How CEOs steal from your 401(k)

[Tyr]

The fat cats now keep almost 10% of profits for themselves, siphoning off money that could've boosted the share prices of the stocks you hold. And the worst of them may take much more

Did a gang of greedy CEOs make off with your 401(k)?

A surprising number of seasoned experts maintain they did -- or at least could be held responsible for a substantial amount of your losses.

Now, as the Obama administration attempts to rein in executive pay for companies that take tax dollars in bailouts, it's worth considering how that pay affects everyday investors trying to save for retirement. Pay's impact on profits

"CEOs look at public companies like personal ATMs," said Daniel Pedrotty, the director of the office of investment at the AFL-CIO, which represents members managing $300 billion in pension assets. "They (the companies) are machines from which they extract as much personal wealth as possible."


Pedrotty's comments may come off as union rhetoric, but Harvard law professor Lucian Bebchuk puts real dollars behind the claim. The top five officers at major U.S. public companies extracted roughly a half-trillion dollars in pay, stock and perks over the past 10 years, pocketing about 9% of average corporate profits.

That's up from about 5% of profits a decade earlier, Bebchuk said. And it doesn't include severance or retirement pay so rich that it can make a shareholder's eyes bleed. The problems:

• Executive largesse siphons off profits that could have raised share prices. Americans invest roughly two-thirds of their 401(k) savings in stocks, which trade at a multiple of profits. A company that earns $2.20 a share might sell for $22 -- or 10 times annual profits, a fairly average multiple.
  
  If executives took a smaller slice, profits would be higher, and it's fair to assume share prices and 401(k) totals would be higher as well, said Paul Hodgson, a senior analyst with The Corporate Library, a research firm in Maine. How much higher is impossible to say, but "it's significant," Hodgson said.

• Pay isn't tied to performance. Investors might forgive this if CEOs were being rewarded for raising profits. But that's often not how it works. Some of the most spectacular rewards of recent years went to CEOs of companies now near collapse. (See "As banks broke down, CEOs cashed in.")
  
  With performance falling through the floor, Bebchuk is scrambling to update his pay-versus-profit figures to see just how badly shareholders are being savaged. He suspects that the percentage of profits going to CEO paychecks has soared as the bear market and recession have shredded bottom lines.

• Wild pay encourages bad behavior. Many watchdogs contend the lure of big paydays is part of what led bank and brokerage CEOs to encourage excessive risk taking, one of the causes of today's mortgage market meltdown. The resulting bear market has cost retirement savers $2 trillion and counting, The Wall Street Journal reports.

 

[petros]

This "bail out" is the biggest scam in history.

 

[CanadianLove]

I'd like to know who has all the money. The Oil Companies? The group the owns the World Banks? It would be safe to say that they are the ones who caused the collapse by cashing out of the markets at the high. Then they start the up and down, sell and buy, money making game until the system was drained.

Who is really in control of our world's funds.

And I will have to assume here that they have something to do with Bush, as they inflated the markets, and got their money out, all on his watch.
:idea: Goerge is gone as well as all the money. :idea:

 

[Tyr]

I'd like to know who has all the money. The Oil Companies? The group the owns the World Banks? It would be safe to say that they are the ones who caused the collapse by cashing out of the markets at the high. Then they start the up and down, sell and buy, money making game until the system was drained.

Who is really in control of our world's funds.

And I will have to assume here that they have something to do with Bush, as they inflated the markets, and got their money out, all on his watch.
:idea: Goerge is gone as well as all the money. :idea:

I'd like to know who has all the money.

In Canada, it would be every riding the elected a Conservative MP. Truely a "have" and "have-not" situation

 

[CanadianLove]

Global losses reach $50 trillion, report finds

Updated Mon. Mar. 9 2009 7:48 AM ET
The Associated Press

MANILA, Philippines -- The global crisis wiped a staggering US$50 trillion off the value of financial assets last year including $9.6 trillion of losses in developing Asia alone, the Asian Development Bank said Monday.

"This is by far the most serious crisis to hit the world economy since the Great Depression," said ADB President Haruhiko Kuroda. But he predicted Asia would be "one of the first regions to emerge from it."

In a study commissioned by the Manila-based lender on the impact of the financial crisis on emerging economies, it estimated the value of financial assets worldwide -- currency, equity and bond markets -- to have dropped by $50 trillion in 2008.

It said developing Asia was hit harder -- losing the equivalent of just over one year's worth of gross domestic product -- than other emerging economies because the region has expanded much more rapidly.

In Latin America, losses were estimated at $2.1 trillion.

According to the study, the figures provide clear proof of the close connections between markets and economies around the world, leaving few, if any, countries immune to financial or economic fallout. A recovery can only now be envisaged for late 2009 or early 2010, it said.

A sprawling region, developing Asia includes 44 economies from the central Asian republics to China to the Pacific islands. The bank had earlier projected the region's growth to slow to 5.8 per cent this year from an estimated 6.9 per cent last year.

The worldwide downturn has hit export-driven economies particularly hard. From South Korea to Taiwan to Singapore, exports have plunged by double digits in recent months as American and European consumers spent less on cars and gadgets.

Kuroda said Monday the impact of the crisis could result in a spike in unemployment, slower growth rates and depressed stock markets.

Tight liquidity and credit could also hit small and medium enterprises, while a drop in remittances from overseas workers, which has been fueling domestic consumption in countries like the Philippines and Indonesia, could remove important social safety nets, Kuroda said.

He said the ADB has responded by stepping up access to loans, grants and credit guarantees by several billion dollars from the originally planned $12 billion for 2009.

CTV.ca | Global losses reach $50 trillion, report finds

 

[CanadianLove]

The Real Scandal of AIG

The real scandal of AIG isn't just that American taxpayers have so far committed $170 billion to the giant insurer because it is thought to be too big to fail -- the most money ever funneled to a single company by a government since the dawn of capitalism -- nor even that AIG's notoriously failing executives, at the very unit responsible for the catastrophic credit-default swaps at the very center of the debacle -- are planning to give themselves $100 million in bonuses. It's that even at this late date, even in a new administration dedicated to doing it all differently, Americans still have so little say over what is happening with our money.

 

[Kreskin]

The board of directors pay the CEO's. I have not heard one iota of criticism directed at those who actually writes the cheques. The CEO's are the recipients, not the cheque writers.

 

[Dexter Sinister]

The bonuses are probably contractual obligations that pre-date the meltdown. Not that that excuses anything, it just explains it, and clearly there were no serious performance clauses in those contracts. It's just a tax and accounting trick to pay the executives vast sums without them appearing as salary figures on the company's books or the executives' personal incomes. Salaries, dividends, and bonuses probably have very different tax implications for both payer and receiver. If they had any personal ethics, they'd refuse the money.

 

[Said1]

The Real Scandal of AIG



The real scandal of AIG isn't just that American taxpayers have so far committed $170 billion to the giant insurer because it is thought to be too big to fail -- the most money ever funneled to a single company by a government since the dawn of capitalism -- nor even that AIG's notoriously failing executives, at the very unit responsible for the catastrophic credit-default swaps at the very center of the debacle -- are planning to give themselves $100 million in bonuses. It's that even at this late date, even in a new administration dedicated to doing it all differently, Americans still have so little say over what is happening with our money.

Most of the CDS AIG (and other firms) sold derived their value from sub-prime mortgage backed securities. That is, third parties bet in favour of people defaulting on their loans! The share of CDS obligations alone is 2 trillion - I think their total value was is in the double digits trillions or that might be combined CDS and CDOs - alot of bananas, no matter who you look at it.

Who said CDSs are like weapons of mass destruction?