectively gotten the best of nature and no longer have to struggle for survival,"

Anarcissie,

We got all this thanks to competitive, motivated individuals. If you remove natural free competition, as they tried to do in the Soviet Union, innovation dries up.

So you want to benefit from the results of free competition and free enterprise, but you want to stop them somehow.

All the crazed inventors and entrepreneurs who worked 16 hour days for years on end, risking failure, have given us all these amazing machines. And now we can grow more than enough food for everyone with minimal labor. So now it's time to sit back and have a beer. The machines will keep running without our effort.

That's the leftist utopian dream. I bet you can't see anything wrong with the logic.

[Anarcissie]

We also got where we are today because people fought large wild animals with clubs. At the time, it was appropriate behavior. Today, it might be a bit passé, don't you think?

But if people really _want_ to work hard, and if they don't destroy or use up too much of the world, that's not a problem: they can cure cancer, fly to Mars, unify the theories of physics, surpass Bach and Beethoven, whatever. I just wish they'd knock off the death and domination stuff, which seems intimately connected with the political and economic mainstream.

[realpc]

"I just wish they'd knock off the death and domination stuff"

No one likes death and domination, or disease or poverty. You like to have a villain to blame for everything unpleasant.

The big mistakes are made by those with power. Most of us can only make little mistakes, affecting only our little world. In that sense, the powerful are the villains (and the heroes by the way). We do a little, they do a lot, for good or evil.

In your fantasy, there are no evil-doers. But that requires that no one is powerful, which is impossible. And if it were possible, no one could do any good either. Because you need power to do anything.

Yes maybe some groups in the US have become too dominant. I don't necessarily agree because it seems to me that anyone can run for office or develop a great new product, if they have the luck, energy and talent.

You want to block the path to success, so no one will have more power than anyone else. You can't block success without ending freedom. And you can't end that freedom unless you have the power. The Soviet Union is one example. The outsiders overthrew the powerful and became powerful themselves. There is not one example of a Marxist revolution where that did not happen.

And when the Soviet Union stamped out freedom it set in motion its own slow destruction.

[Anarcissie]

Actually, the Soviet Union fell apart when it tried to liberalize itself. But that's a complicated story and might not be relevant.

Freedom means people can do what they want -- and what they want is often to do something besides work all the time so they can pile up stuff and take advantage of one another. That is why the relation of capitalism to general freedom is pretty ambiguous (as I said before). I have no desire to block anyone's path to "success", whatever that means; I would like to see a decline their ability to use and exploit other people through force and fraud, which is what a lot of our current political and economic life is about. However, if they are as inevitable as you say, I guess people will just go on choosing them and then crying about the result.

[realpc]

Anarcissie,

We make laws which try to keep things as fair as possible. There are no perfect laws, and promoting justice is an endless struggle. I did NOT say exploitation is inevitable, I said inequality is inevitable. Well, some degree of exploitation is inevitable because laws and law enforcement are not perfect. We must try to make things fair, while maintaining freedom.

"the Soviet Union fell apart when it tried to liberalize itself."

Oh baloney. It never would have tried to liberalize itself if it weren't failing already. And I can't imagine why anyone defends the totalitarian Soviet system. Try living under totalitarianism for a while, and see if your opinion of America doesn't improved drastically.

[realpc]

Anarcissie,

We make laws which try to keep things as fair as possible. There are no perfect laws, and promoting justice is an endless struggle. I did NOT say exploitation is inevitable, I said inequality is inevitable. Well, some degree of exploitation is inevitable because laws and law enforcement are not perfect. We must try to make things fair, while maintaining freedom.

"the Soviet Union fell apart when it tried to liberalize itself."

Oh baloney. It never would have tried to liberalize itself if it weren't failing already. And I can't imagine why anyone defends the totalitarian Soviet system. Try living under totalitarianism for a while, and see if your opinion of America doesn't improve drastically.

[lc2]

Well, I think we have the answer ...

realpc and chris should run off hand-in-hand into the sunset, having found in each other the greatest love for and devotion to American-style capitalism, circa 2007, there ever was. Where will they spend their honeymoon? Perhaps Baghdad or the slums of Johnanesburg, so they can turn to each other in profound mutual recognition that there really is no better place in the world than shopping malls, anywhere USA.

May they live happily ever after in cyber space ....

[chris]

lc2, you wrote:

"Well, I think we have the answer ..."

To what question?

You wrote:
"...recognition that there really is no better place in the world than shopping malls, anywhere USA."

Sorry, but as a resident of New York City, I don't spend much time in shopping malls. However, a pretty good one recently opened near me in Brooklyn. It includes a Target as well as a number of other chain stores.

Brooklynites seem to love the place -- Atlantic Terminal -- and a few years from now a new arena for the Nets -- a pro basketball team moving to Brooklyn from New Jersey -- will open across the street from the Atlantic Terminal Mall.

The arena is part of a huge project that will include 16 residential and office buildings over 22 acres, mostly built on a massive slab of concrete and steel placed over Long Island Railroad Tracks that run below ground level in an open cut.

The Brooklyn Dodgers had hoped to move to this site in 1957, but the NY City opposed the plan to build a baseball stadium on the site at that time, saying better ideas were in the works. Well, fifty years later the site is still vacant. But not for much longer. It took a lot of pressure from a capitalist with a vision -- Bruce Ratner -- to overcome the stasis that had allowed this area to remain an eyesore for more than 50 years.

And from the Pot-Calling-the-Kettle-Black Department, you wrote:

"May they live happily ever after in cyber space ...."

Don't you post at this site because you want to get all cozy and share tea with Barbara Ehrenreich as you commiserate over how the glass-is-three-fourths-empty?

[chris]

For Different et.al.

On Education
What's Wrong With Vocational School?
By CHARLES MURRAY
January 17, 2007; Page A19

The topic yesterday was education and children in the lower half of the intelligence distribution. Today I turn to the upper half, people with IQs of 100 or higher. Today's simple truth is that far too many of them are going to four-year colleges.

Begin with those barely into the top half, those with average intelligence. To have an IQ of 100 means that a tough high-school course pushes you about as far as your academic talents will take you. If you are average in math ability, you may struggle with algebra and probably fail a calculus course. If you are average in verbal skills, you often misinterpret complex text and make errors in logic.

These are not devastating shortcomings. You are smart enough to engage in any of hundreds of occupations. You can acquire more knowledge if it is presented in a format commensurate with your intellectual skills. But a genuine college education in the arts and sciences begins where your skills leave off.

In engineering and most of the natural sciences, the demarcation between high-school material and college-level material is brutally obvious. If you cannot handle the math, you cannot pass the courses. In the humanities and social sciences, the demarcation is fuzzier. It is possible for someone with an IQ of 100 to sit in the lectures of Economics 1, read the textbook, and write answers in an examination book.

