The kingdom of the Golden Parachutes: California

As we are focusing on who is getting these golden parachutes, we should notify that there is a third group rising besides the top managers and the students. In California the spotlight is changing from the executives to the union-protected government workers, causing the companies to leave California and settle in less-restrictive and less-taxed areas like Texas and Arizona. It is only a natural consequence that this reallocation is causing unemployment, in times that the states’ pension fund is at the brink of bankruptcy.

Nevertheless we can’t forget the executives. Although the government workers are rising, the managers are still paying themselves way too much, living a luxurious life including sex and drugs. It looks like California is getting out of control, but if even the government workers are participating, who can stop this crazy behavior? Regular people are paying and losing too much, I think it won’t take too long anymore before they decide to protest against this money absorbing habit. (Dailycaller)

Corien Staels

New kind of golden parachutes?

Sometimes a new education reform idea comes out of the blue…this time its a very strange one. According to Mitch Daniels (Governor of Indiana, USA), students who graduate early should receive an amount of money…a golden parachute.

His idea is to give these ‘early graduated students’ the money that would have been spent on their education if they had stayed in school the full 12 years. Normally, schools spend approximately $5,865.78 per student each year. So when a student can graduate in less than 12 years, why not give the money to the student? He or she could use it very well to further his or her education.

These payments would give students an extra incentive to study hard in high school and go on to college, with a financial boost of the state helping them. But is this realistic? Isn’t this whole idea making education ‘a rat race’, in which each student has to graduate as fast as they can in order to get the most money?

Nicolas Pollet

http://www.nwitimes.com/news/opinion/editorial/article_d19e2d9c-7d2f-571f-b11e-be8969abf46a.html

Nothing wrong with golden parachutes for European Commissioners?

I would like to react on what Kevin said in his ‘European guidelines to end golden parachutes’ blog.

These ‘European guidelines’ to end golden parachutes that Kevin talked about, are very hypocrite. On the one hand, the European commission wants to implement restrictions on the remuneration of CEO’s. On the other hand, they don’t want to implement restrictions on their own ‘golden parachutes’.

European commissioners continue to receive a salary for 3 years… after they have left the European commission. Most of these European commissioners earn between €19.900 and €24.422 a month. After leaving the commission, each of them earns 40 to 65% of this wage…each year, 3 years long.

One of the reasons (according to the commission) is that this ‘golden parachute system’ has to ensure ‘the independence of commissioners’. Rather odd, especially because the EU would like to limit managers’ golden parachutes and force companies to take drastic measurements when the business runs into serious problems…

Nicolas Pollet

http://www.elsevier.nl/web/10228991/Nieuws/Europese-Unie/Brussel-Niets-mis-met-opstappremie-eurocommissaris.htm

Corporate Governance in question

What Corien writes about the new corporate governance guidelines the Belgian government has agreed on is true, but I would like to indicate some failures in the execution of the decree. Some people say the law can easily be avoided by giving a justification why you cannot, as a corporation, give any information about the remunerations in your company.

Also the free will off the companies who applied to the code Buysse and the code Lippens disappears, these laws were just for the companies who wanted to make a good impression, so the advantage these firms have had the past several years, disappears right before their eyes.

The new law applies just to the listed companies , only these have to be honest about their remuneration policy. Subsidiaries of listed corporations, as well as the not listed corporations still have the freedom to give all the bonuses and golden parachutes they want. Is this the situation the Belgian government want to achieve?

Kevin Rokegem

sources: jobat & express

The British version of 'Say-on-pay'

The predecessor of the Say-on-pay law in the US was the UK. The British version of the say-on-pay law has been required since 2002 (8 years before the US). But the UK struggles with the fact that this law has a limited effect in the negotiations with the top executives. Because in the debate you have two sides: the pro-shareholder side and the pro-management side,  both contradicting each other.

Andrew lund (a law professor) says that they have to change the focus , if they want to have a bigger effect on the pay package. He suggests that the shareholders have to vote on the pay package before the CEO is hired , because when you vote against someone he can take that as an insult. And  when someone is insulted ,ther’s a chance that his work will suffer. But here appears the same problem as before (two sides problem). I hope that these two sides find their golden way through this remuneration problem.

Bram T'Hooft

source: www.theconglomerate.org/2010/08/brett-mcdonnell-on-lunds-say-on-pay.html

New ‘say-on-pay’ law could temper ceo pay

According to Corien’s reaction on Kevin’s message, I wanted to know how America struggles with this kind of remuneration issue.  Starting in 2011, the SEC (Securities and Exchange commission) will give the institutional investors a vote on the remuneration package of top executives at the U.S. corporations. But the vote is non-binding and the companies aren’t obligated to follow the results of the voting. Although these weaknesses, the new ‘say-on-pay’ law is expected to have a great impact on the relations between top executives and the shareholders. (Because of the embarrassment if a company ignores the wishes of their  institutional investors .)

In addition of this new ‘say-on-pay’ law, the SEC made a controversial director election rule by giving shareholders the power to elect one or two director candidates onto corporate boards. This new rule provides the shareholders of  more power in behind-the-scenes negotiations with top executives (for a normal pay package). I look forward to see the results of these new guidelines at the end of 2011.

Bram T'Hooft

( www.marketwatch.com/story/new-say-on-pay-law-could-temper-ceo-pay-2010-08-26 )

The end of the golden parachute empire, or not?

Kevin talked about European guidelines to limit golden parachutes, in the mean while, Belgium is thinking about strict prohibition of these parachutes. Although many politicians have already announced they want a total prohibition of the famous golden parachutes, Belgian Parliament has not yet made any legislation what so ever. Are they afraid the financial top and other influential managers will turn against them?

Even though a new Corporate Governance Code for listed companies, which forces to include in every new contract with top managers the decision on severance pay, was presented, the golden parachutes still exist due to the lack of a new legislation. The code says that top managers have to specify that severance pay awarded when there’s an early termination of the contract should not be more than a twelve months’ remuneration.

The difference between the Corporate Governance Code and legislation is that the CGC is not obligatory; it just provides guidelines for listed companies what means the impact isn’t that big. Maybe if the European Union would define its guidelines, Belgium can step it up as well! (hg.org)

Corien Staels