Otsog

The latest figures tell us that American executives make more than foreigners, media titans make more than oilmen, and none of it makes much sense. http://www.slate.com/articles/business/moneybox/2013/07/american_ceo_pay_u_s_executives_are_paid_way_more_than_foreigners.html?wpisrc=nl_wonk_b It’s not exactly news that CEOs of big companies get paid a lot of money. And everyone knows that the pay gap between the big executives and the average Joe has been growing. The surprise revealed in a great new database of executive compensation—compiled by Equilar on behalf of the New York Times and covering U.S. firms with more than $1 billion in revenue—is the striking lack of method to the madness: America’s CEOs are paid a lot largely because other American CEOs are also paid a lot. (Database link: http://www.nytimes.com/interactive/2013/06/30/business/executive-compensation-tables.html?ref=business&_r=0 ) Philippe Dauman of Viacom, for example, is a very rich man—which is what you’d assume about the CEO of a major media firm, with the 100th highest amount of revenue of any publicly traded American company. Dauman brought in $33.4 million in salary, bonuses, perks, stock, and options in 2012. Nice work if you can get it. But then again, there’s Leslie Moonves of CBS. He’s also a very rich man. Given Dauman’s wealth, that’s exactly what you’d expect of the CEO of another large American media company. What you might not expect is that, even though Moonves’ firm is just two spots ahead of Dauman’s on the revenue rank order, Moonves made nearly twice what Dauman did last year: $60.3 million. Lurking between Moonves and Dauman on the executive pay list is Disney’s Robert Iger, who brought in $37.1 million in 2012. Disney, which is more than twice as big as CBS or Viacom, had $42.3 billion in 2012 revenue, and its stock did better than the other companies in 2012, too. So is Iger underpaid? Or perhaps Moonves is overpaid? Nobody knows. It would be wrong to say that compensation for America’s chief executives is handed out randomly, but there’s certainly no clear link to corporate performance, and even the link to corporate size is surprisingly vague. But there are patterns. Despite the seemingly scattershot nature of the pay packages for Dauman, Moonves, and Iger, the one thing they have in common is that they’re all very well-paid—not just compared to the average American, but compared to the average CEO. And that’s the case throughout the media industry, where executive pay is high compared to what you see in other sectors. This reflects the fact that nobody really knows how to judge a CEO’s worth. Since the executive is hired by a board of directors that’s theoretically accountable to a company’s shareholders, it seems like CEO pay should have something to do with stock price. But nobody wants a CEO to focus exclusively on short-term stock issues and ignore the firm’s long-term strategic position. And even if you do focus on share prices, what’s the relevant issue? Absolute return? Returns relative to the market as a whole? Returns relative to the sector? Tim Cook’s compensation at Apple was recently restructured to emphasize Apple’s share price relative to the S&P 500, which in some ways hitches him less to how well Apple fares against its competition than to how investors view the technology sector as a whole. There’s enough ambiguity that you could argue a given case in many different ways. In practice, norms tend to dominate. Media CEOs are very highly paid because so are other media CEOs. Nationality matters, too. On the one hand, it might seem strange that John Watson of oil giant Chevron was paid “only” $22.3 million in 2012—less than the CEOs of CBS or Viacom, even though his company is much bigger than either. On the other hand, compare Watson to the CEO of the similarly sized French oil giant Total S.A.: poor Christophe de Margerie earned a mere $3 million in 2011 (the most recent year for which numbers are available). That same year, Watson brought home $18.1 million. The reason for this is both mysterious and epically clear—American chief executives are systematically better paid than CEOs from continental Europe or Japan. CEOs of U.K., Canadian, and other Anglophone firms tend to earn at close to American levels. These kind of local differences matter so much because, as Ray Fisman has explained for Slate, executive compensation decisions are typically made by peer group comparisons. Media CEOs are compared to other media CEOs and oil executives to other oilmen. American executives argue—conveniently enough—that their compensation should be compared to what other American executives are paid. This argument has tended to be persuasive to American boards, which—conveniently enough—are made up primarily of American corporate executives. And big American investment management firms—also led by American corporate executives—likewise think this makes sense. Which is all quite nice, but if you tried convincing one of these very same executives that he shouldn’t replace an American factory worker with a cheaper Chinese one, he would laugh you out of the room. Apologists for this arrangement, such as the University of Chicago’s Steven Kaplan, argue that pay for U.S. CEOs has merely risen in line with pay for other kinds of very highly compensated individuals. Others dispute this math, but one might also dispute its relevance. It is true to some extent that America’s unusually well-paid CEOs are matched by an unusually large and aggressive financial sector and an unusually lucrative legal profession. Compared to the United States, continental Europe and Japan rely much less on lawsuits and much more on preventative regulation. They’re also much less gung-ho about the nonbank financial institutions—hedge funds and private equity shops—that provide for a very large share of the non-CEO element of the superrich. But the thought that American executives need to be paid more than German ones because America also has more superrich hedge-fund managers does not provide me with enormous comfort. At best, this argument would prove that we should add skyrocketing CEO pay to the list of social ills exacerbated by an inadequately regulated American banking system. Meanwhile, nobody is going to be crying for the poor oil executives, but the huge and seemingly nonsensical gaps between CEOs of one company and another should give us pause. Executives are compensated lavishly but arbitrarily, and there’s no end in sight to the upward trajectory.