But students who cannot follow complex arguments accurately are not really learning economics. They are taking away a mishmash of half-understood information and outright misunderstandings that probably leave them under the illusion that they know something they do not. (A depressing research literature documents one's inability to recognize one's own incompetence.) Traditionally and properly understood, a four-year college education teaches advanced analytic skills and information at a level that exceeds the intellectual capacity of most people.

There is no magic point at which a genuine college-level education becomes an option, but anything below an IQ of 110 is problematic. If you want to do well, you should have an IQ of 115 or higher. Put another way, it makes sense for only about 15% of the population, 25% if one stretches it, to get a college education. And yet more than 45% of recent high school graduates enroll in four-year colleges.

Adjust that percentage to account for high-school dropouts, and more than 40% of all persons in their late teens are trying to go to a four-year college -- enough people to absorb everyone down through an IQ of 104.

No data that I have been able to find tell us what proportion of those students really want four years of college-level courses, but it is safe to say that few people who are intellectually unqualified yearn for the experience, any more than someone who is athletically unqualified for a college varsity wants to have his shortcomings exposed at practice every day.

They are in college to improve their chances of making a good living. What they really need is vocational training. But nobody will say so, because "vocational training" is second class. "College" is first class.

Large numbers of those who are intellectually qualified for college also do not yearn for four years of college-level courses. They go to college because their parents are paying for it and college is what children of their social class are supposed to do after they finish high school. They may have the ability to understand the material in Economics 1 but they do not want to. They, too, need to learn to make a living -- and would do better in vocational training.

Combine those who are unqualified with those who are qualified but not interested, and some large proportion of students on today's college campuses -- probably a majority of them -- are looking for something that the four-year college was not designed to provide. Once there, they create a demand for practical courses, taught at an intellectual level that can be handled by someone with a mildly above-average IQ and/or mild motivation.

The nation's colleges try to accommodate these new demands. But most of the practical specialties do not really require four years of training, and the best way to teach those specialties is not through a residential institution with the staff and infrastructure of a college. It amounts to a system that tries to turn out televisions on an assembly line that also makes pottery. It can be done, but it's ridiculously inefficient.

Government policy contributes to the problem by making college scholarships and loans too easy to get, but its role is ancillary. The demand for college is market-driven, because a college degree does, in fact, open up access to jobs that are closed to people without one. The fault lies in the false premium that our culture has put on a college degree.

For a few occupations, a college degree still certifies a qualification. For example, employers appropriately treat a bachelor's degree in engineering as a requirement for hiring engineers. But a bachelor's degree in a field such as sociology, psychology, economics, history or literature certifies nothing. It is a screening device for employers.

The college you got into says a lot about your ability, and that you stuck it out for four years says something about your perseverance. But the degree itself does not qualify the graduate for anything. There are better, faster and more efficient ways for young people to acquire credentials to provide to employers.

The good news is that market-driven systems eventually adapt to reality, and signs of change are visible. One glimpse of the future is offered by the nation's two-year colleges. They are more honest than the four-year institutions about what their students want and provide courses that meet their needs more explicitly.

Their time frame gives them a big advantage -- two years is about right for learning many technical specialties, while four years is unnecessarily long.

Advances in technology are making the brick-and-mortar facility increasingly irrelevant. Research resources on the Internet will soon make the college library unnecessary.

Lecture courses taught by first-rate professors are already available on CDs and DVDs for many subjects, and online methods to make courses interactive between professors and students are evolving. Advances in computer simulation are expanding the technical skills that can be taught without having to gather students together in a laboratory or shop.

These and other developments are all still near the bottom of steep growth curves. The cost of effective training will fall for everyone who is willing to give up the trappings of a campus. As the cost of college continues to rise, the choice to give up those trappings will become easier.

* * *
A reality about the job market must eventually begin to affect the valuation of a college education: The spread of wealth at the top of American society has created an explosive increase in the demand for craftsmen. Finding a good lawyer or physician is easy. Finding a good carpenter, painter, electrician, plumber, glazier, mason -- the list goes on and on -- is difficult, and it is a seller's market.

Journeymen craftsmen routinely make incomes in the top half of the income distribution while master craftsmen can make six figures. They have work even in a soft economy. Their jobs cannot be outsourced to India. And the craftsman's job provides wonderful intrinsic rewards that come from mastery of a challenging skill that produces tangible results. How many white-collar jobs provide nearly as much satisfaction?

Even if foregoing college becomes economically attractive, the social cachet of a college degree remains. That will erode only when large numbers of high-status, high-income people do not have a college degree and don't care.

The information technology industry is in the process of creating that class, with Bill Gates and Steve Jobs as exemplars. It will expand for the most natural of reasons: A college education need be no more important for many high-tech occupations than it is for NBA basketball players or cabinetmakers.

Walk into Microsoft or Google with evidence that you are a brilliant hacker, and the job interviewer is not going to fret if you lack a college transcript. The ability to present an employer with evidence that you are good at something, without benefit of a college degree, will continue to increase, and so will the number of skills to which that evidence can be attached. Every time that happens, the false premium attached to the college degree will diminish.

Most students find college life to be lots of fun (apart from the boring classroom stuff), and that alone will keep the four-year institution overstocked for a long time. But, rightly understood, college is appropriate for a small minority of young adults -- perhaps even a minority of the people who have IQs high enough that they could do college-level work if they wished.

People who go to college are not better or worse people than anyone else; they are merely different in certain interests and abilities. That is the way college should be seen. There is reason to hope that eventually it will be.

Mr. Murray is the W.H. Brady Scholar at the American Enterprise Institute. This is the second in a three-part series, concluding Thursday.

[Ceci]

"Don't you post at this site because you want to get all cozy and share tea with Barbara Ehrenreich as you commiserate over how the glass-is-three-fourths-empty?"

Hey...my glass is right at the halfway point! If someone's is lower than that, I don't want it. :)

Half full/empty...yup..same ole, same ole, civilizations have "debated" that same issues over and over again. The masses rail over "inequity" and a breeching of the social contract, yet despite those who slip throught he cracks and fail (or worse yet, die), humanity as a whole lives on. So there's no impetus for our "leaders" to change things. Only when a large enough group of people are affected severely enough does change occur and it's usually catastophic such as a revolution....an utterly horrible and non-useful answer. In the hysteria, one group of elites is exchanged for another and eventually the same issues resurface. lather, rinse, repeat.

So...since elites have always ruled the countries and businesses of the world (our founding fathers were rich lawyers, and land speculators etc..the same types that run things today), and they are insulated from the negative effects of their decisons, how in the world can we ever convince them that it's in their long term best interest to not let the corporate pendulum swing so wide toward extreme rewards and abandonment? Should we even try since it's not likely they'll ever think the ethical/moral plight of individuals is important relative to the economic engine that powers "progress"?

[realpc]

Ceci,

I think that instead of letting the elite run the country, we should put losers in charge. They will have compassion, wisdom and understanding, since they know how it feels to be helpless. They will treat everyone with equal respect and consideration, and make laws that are perfectly fair.

Only a loser can have the energy, brains and motivation required for the job of leadership. I agree with you completely. Kill the educated successful elite or send them to concentration camps. Long live the losers!

