ResourceWise

Outlandish CEO Pay: How to Fix the Problem

It is reasonable to be angered by these examples where CEO pay is clearly unrelated to performance. However there is no silver bullet (e.g. CEO pay caps) that can prevent future melt downs of the markets. Reform is needed across all aspects of the market. Some of the many areas to examine:

1. Establish a clear link between pay and performance for all employees not just CEOs, where performance covers short term results as well as the actions taken to protect the longer term health of the franchise. Pay variable compensation i.e. bonuses based on net income not on revenues.
2. Risk rate revenues and treat the higher risk revenues to higher capital requirements.
3. Separate customer funds from bank funds (revive some form of the Glass Steagall Act, 1933).
4. Examine the social usefulness of activities that take place in the financial markets e.g. short selling, spread betting, high frequency trading, and tax arbitrage. Ban those activities that can cause harm to others.
5. Examine product structures that enable banks to profit from risk taking and pass on all risk to third parties (e.g. to customers, counter parties and tax payers). The cost of risk needs to be fully borne by the originator of the transaction and should not be passed on to other market participants without their specific agreement.
6. Bring all market participants (e.g. banks, hedge funds, private equity funds, insurance cos. etc) onto the same level playing field - with clearly marked boundaries, switch the lights on and let the games begin – in full sight of the regulators.
7. Simplify regulations, consolidate regulators and provide them with massive teeth.
8. Restrict gambling to clearly designated and regulated casinos – not the stock/bond/currency/co... markets.

It is clear to even a casual observer that many aspects of the current markets need substantial redesign. Let’s do that instead of demonising individuals who have just tried to take advantage of a crooked table with loaded dice.

Jim Rogers: It's Better To Let Financials Fail

User366653 has taken the trouble to spell out an overview of his plan, so should be lauded for it - whether one agrees with every detail or not. Other commentators need to move beyond slogans e.g. nationalize, wipe out existing shareholders, moral hazard, etc and should actually explain how their plan will work, what risks it would mitigate and what the long term prognosis will be.

Fear and Greed: Premise for Capitulation and Overreaction

The financial markets must serve society in a manner that minimizes the chances of an economic Chernobyl. In its current form the markets are a collection of camouflaged time bombs that can be triggered off by any intelligent fool that has access to it – including the hedge funds and private equity funds that aren’t regulated but can play in the market and destroy value to create wealth for themselves. Their licence to steal needs to be revoked. There is a huge ocean of debt (estimated by some at $7.5 Trillion!) whose toxicity is still unknown. Unfortunately the same players and entities that are center stage in the bailout are now being empowered by society to fix the problem. I think the rules of the game need to be re-written and brutally enforced so that greed can be tempered by fear, rather than feeding on it.

Stale Ideas Killed AIG, Lehman

When board members and CEOs fail to recognize problems facing their company - it is either hubris or laziness. If they understood their role as the trustees of shareholder wealth they would behave differently i.e. look at problems with open eyes and listen for solutions with open years. Employees at all levels within such organizations have ideas and solutions that never see the light of day - because most senior management live in a bubble, which when it bursts releases them to float away on their golden parachutes.