My top position is 228% of my portfolio :D Good thing I am a 20 something and it's all my money. Somehow I still tell myself I'm conservative.

Hey Canadians, Would you consider Sun Media products a competing daily paper? I honestly have never read one regularly and was curious about the strength of their local coverage. For example, would you say the Ottawa Citizen meets requirement #1 of Buffett (below)? Or does the presence of the Ottawa Sun make Ottawa not an appropriate city for Newspaper investment? Ottawa Citizen circulation: 113,859 weekdays Ottawa Sun circulation: 45,442 weekdays

Meditation (not joking)

Looks like this is his legit account. First review from '99. 45 5-star reviews and 3 4-star reviews. So, basically a comprehensive list of Taleb's 48 favourite books over the past 15 years. http://www.amazon.com/gp/cdp/member-reviews/A3V94HTDKTOY1O?ie=UTF8&display=public&page=1&sort_by=MostRecentReview

What a thrilling start to the finals! Some great comments from my facebook feed today: - Hey Canucks, I hope you're taking notes on the way hockey is supposed to be played. What a great, GREAT game. - (comment on above) You know I was thinking the same thing. And also what would we have to trade to get that guy, that guy & that guy.

Mobile homes

It is a sobering thought that you could have lost money investing in Coke over a decade long holding despite consistent profit growth over that period. Also, hypothetical companies are not in my circle of competence. Option c: put the money under my mattress

Happy Birthday Tim!

Holy crap whoops. Didn't realize that initial link had a reference code in it. Sorry.

[amazonsearch]Manage Your Day-to-Day: Build Your Routine, Find Your Focus, and Sharpen Your Creative Mind[/amazonsearch] Seems a bit more pop-business/science than serious read, but sounds pretty interesting.

Straw man. http://farm4.staticflickr.com/3699/8815760610_bc28e74bbb.jpg I'm not sure I understand this point, productivity gains are always above 0%. Is an argument against the economic benefits of the printing press also an argument against the economic benefits of a literate society and intellectual discourse?

Would you guys consider the Age of Enlightenment innovation? Or would it always have to be prefaced as 'cultural' innovation?

http://cdn1.globalissues.org/i/poverty/wdi-2008/poverty-levels-over-time.png Boo-hoo we haven't spent an obscene amount of money to retrieve some useless rocks from a really far away place in a long time #firstworldproblems (I think space exploration is a net benefit to society and a great investment of public funds, snideness solely used for hyperbolic counterpoint)

They are municipal employees so I'm going to go with Hanlon's razor ;) Never attribute to malice that which is adequately explained by stupidity.