[Ceci]

:) ...interesting comment realpc because how we all define "elite" and "losers" is important to the discussion. Education certainly has nothing to do with being an elite, a "winner", a leader. Now, there is a connection since it's used to impart the knowledge of the rules to the future generation. But many educated individuals choose to not abide by those rules as they see them as artificially competitive to a fault. (...a mentality of do unto others before they do unto you.)

Not everyone wants to set policy and tell others what to do. There is plenty of room in the world for the Scottys and Spocks (sorry for the trek reference, but it was a fave..waxes nostalgically...)

But it's not to say that the Scottys and Spocks of the world shouldn't be more greatly involved. The captain needed their vital input and skills. But, he did not question the knowledge that Spock imparted. Right now, (and every civilization before) our business and gov't leaders are not technically, philosophically, or even academically savvy (yup..I said it, I've met leaders of billion dollar companies and they're often very outgoing and driven, but they're not that smart). Instead they are noted for money making acumen and a degree of competitivness that has always led societies down a path of boom and bust. (the cycle is getting shorter and shorter between waves) Their notion of the "big picture" is tiny compared to the real Scottys and Spocks out there.

It seems like societies have always been wondering who should lead and how. Philosophers have debated about the basic nature of man. (cooperative and rational or brutish and egoistic/self centered...see locke and hobbes for some ideas that lead to the creation of our constitution...and the federalist and antifederalist debates.)

One could have a grand time researching further the tendencies for a certain type (self centered) to end up in leadership roles, while the other (cooperative) tends to end up in the masses. One could also ponder why as a society we tend to label the egoistic types as "winners" and the cooperative types as "losers". It appears to be narrowly defined by access to power and money.

But there's information to be conveyed up to the "winning" elites from the "losers" :) The almost 100% top down flow that we presently have in the majority of businesses and gov't agencies is metaphorically like the Enterprise captain not listening to either his science advisor or his engineer. If he makes all the decisions and pushes them down, the technical guru's no longer need to exist...just be a tech monkey and do as I say. Ultimately, the enterprise will run down mechanically due to lack of skill or it will end up in a predicament that could be their demise (cue TV, tense theme music here)..one that could have been better forseen by a uber smart, wide focus, science advisor named Spock. There's a long term reason to fund and keep listening to your academics and your technical folks (both grants and wages). A society is most efficient when it is specialized into different groups. But you *must* empower all of those groups in order to maintain sucess.

I cannot deny that the wealth generating engine of our economy has been very powerful. I also understand that equality does *not* mean equal distribution of wealth. It means everyone has equal access to the opportunity to earn wealth and power and has equal value when leaders make far reaching moral decisions. Our present societal arrangment of ultra low wages for up to 25% of workers creates an ongoing need for them to require loans and incur debt to handle every little "bump in the road" (car repair, illness, return to school or needing to move to pursue work that has left their locale for example) These people are not given equal "access". There's little or no way for them to get out of their predicament...round and round they go on their hamster wheel to nowhere.

Having compassion or noticing the plight of the less fortunate does not equal being stupid enough to shoot the economy in the foot. It *does* mean that despite the speed of the wealth creation our present economy provides, some people see that it has a significant negative cost. The bigger a wave is, the fewer number of people that will have the skill to ride it. Also the bigger the wave, the shallower the water under you and the more likely that you could die if you crash. I would contend that our present policies have created an enormous wave..one few can ride and one that has huge consequences when it finally crashes. There are many intellectuals (yes...even business leaders and economists) who have offered advice as to how to moderate the wave. It will still create wealth (albeit more slowly), but it will also be longer lasting, less predatory and competative and less catastophic when it's time for it's natual death. Instead of boom and bust, the oscillations are more moderate.

[chris]

ceci, you wrote:

"I've met leaders of billion dollar companies and they're often very outgoing and driven, but they're not that smart."

Really. How did you determine this? This is an astounding statement.

Are you able to perform IQ tests on people when you shake their hands?

You are obviously quite young. Are you able to assess the knowledge intellectual skills and capacities of someone substantially older than you who has had more education and many life experiences you've never even imagined?

Your extraordinary arrogance about life and economics is laughable and unfortunate. But you won't recognize the falsity of your beliefs until you are much much more experienced.

[Ceci]

"You are obviously quite young."

Bzzt. Try again.

I'm "pitching" a moderate economic approach. One that embraces no economic model as "correct", but where most have components that *possibly* should be rotated through for the wild oscillations of fortune to be tamed. When we look for "one size fits all" solutions, we doom ourselves to repeating cycles of boom and bust economies.

"Are you able to perform IQ tests on people when you shake their hands?"

Intellect (and wisdom) can be quite easy to spot. The tendency to berate, and demean others and use ad hominem attacks are just a few clues. ;) Those in the case of some people, aggression can overrun their natural intellect.

Aggression and competition can be a good thing. But without compassion and a broader viewpoint, it's no longer a motivator that "get's things done" and doesn't get hooked on victimhood. Instead it steps on others and can inadvertantly cause one to behave in a predatory manner.

Most business leaders have no motivation to change the status quo. They have "everything to lose" if they try a new paradigm and the theories don't turn out to be quite right. (Even if they're almost right and just need to be tweaked, the consequences are high from their vantage point.) The segment of society that is earning so little has everything to gain, if someone, anyone would just *try* something new. They're already losing their shirts under the present business as usual policies. That these two utterly separate viewpoints are real, there is no question. But the viewpoint of the powerful does not trump the viewpoint of the masses. The worldview of the walmart clerk is as valuable and ethically important as the CEO's. A compromise between the two philosophies must be reached. Presently we just ignore the whinings of the masses...label them as addicted to victimhood. And though there are some who will fit that model, there are qutie a few that do not.

Once again, I reiterate. "To whom much is given, much is expected". It is not weak, nor a failure to use wealth to leave things better off than you found them (not just better off in the capability to build more wealth :) ). Altruism isn't going to doom someone to poverty, nor is it stupid. Yes, it's possible to help too much or waste your money doing things that will ultimately make people wait around to be taken care of. But to flee from compassion because people have made mistakes in the past is also not the answer. The answer is to continue to refine things. Excessive competition and aggression and excessive compassion are both equally harmful. We've veered off into excessive competition. Now it's time to add back compassion.

[chris]

ceci, you proved my point about your inexperience and lack of business knowledge when you stated the following whopper:

"Most business leaders have no motivation to change the status quo."

Show me one business that did not change and I will show you a business that is in decline, if not already gone.

Whatever your age, your experience in corporate matter is non-existent. A chief component of leadership is evaluating and identifying attractive investment opportunities.

Drug companies are easy examples. How do you think drug companies decide what drug technologies to pursue?

According to you, the CEOs of Merck and Pfizer are too scared to attempt to develop any new drugs and are sticking with the reliable sales of aspirin to bring home the bacon.

Companies that did not innovate -- like US steel companies -- saw their markets shrink as competitors outperformed them around the world.

