Tuesday, January 08, 2008

They're all peddling change, all of a sudden

No man will work for your interests unless they are his.
Share With Friends Seabury, David


American presidential candidates are peddling change, all of a sudden. Obviously copying a successful forumla started by Barack Obama.

On one level, it doesn't matter who wins the damn election. Obama is probably the least wealthy of all those running, and he is a millionaire (albeit just barely).

As a Christian, my thoughts turn to the poor. And then they turn to the ways that companies use financial incentives to produce performance. Stock options sharply reduce the downside, but they may encourage unnecessary risk, and are dilutive to existing investors. Restricted stock grants work better. But lately we've seen disgraced executives who leave actually getting their grants vested immediately. Some companies that hire a CEO away compensate them for their 'lost' stock options or grants, thereby rendering meaningless the restricted nature of the grants.

On the other hand, if done well, option or stock grants can be very effective. American Express recently got some good press for intelligently structuring a stock option grant to their CEO.

Now, what will it take to get our elected officials to produce policies that will meaningfully assist the nation's poor? They increase their salaries and grant themselves benefits, and yet the income of the poor remains flat.

Perhaps we should tie any increases in our leaders' pay to the increase in incomes of the bottom 5% of all wage earners. Maybe that would be a start. If the bottom 5% have wages that remain flat with inflation, our leaders get no pay raises!

1 comment:

susankay said...

Like that