Wow. Great read. Just did all 5 parts straight.

As a Montreal fan this is a truly terrible day. I do have more Bruins in my pool though... *sigh* Go Bruins

I discovered /r/securityanalysis before here. It is a great sub. Beren and currygoat do an excellent job of providing a good flow of high quality information. For a laugh I sometimes go to /r/investing , it is a silly place.

Short Elon Musk Also, a similar thought would be brought up on the 2+2 forums when someone would bitch about poker being all luck: 'There's a quick and easy way to test whether an activity involves skill; ask whether you can lose on purpose. In games of skill, it's clear that you can lose intentionally but when playing roulette or the lottery you can't lose on purpose.' Which is actually a Michael Mauboussin quote.

Thanks, that was great.

HGTV, BNN both have a ton of shows online through their websites. CBC is great for live streaming games. Not sure on SportsNet or TSN alternatives. You can buy a package through NHL.com. But when I looked into that a couple years ago it was too expensive. May be worth it now. I found the same thing with other sports too. EPL and Rugby would have cost ~$30/month on their own. For now I get by with http://atdhe.eu/ for streaming sports and acrossthetasman.com for torrenting rugby games. Had a great stream from Sky Sports for the Masters, the British commercials were hilariously bad.

At least Greenspan will find his mistake after his advice leads to ruin. http://img3.allvoices.com/thumbs/image/609/480/21658917-alan-greenspan.jpg

lol http://i.imgur.com/vzgWfCn.png http://bitcoinity.org/markets

I am kind of shocked how terrible the conversion rules are. I did just assume they were only clawing back your initial deductions and not treating the whole thing as a withdrawal. Sorry about that, I could have saved each of us a bit of typing time if I hadn't jumped to conclusions. I understand that you will be taxed twice if you die/divorce. That sucks man. That seems to be a huge flaw in the structure of the IRA's. However, our disagreement did start over a statement by me that is still 100% accurate. The context of my post was in regards to the IRA's being tax breaks. Investment income earned in a ROTH IRA is a 100% tax credit. Just because the conversions rules are crap doesn't change that. You didn't have to convert and that is not the only way to contribute.

First, you write: I've explained the tax paid at conversion was recapture on a deduction you already took. Let me explain: The account was originally all IRA. Then it was converted to Roth IRA. This is the order of operations argument: I paid 35% tax at conversion, but all other things being equal it would have been a 35% tax later on. Normally people say that's a wash -- due to the order of operations. You withdraw money from the account early to pay the tax at conversion. This money would have grown at the speed of the account otherwise and would have been there to settle the account bill in full at a later date had I never done the Roth conversion. However the way I did mine is instead of withdrawing money from the account to settle the conversion bill, I kept it all in there and used my already-taxed money to pay the bill. Most people though don't do it that way and they withdraw a little from the IRA to cover the conversion tax. So that's why your argument isn't valid -- I took the added risk of potentially being taxed yet again if I die early or go through divorce. Not only taxed twice (killing the order of operations argument), but also losing other things like the step-up in basis. The growth of the tax paid would not have been stunted by early tax bill settlement. So the guy with a Regular IRA who never paid any of the tax bill early is the one you are talking about -- he is not being taxed twice. But the RothIRA guy, following the order of operations argument, merely payed the entire tax bill upfront rather than later. And now he gets taxed a second time if you die early, get divorced, or if Obama makes you withdraw the gains early because it exceeds $3m. Then you write: I guess you are conceding by changing the subject? Oh, yeah, like talking about the risks of the RothIRA is changing the subject when you want to keep the topic about "100%" tax credit certainties right? Well, your 100% tax credit certainty is a straw man that I'm battling with. It's a myth -- there are no certainties. I try to explain that to you and you are claiming foul. You weren't even aware of those death & divorce rules, and that's why you were "100% certain". There isn't any 100% certainty. There's just the rules as they are, and there's trying to explain them to you. Still waiting for a reasonable argument against what I actually wrote.