The US leads the world in the manufacture of aircraft and big computers. Do you suppose we maintain our leadership because we are still building airplanes and big computers with 1950s theory?

You have the lamentable tendency of making grand pronouncements about the workings of the world without giving a single example to support your claims.

YOu don't give examples because you can't. There aren't any, unless you want to look at failed companies within viable industries.

Here's one for you. Around World War II, turbine jet engines were under development. The idea was good in theory, but the engineers weren't having much luck getting jet turbines to work in practice.

Nevertheless, two factions arose in the aircraft engine industry -- those who believed jet turbines would work and those who decided they wouldn't.

Curtiss-Wright was an aircraft engine builder that decided jet turbines would never work. Curtiss-Wright bet its future on continuing to produce the radial-piston engines on which it had built its name.

Guess what? Curtiss-Wright was wrong. Jet turbines finally advanced to the point where they were able to power aircraft.

After a period of success, the US military and the commercial airlines began ordering aircraft powered by jet turbines and it was all over for the radial-piston engines.

Do you think it was easy for Curtiss-Wright to decide against turbines? Do you think the CEO didn't consider the impact of being wrong?

He and his team considered every piece of information about the potential of turbines. They decided, at worst, there would always be a market for radial-piston engines even if turbines gained some success.

Even though some aircraft still depend on piston engines, the radial-piston engine is now found only in aircraft museums. Curtiss-Wright was wrong. But management desperately wanted to be right.

More recently you can consider the stunning number of business failures among Internet companies. Of all those Internet companies that went public over the last decade, only a handful are still around.

Amazon almost went under. The entire internet industry was based on taking commerce in a new direction. But consumers didn't see it that way.

One day you might learn a little.

[realpc]

A lot of what Ceci said there seemed moderate and reasonable to me. We certainly do have problems and I never said everything is great. I usually argue against the radical utopians, and they always assume I am radical in the opposite direction (wacko libertarian).

Just because I am not radical in their direction -- well there are people who can only see in terms of extreme opposites.

Several things have helped me understand power struggles (and politics = power struggles). I think anthropology is helpful -- having some idea of the social structures we evolved from. And zoology can also be tremendously helpful. We are primates, and we still have primate instincts (and mammal instincts also). We're different from the other primates of course, but some patterns are very similiar.

For example, certain males in a chimpanzee group have a strong impulse to strive for dominance, and they compete to be the alpha male. This requires political talent as well as physcial strength and impressiveness. Alpha males must win over female supporters, and no one becomes the leader by brute force. Alpha males also must use their authority to keep peace and order in the group. They are not ruthless tyrants; they are strong, fair, dependable, and protective.

If an alpha male does not maintain happiness in his group, he will be easy to overthrow.

Of course things are much more complicated with humans. It is possible for a small evil group to seize control of the weapons and rule by force, without democratic approval. But our nature is a mixture of democracy and power hierarchy.

Real democracy would not work, and authority is needed to keep order. But some degree of democracy is essential -- the public has to approve of the rulers or they will be overthrown (except, as I said, when an evil group has seized control).

The radical left believes, of course, that an evil group has seized control and therefore revolution is called for. I don't really see it that way. Our rulers listen to us -- as soon as the American public demands it, and looks serious, we will pull out of Iraq.

I think the radical left is like the sub-alpha chimpanzee who is looking for his chance to overthrow the alpha male. There are certain males who cannot stand to be sub-alpha, and they are always waiting for their chance. That's why radical leftists are so enraged -- their primate instincts are driving them.

[Ceci]

I agree on most points realpc. I heartily agree that gov't or business leadership, if it's at least benign, is for most people, easy to accept and they're willing to follow. I personally fit that mold. I hope you're right and that there is a feedback loop going up from the American public and the leaders will listen to it. I admit that I'm skeptical about that. But only time will tell on that one.

Speaking of sub-alpha chimps and the like, I recall watching a TV show on wolf packs (proof of very little knowledge here) and noticing that a female wolf was having difficulty with no longer being the alpha female. She ended up omega and eventually left the pack.

Chris, when I speak of the status quo, I'm talking of bigger concepts than things like product development. I'm talking about the larger scale monetary cycle and how the flow of said cycle is regulated *via* the philosophical decisions made be leaders...the *motivations* behind business decisons. Think big...really big and you'll likely figure out that you and I have quite a lot in common. I don't disagree with many of the things you're saying *as far as it goes*. But the processes you're describing are the concrete detailed ones *after* the motivations have all been hashed out. That is not what I'm referring to. I'm talking about the philosophies, moralities, psychologies of leaders which drive their rationalizations for making decisons such as gov't subsidies versus paying living wages.

[chris]

ceci, you wrote:

"I'm talking about the larger scale monetary cycle and how the flow of said cycle is regulated *via* the philosophical decisions made be leaders...the *motivations* behind business decisons."

Can you define "monetary cycle"? Once again, it's not evident that you have any idea about the meaning of that term.

As for motivations of corporate leaders, well, they're not mysterious or bound up in matters well beyond their control.

A CEO of a big company that borrows capital regularly will take note of what the Fed chairman says. But his mission won't change much. Every CEO is expected to lead the company toward greater sales and profits. He will craft his strategy to succeed against a backdrop of rising interest rates or lowering interest rates.

You wrote:
"Think big...really big and you'll likely figure out that you and I have quite a lot in common."

Not likely. You seem to think CEOs ponder life's big philosophical questions. Maybe they do at times, but not on the job.

You wrote:
"But the processes you're describing are the concrete detailed ones *after* the motivations have all been hashed out."

The processes I've mentioned are the ones that concern CEOs. They are motivated, and the board of directors demands they be motivated, by issues of building the business. That's the job.

You wrote:
"That is not what I'm referring to. I'm talking about the philosophies, moralities, psychologies of leaders which drive their rationalizations for making decisons such as gov't subsidies versus paying living wages."

You're off in dreamland again. Pay is based on how much it takes to attract workers to perform specific functions. Operating a cash register requires almost no skill. Hence, the pay for operating a cash register is low. And people line up for those jobs. Pay is too low only when no one wants the job at the advertized pay-rate.

If a CEO wants to hire smart engineers, he must pay a lot more tha he pays cashiers. Of course Congress has not raised the cap on H1-B visas, the visas issued to high-tech workers from other countries who want to come here. Instead, Congress, by its inaction, has caused US tech companies to hire people in India to perform some engineering work there instead of here.

You seem to have concerned yourself with the wages of people who have no skills. You'd do yourself and them a favor if you spent a little time investigating jobs that require some skill and pay higher wages. You and others could pursue those opportunities rather than moan about the low pay for no-skill jobs.

And as for your reference to government subsidies, well, all businesses want government assistance in one form or another. Sometimes it's a good idea to give an industry a helping hand from the government. Sometimes it's not. And sometimes, the help should be temporary.

Homeowners are given a mortgage interest deduction. There's no reason for this deduction. It increases the cost of home ownership and it raises the cost of borrowing for lower-income home-buyers. It should end. But voters are so ignorant of the simple mathematics of mortgages that they will defend the mortgage interest deduction as though it were life itself.

Meanwhile, there's almost no one at Microsoft, IBM, GM or GE earning minimum wage. That vast majority of jobs at those companies require skills well beyond operating a cash register.

And, as I mentioned previously, you should offer some real-world examples for the claims you've made. But you never provide any. Because, as we both know, there aren't any.

You should know that when you can't supply evidence to support your theories, you have to re-evaluate your theories.

[Ceci]

Chris, like I said earlier, I agree with many of your data points that you're providing. But you've still not grasped that the point I'm making is not about facts, it's about morality. One can study business decisions and dissect them ad infinitum. But the bottom line is...is the decision moral? That trumps all other considerations. There are people publishing dissertations and books discussing this. There's no reason for me to rehash it here. Start with Amartya Sen and work your way through the references you'll find in his papers/books. Also try Katherine Newman, Kevin Phillips, and David Korten.

I do not question that the present methodology of business is wildly successful at generating vast profits. But are the mechanisms/decisoins they're using to do so moral? That's the "business as usual" part of my whole proposition. The overarching philosophy that appears to be governing their behavior is the same one that has been used over and over in human endeavor.

As human beings, we're capable of assessing the long term consequences of our decisions and our motivations. No other animal we know of can do that. From what I can tell the present path we're on has had unsatisfactory endings for just about class level of previous societies (save for the very top which unless there's something as catastrophic as a revolution, do seem immune to consequences). If the results have been "less than stellar" in the past, it seems folly to me to persist in doing the same thing yet again. As possibly the only creature on the planet that can evaluate it's past behavior and re-assess it in the present situation, it's incumbent on us to do so.

BTW...as someone who's worked a well paying and highly technical job (I did neuro-cell biology/biochemisty research), and now works a clerical job that you believe requires no skill, I can assure you that the job I have now is every bit as demanding as the one I had previously that paid $15K more per year (and that was 8 years ago). Also my father was a farmer and I witnessed years of seeing his costs rise, yet the price of corn and soybeans was flat.

These fundamental facts exemplify why you and I have such a disconnect. This is something I've experienced. It's not in a book or a factoid I can quote. The bottom line is that I now earn so little that I can't leave to go to a more "employable" area of the country. I'm back in school to learn another career that will be more marketable than neuroscience. So I'm working full time, going to school and taking on debt to do so. I'm also praying that nothing serious "blows up" in my life because at $17 per year, it would only take one big event to put a permanent end to my ever becoming financially solvent.

These things are facts. I'm not a whiny, oh woe is me person. I cringe when I see people who are waiting to be "rescued". But presently it is insanely easy to slip through the cracks and find not even the slightest toe hold to get yourself back up into solvency.

[chris]

ceci, you wrote:

"But you've still not grasped that the point I'm making is not about facts, it's about morality."

This may be your concern, but "morality" is not a subject of great concern to any business. Outside of the mafia, business leaders want to know that whatever they are doing is legal. The legality of an enterprise's activities is determinable.

Many people would agree that cigarette companies are immoral. Doesn't matter. They are engaged in a lawful enterprise. That matters.

You wrote:
"One can study business decisions and dissect them ad infinitum. But the bottom line is...is the decision moral?"

Perhaps that's how you wish business leaders would spend their time. But they don't, and they won't.

Their business is meeting the demands of customers, not fretting about whether killing tuna-fish and stuffing them in cans is immoral.

You claimed:

"That trumps all other considerations."

Once again you have uttered a grand proclamation with not a shred of fact or evidence to support it.

YOu wrote another whopper:

"As human beings, we're capable of assessing the long term consequences of our decisions and our motivations."

Did the British drug company the marketed Thalidomide have the slightest hint that it's drug would cause the horrifying deformities that resulted from its use by pregnant women? No.

The world has been burning oil for over 100 years. How long did it take before any credible source suggested that burning hydrocarbons MIGHT cause some problems for the Earth's climate?

You wrote:

"...and now works a clerical job that you believe requires no skill..."

I stated that operating a cash register takes almost no skill. A clerical job might require SOME skills, but I'm unaware of any clerical job that requires a highly skilled person to perform it.

You added:
"...I can assure you that the job I have now is every bit as demanding as the one I had previously..."

A no-skill job may be very demanding. I never said otherwise. I've worked on the back of a moving dump truck shoveling off sand onto the road in the middle of summer in Montana. Idiot's work to be sure, but very very demanding. So what?

You wrote:

"Also my father was a farmer and I witnessed years of seeing his costs rise, yet the price of corn and soybeans was flat."

And now corn prices are rising because demand has risen as a result of ethanol sales. It's all about supply and demand when it comes to commodities, and no one knows exactly what supply or demand will be in the year ahead. That's the hazard of farming and nothing can change it.

You're looking for certainty in a very uncertain world. There's not much of it, but if that's what you want, it's out there.

Get a job as a science teacher in a high school. Pick a city. You will never have to worry about employment again.

[Ceci]

"This may be your concern, but "morality" is not a subject of great concern to any business. Outside of the mafia, business leaders want to know that whatever they are doing is legal. The legality of an enterprise's activities is determinable."

And therein is the crux of our disagreement. To many (possibly most) people, morality trumps legality. The two are not synonymous. Many legal actions can be immoral as I'm sure you well know.

As far as the skill required of my clerical job, it's taken over 6 months for me to wrap my brain around its technical requirements. I'm still learning the details. It is severely underpaid for the level of skill required. From a business point of view, I must question whether it's advisable for a company to pay so little. People like me will leave a job like this in the blink of an eye because the pay is below living wage level. So they continue to lose valuable skills at this entry level position. There are people out there who'd enjoy this level of work and the lack of stress. (library) The salary could still be low yet they'd be satisfied (I count myself as one of them). But at below a living wage, the chance at retaining skills is essentially nil. The people who lose are patrons who can't get their issues resolved because of all the turnover. Now, one could say that the "company" will eventually smarten up, but over and over I've seen companies choose to outsource labor, or offshore it with little concern for the quality of product or skill they'll have as a consequence. Yes, it's in the equation, but it's a minor component compared to the financials. Customers can't get decent customer service help because of the churn. One could say that they could just stop buying product X...but where can they turn? Nearly every company is doing this.

And as for whether it appropriate to pay below a living wage for even a no-skill job...no one will ever convince me that it's right. It's unethical when someone is performing a day's work to pay them less than it costs to have food, clothing and shelter. I don't care if it is unskilled labor.

FWIW, there was much more going on in the farming situation than supply and demand...subsidies are big, big,big...as are buying from south america etc.

I agree that there's no such thing as certainty in the world, but people should be capable of relying on their leaders to make decisions that live up to the moral codes we were taught as children. We've all entered a social contract with each other in order to have a society that provides some measure of security because we all know what to expect from each other. The gov't/big business/leadership portion of the equation is basically saying that it'll break any promise/contract if it ever negatively impacts them. We all deal with negative events in our personal lives, so it seems odd that billion dollar companies renounce ethical actions in order to make their way financially smoother.

To reiterate; you said,

"This may be your concern, but "morality" is not a subject of great concern to any business."

Yup...that quote says it all.

[realpc]

Everyone defines "morality" differently. The natural world is beautiful and healthy because it does not follow human-style morality. Big trees cast shadows so most little trees cannot grow -- as a result, the big trees have adequate space. Animals in a poor environment either migrate or die, they do not receive welfare or charity. As a result, there are no slums in nature.

Nature's morality seems cruel to us, because it seems not to prevent suffering. But in reality, it does prevent suffering.

I am not saying we should be social Darwinists and leave the sick and weak to die. But we should recognize that well-meaning human morality often leads to increased suffering. We should recognize that nature is infinitely wiser than we are, and we should try to learn something from nature.

Of course we can never be as heartless as nature seems to be. We would never follow its example and let sick babies die. But we do need some humility when it comes to morality. We should admit that we have very little understanding, and most of our best efforts fail. Be skeptical of grand schemes to eliminate suffering.

[chris]

ceci, you're drifting around in a utopian dreamland. What you expect of the world will never be. Nor has it ever been.

As I said, look into teaching science in high school. Teachers are members of a union and there is a painful shortage of science teachers in the public school system.

It is very easy to get in the door. Nothing more than a college degree is required to become a substitute teacher -- a no-skill job, by the way.

As you learn about a school system as a substitute, you will discover where you should go.

Meanwhile, becoming a "certified" teacher is also quite easy. You might eventually have to take a few education courses to meet some requirements, but most states allow you to start working as a teacher before completing the requirement.

Moreover, through the school system teachers seeking certification are often given weekend courses for which they receive nearly a semester's worth of credits, and unless they prove to be total morons, they pass and become certified.

Of course I am sure you will complain about the "morality" of the public school system due to its lack of success in educating millions of students around the country. But you can take that up with the union and the administration of the school that hires you.

[Ceci]

I think I understand where you're coming from realpc...ethical relativism.

I've also done a bit of reading lately about the philosophy of natural law and natural rights as discussed by Hobbes. If I understand things correctly, I happen to agree with him. By *natural* law, mankind is endowed with certain inalienable rights. These rights allow him to pursue his agendas in any way that he determines that are in his best interests/self preservation.

BUT, in the creation of our modern societies, we entered a social contract that stipulated that certain behaviors were "off limits" so to speak. Natural Law was superseded. The purpose of giving up some of these natural rights was to have a more stable society. Ideally the goal was to govern with the consent of the people and it was assumed they'd consent if the social contract was honored.

Moral relativity was not a cornerstone of how our (USA)society was constructed. It was understood to be the "way of nature", but not supposed to be the way of a governed populace. The every man for himself philosophy may be the way nature works, but it does not lead to a stable, long term civilization.

It appears though that certain moral codes were abandoned right off the bat when the founding fathers declared everyone to be equal except for slaves and women. (lack of equal opportunity) Yet to aspire for people to rise up to the ideals espoused in the social contract is not longing for a utopia. (That ain't gonna happen except within someone's own mind/perception.)

But morality isn't some nebulous, undefined phenomenon. Philosophers have discussed which behaviours of people lead to societal gain or loss for hundreds of years. Morality is simply seeing the bigger picture and noticing (and acting on) when a decision that is in the best interest of the individual/corp may be against the best interest of society. It requires denying yourself something until you can assure yourself that you're not harming others by your actions. Sure there are times we bungle things because we don't know at the time that they are harmful. But once we know, it's immoral to persist in such actions.

[realpc]

"The every man for himself philosophy may be the way nature works"

That is not true, and not at all what I said. Primitive humans and social animals all obey strict ethical codes, much stricter than our own. Nature is NOT lawless, in spite of what earlier philosophers assumed. We now have information from anthropoly and zoology showing without doubt that nature is lawful and highly organized.

[chris]

ceci, you wrote:

"But morality isn't some nebulous, undefined phenomenon."

In fact, most of it is nebulous and undefined. Morality also does not qualify as a "phenomenon."

You, however, see it differently, which means you will find yourself in a struggle with those who don't agree with your "morals."

Try matching "moral" views with serious muslims.

You wrote:

"Morality is simply seeing the bigger picture and noticing (and acting on) when a decision that is in the best interest of the individual/corp may be against the best interest of society."

Yeah. That's an easy one. How about cloning? I think it's a great idea. But there are probably about 100 million people in the US who strongly disagree with my view. Who's right? Frankly, I have no doubt that I am.

You wrote:
"It requires denying yourself something until you can assure yourself that you're not harming others by your actions."

That's a prescription for a life of poverty and self-denial. What a waste.

How many people have died because doctors believed they were treating their patients correctly only to find later they were wrong?

Over 40,000 people die each year in car accidents in the US. Are car companies good or bad?

Will cloning lead to import life-saving discoveries or will it lead to the creation of Frankensteins? Most likely, both. Is that moral or immoral?

[lc2]

Let's just call this the realpc and chris show and be done with it. This blog has become incredibly repetitive and boring.

realpc, we get it: we're primates, therefore capitalism is the logical outcome of the law of selection ... or something.

chris, we get it: we're all stupid (except realpc) and those of us on the front lines of low-wage America don't know how good we've got it ... or something.

Have either of you noticed that hardly anyone ever posts here anymore? Is that your goal?

[barbsright]

IC2, I agree. There is a fine line between arguing and discussing, and it was crossed a long time ago by Chris and RealPC. IC2, I encourage you to read the chapter in the book Freakonomics that explains what a beauty queen and a crack dealer have in common. This will help you to better understand why you, and I, and others are "on the front lines of low wage America.

[chris]

For anyone who wants to read Freakonomics -- jump to it through the following link:

http://www.pfff.us/books/Freakonomics%20-%20Steven%20Levitt.pdf

By the way, the logic linking crack dealers and beauty contestants is strained. While there are a couple of points of comparison between the two pursuits, an evaluation of them yields far more contrasts.

[James]

Why is Nardelli even a matter of concern for most people here? Are you Home Depot shareholders? If not, then this entire conversation is irrelevant. It wasn't your money that paid him, so what do you care?

[GrumpyGrandpa]

I've often wondered why people had such disdain for Home Depot, but an extremely negative experience we had recently gave us new insight.
We had a dispute with a Home Depot landscape contractor for a project at our home back in June/July 2006, and here in February 2007 we're still dealing with several isssues related to poor work quality, an 'overcharge', and what we consider to be deception on the part of both the contractor & Home Depot.   

After filing a complaint with the official Home Depot consumer affairs office in July, we also reported to the FTC in November that we thought Home Depot's advertising circulars, store employees, and webpage promises of 'guaranteed customer satisfaction' were false and misleading advertising.  Our experience with their landscape contractor was nothing like the process detailed on the homedepot.com webpage explaining how their customer/ contractor interaction is supposed to work (I have printouts from the homedepot.com webpage showing the specifics, although I discovered in January that most of that language has now been removed from homedepot.com. )

In June 2006 & prior to signing a contract,  we were told by the local Home Depot store where we shop and also by the landscape contractor that he wouldn't be paid until we signed a 'waiver' that we were satisfied with his work.   This was supposed to protect some level of protection for the consumer.  

When the contractor later presented us with the final bill, he said Home Depot no longer required a signed waiver & insisted on charging more than the original contract.  This was after he assured us in person and on the telephone about a week before that the costs would be less than the original contract estimate because some of the most expensive tasks on there (the paver stone walkway) could not be reset due to overly saturated soil after more than a week of July/Spring rains.   

The contractor's exaggeration and insistence on being paid more (for less work) and presenting a 2nd bill misled us into believing that Home Depot agreed with him and left us no recourse.   His comments indicated he had held us responsible for the lengthy rain delay to his work schedule, and also his own faulty estimate of the amount of materials needed for the job; these obviously were things beyond the homeowners' control.    To our amazement and chagrin, the Home Depot zone manager informed us in an Oct. 28th meeting with him & the owner of the parent company that Home Depot really had changed the policy (in mid job) & no longer required a signed waiver by the customer for the contractor to be paid.   However, we were never notified of that change by Home Depot after our job started; and that info was not stated on the homedepot.com webpage even into November.   For us, it's the first instance where a business has changed a policy retroactively and applied it to a customer with an already binding contract.

We also had asked (unsuccessfully) multiple times for a change order to be done by the contractor as the original contract language stipulated, and the contractor never did produce the change in the scope of work or adjusted costs as we requested although he promised that he would have his wife work up a new estimate.   He also did not have our permission to change the billing method for the work already done under the original contract or to continue the job without producing the above mentioned changes, although he did both.   We have a # of email notes documenting multiple requests for the change order which were done in person, emails, and in a telephone conversation.

We'd also like to point out that we told the contractor we would work with him in trying not to reduce the value of his original contract when he said the paving stones could not be reset because of the saturated soil.   He agreed to 'substitute' a couple of other tasks in lieu of the paver path work & said those would be of less value than resetting the paver stone walkway & would result in a small refund to the original contract.    Rather than considering that to be 'additional work',  it was agreed by both parties that it would be a substitute for the tasks he couldn't complete under the original contract.     

Since the complaint could not be resolved by the Home Depot zone manager assigned to our case, he finally bounced it back up to the corporate offices at the end of October. He did leave us a telephone message that the remaining issues would be fixed.  We sent 2 subsequent emails to the zone manager requesting contact info for the person who he mentioned as a contact at the corporate office and a status report on these above outstanding issues but did not get the courtesy of a reply.

After another 4 to 6 weeks of inaction/non-communication by Home Depot and extreme frustration on our part, we also reluctantly filed a complaint thru the Atlanta Office of the Better Business Bureau in December.   The Home Depot resolution specialist who replied showed no interest in communicating about this issue. Her reply to the BBB complaint showed that she didn't even know the specifics of the job, calling it 'tile purchase and installation', although she had been sent specific/detailed emails about the complaint.     Apparently, she didn't even read the notes, didn't know there still were 'outstanding issues',  & dismissed our concerns.     

We have tried since July to get siding that was damaged by the contractor replaced and misdirected seepage routed to the drainage swale down our fenceline per the surveyor's work, and that was before the artic weather arrived & left a 3 foot snowdrift beside our house.   Since they could not manage to fix these issues during almost 6 months of good weather,  it seems more likely that this Spring we'll have to find another company to fix the problems they left us.  

The one issue that was fixed by the parent company of the contractor required tearing out the unusable paver patio done by the first contractor and redoing it, although this parent company threatened to charge us for that redo when the owner discovered we had originally complained about being 'overcharged' & still wanted that 2nd charge refunded. 

We thought the parent company's redo of the patio was a much better quality job & complimented the owner prior to that meeting; however, even those paver stones now move underfoot when walked on since there was a problem with the plate vibrator normally used to 'set' the paver stones. Since the vibrator couldn't be used, this left the paver crew only with a push broom and water from our garden hose to accomplish that task.   Obviously, this does not feel like a stable installation & may even be dangerous; plus further research indicates that this method usually is only a temporary fix & requires additional attention down the road. 

With my bad back (at age 60), my wife attempted to fix some of the problems with the contractor's work in July when the misdirected seepage started flushing uncovered 'material' placed by the contractor into the rocks below the patio; it had begun to push our neighbor's back fence away from the fence posts.   Even with her arthritic hip, my wife spent almost an entire afternoon cleaning sand and recycled concrete out of the rocks from the slope in back of our home.    That apparently inflamed her moderately arthritic hip even more, and during her next medical visit her doctor informed us she needed hip replacement surgery which was performed on Jan 12th.

If the work done at our house had been of acceptable quality, we likely would have been more receptive to compromise; but we are extremely upset to have spent thousands of dollars (& more than originally budgeted) and to have been left with such extremely poor quality work and no confidence that it can be fixed by the same people who already have failed to do so for more than 6 months.

I have sincerely attempted to avoid criticism of Home Depot, as my wife & I both have been very satisfied customers for almost 20 years & spent thousands of dollars at their stores.  It makes me sad that this has turned into an adversarial relationship; however, with 20 years of trust destroyed in one business transaction & for a small disputed $ amount for Home Depot, it appears there is no longer a choice.  There are many other negative experiences we documented with this particular contractor, although we've never even mentioned a significant # of those to Home Depot.    

With all our very detailed notes (& digital photos of the poor quality work) made from each of our encounters with the contractor &  his employees (and our subsequent interaction with our local Home Depot store and their zone managers), we have found there are dozens of business webpages where one can post our still ongoing frustrations in attempting to resolve these issues.  Being retired, I do have lots of time to communicate with anyone who is interested in this company's issues but really don't wish to be a 20 year enemy of a company I used to admire; and it would be better for both parties if we could come to an amicable resolution of these issues.   However, I am putting together a webpage which will contain all the specifics of our experience at http://robanders1.googlepages.com/
It will be our hope that any information we decide to publish might save other potential Home Depot customers from a similar type experience and make something good come from such a negative experience.

[Kevin Carson]

chris,

Home Depot's "earnings" under Nardelli reflect common management practices like taking the most shortsighted, pennywise-poundfoolish costcutting measures to inflate short-term earnings at the expense of long-term productivity. It's commonly referred to as "starving" or "milking" an operation, otherwise known as eating the seed-corn. The prevalence of such management practices over the past thirty years is just one symptom of MBA disease.

"Would you prefer the economic programs in place in North Korea, Cuba, the Islamic theocracies of the middle east or Zimbabwe?"

Uh, I can't decide whether you're being stupid or disingenuous here. Do you really think the only two alternatives are American-style subsidized corporate capitalism, and Cuba? Uh, how about a free market? I mean a *real* free market, where big business operates on its own nickel without special state-enforced privileges and protections, not the kind of "free market" neoliberal politicians and journalists like to talk about. If the free market governed the price of all production inputs and distribution costs, and all business were forced to compete without "intellectual property" monopolies and regulatory cartelization, I imagine the economy would look a hell of a lot different. It might look less like McWorld, and more like Emilia-Romagna.

[arena]

Company Focus4/11/2007 12:01 AM ET

CEO mansions: A stock indicator?

When a company's chief buys a big estate, the stock is about to tank. At least that's what two university researchers say. Here's how the correlation works, and some rather startling examples.

By Michael Brush
Forget everything you've learned about picking stocks (for a minute, anyway).

Instead, keep your eyes on high-end real estate sales and what I'll call the CEO Home Purchase Indicator.

Here's the idea: Whenever chief executives spend like kings on palatial mansions, it's a good sign their stocks are about to hit the skids. Stock picks based on that theory and held for three years beat the market by an average 46%.

The logic goes something like this: CEOs willing to spend outrageous money on housing aren't concerned about their job security or a watchdog board of directors, meaning they may not be working as hard as shareholders would like.

That's according to recent research by finance professors David Yermack of New York University and Crocker Liu of Arizona State University, who recently examined the link between the size of CEO homes and stock performance.

Here are a few of the more stunning examples of how the imperial CEO Home Purchase Indicator could have helped you make money in the market.

A contrary indicator
Let's start with Power-One (PWER, news, msgs), which makes power-conversion devices for telecom equipment that helps power the Internet. Back in August 2000, Power-One's then-CEO, Steven Goldman, moved in to a luxurious 11,800-square-foot, six-bedroom, seven-bath home in Malibu, Calif., complete with a swimming pool.

The house, not too far from the company's Camarillo, Calif., offices, was recently assessed at $3.3 million, and it's on 1.2 acres recently valued at $13.2 million, according to HomeInfoMax, which helped me research home values for this column.

Power-One stock traded north of $86 a share the year its CEO moved into his Malibu mansion and closed out the year at $39.31, adjusted for splits. But by September 2001, the stock had sunk below $5.50.

Power-One writes it off as a coincidence, explained away by the Internet stock crash at the time. "I think everyone understands that in the 2001 time frame the whole market corrected because of the Internet bubble, and Power-One is one of the stocks that got hit hard," says Dave Hage, who handles investor relations for Power-One. "I think they were stretching in their research, but so be it."

But this indicator doesn't just work with busted dot-coms. You could have made as much as a 45% gain by shorting Hilton Hotels (HLT, news, msgs) in the late 1990s after Hilton's chief executive, Stephen Bollenbach, purchased a 12,854-square-foot house on 2.9 acres in Los Angeles. (By going short, investors sell a stock they do not own, hoping it declines so they can buy it back and replace it at a lower price in the future.)

David Perdue took the reins at retailer Dollar General (DG, news, msgs) in April 2003. By 2004 he was building a 9,890-square-foot, six-bedroom, seven-bath dream home in Nashville, near the company's Goodlettsville, Tenn., headquarters. The home was recently valued at $2 million and is nestled on $829,000 worth of land, according to Intelius, an online database.

The year Perdue's house was built, his company's shares traded in the high teens and low $20s, and finished the year at $20.27. The stock started off strong in 2005 but then went into a steady slide, falling to $12 a share by Aug. 30, 2006.

The opposite indicator applies as well, according to the study. There may be no better example than Warren Buffett, the chief of Berkshire Hathaway (BRK.A, news, msgs), who still lives in a house he bought for $31,500 in 1958 in an ordinary neighborhood of Omaha, Neb. Berkshire Hathaway's share price has advanced 34,820% since the start of 1980.

Fat, happy and well-housed
What's going on here? After all, you might think that a CEO buying a mansion near the home office is a reassuring sign of commitment to the company. Instead, Yermack believes the purchase is a signal that the top executive feels "entrenched" and unafraid that the board may write a pink slip for mediocre performance. That kind of boss is less likely to feel pressure to work hard, according to this theory.

"It gives you some insight into the CEO's mindset," Yermack says. "An entrenched CEO perceives himself as immune from discipline by his board and is uninterested in maintaining or improving his performance to attract outside offers."

Yermack and Liu define a CEO home as extravagant if it is 10,000 square feet or bigger, or if it is on an estate of 10 acres or more. The two, looking back at 35 years' worth of data, sold stocks short when companies' CEOs bought mansions and bought stocks of companies whose CEOs bought humbler abodes. Over time, they simulated shorting 23 stocks and purchasing 141 stocks. On average, positions they added beat the S&P 500 Index ($INX) by 15% in the six months after the stocks were shorted or purchased, by 29.2% after one year and by 46% after three years.

"There aren't many investment strategies that do that well," says Yermack. "It is shockingly large in terms of what you see in financial research."

Stocks also tend to do poorly when CEOs finance a home purchase partly by selling the company's stock, even if the selling is relatively small. Yermack speculates that CEOs may be using the home purchase as an alibi for selling stock, when they are really selling because they see bad news ahead for the company.

Heavy lifting
Though online databases such as Intelius and HomeInfoMax have extensive national records of real estate transactions -- all part of the public record -- it's not always easy to find the CEO home purchases. Yermack and Liu found home purchases for CEOs at most of the S&P 500 companies. But they had to do extensive sleuthing in voter registration records, employment contracts and political-contribution databases to nail down many transactions with certainty.

One thing to consider: The CEO Home Purchase Indicator could keep you out of stocks that do phenomenally well over the long term. FedEx (FDX, news, msgs) Chief Executive Frederick Smith purchased a 10,320-square-foot home on 11.75 acres in Memphis, Tenn., in August 1986. The home and land were recently assessed at $3.4 million, according to Intelius. FedEx stock traded for around $15 at the time, adjusted for splits and dividends. But then it slipped below $9 by early 1988, a significant fall. It didn't close above $15 again until September 1993. So far, so good. But since then, the stock has taken off, advancing eightfold to close above $120 earlier this year -- all on Smith's watch.

At the time of publication, Michael Brush did not own or control shares of any companies mentioned in this column.

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[mike]

I just have to ask after reading these boards. I feel sorry for the employees of home depot. The pay sound to be a tad on the low side. But once you get into decent pay you have to work 55 plus hours. I guess you cannot have a family, life, hobbies or anything else when you have to work that many hours. Do you know that the USA work there employees more hours then ANY country in the "free" world". That is a fact just research it. I do not understand why someone would want to throw away the best part of there life working so many hours. Have you guys looked into unions? I am not pushing a union or saying it is the best thing. I do know and it is a fact that unuion people tend to make an average of 34% more money. Just something to think about. And no a company cannot fire you for trying to get a unuion. If they do you will become very rich because it is against the law for any company to try to stop you from joining a unuion.. Do as you want it if your future and you only live once. Enjoy it with better wages and benifits.

Click here: Retail, Wholesale and Department Store Union (RWDSU)