America's fastest dying cities

[Tris]

Canton, Cleveland, Dayton, Youngstown -- GoGo Ohio
Detroit and Flint Michigan
Charleston, WV -- In some ways really surprised at that one, with the massive DuPont chemicals plant on the river


The pictures at:
http://www.forbes.com/2008/08/04/economy-o...thisSpeed=15000

Pretty much say it all, particularly for Youngstown (Been there seen that, just never got to the back side of that old plant seen in the distance). Of all the pictures in the list, the Youngstown is theonly one that truly captures the despair of the area. The Cleveland one comes close, but no where near the Youngstown one.

[--Pete]

Hi,

http://www.forbes.com/2008/08/04/economy-o...thisSpeed=15000

Man, I hate that site. I'm fully capable of clicking 'next' when I want to see the next page. I don't need some arrogant software to do it for me.

As to the story; yeah, so what? We've got leaders who think locally in a global economy. Is there any surprise we can't compete? And the average American drives a Toyota but gets a good feeling from his 'Buy American' bumper sticker. Patriotism is OK, as long as it doesn't cost anything.

We pissed away our heavy industries in the '60s and '70s. Didn't learn a damned thing from that. We lost our light industries gradually over the second half of the last century. Didn't learn anything from that, either. We've been shipping a lot of our commercial jobs overseas. Not learning much from that as far as I can tell.

As long as we have trade agreements in place that allows countries that rape the environment and exploit their workers to compete with the rules bound American industries, for that long we'll continue to lose jobs. But any politician that tries to fix the problem will get crucified because he'll cost us some of our precious money. And that, in the final analysis, appears to be all that matters to the average twenty-first century American.

--Pete

[eppie]

Hi,
Man, I hate that site. I'm fully capable of clicking 'next' when I want to see the next page. I don't need some arrogant software to do it for me.

Hahaha, indeed, it was interesting though.

As to the story; yeah, so what? We've got leaders who think locally in a global economy. Is there any surprise we can't compete? And the average American drives a Toyota but gets a good feeling from his 'Buy American' bumper sticker. Patriotism is OK, as long as it doesn't cost anything.

We pissed away our heavy industries in the '60s and '70s. Didn't learn a damned thing from that. We lost our light industries gradually over the second half of the last century. Didn't learn anything from that, either. We've been shipping a lot of our commercial jobs overseas. Not learning much from that as far as I can tell.

As long as we have trade agreements in place that allows countries that rape the environment and exploit their workers to compete with the rules bound American industries, for that long we'll continue to lose jobs. But any politician that tries to fix the problem will get crucified because he'll cost us some of our precious money. And that, in the final analysis, appears to be all that matters to the average twenty-first century American.

--Pete

Well this is inherent to capitalism. There is no way you can get cheap things that are made at home in a rich nation. Rich nations that want to stay innovative need to invest a lot of money, and usually have a high tax rate (like in Sweden) or get money in another way (Switzerland). If you want to keep your big multinationals profitable you need to allow them to close their factories and let them reopen them in Asia or so.
I don't see who is there (personally) to blame for 'pissing away' your heavy industries.
Your comment about 'countries that rape the environment and exploit their workers' I don't really understand. First when countries (say china) gets richer they will change their workers and environment laws and second, the difference in salary is so huge that the don't have to put in effort to stay competitive.

[--Pete]

Hi,

I don't see who is there (personally) to blame for 'pissing away' your heavy industries.

A number of factors, but check out the labor disputes of the '50s and '60s. Not a year went by that the steel workers, or the auto workers, or the teamsters, or some other group wasn't on strike for higher wages and more benefits. These were not oppressed workers, they were some of the best compensated employees in the nation. Especially considering the entry level skills required (nearly nothing). Add to the high cost of labor the expenses of meeting safety requirements to make the plants safe for idiots and then later (late '60 and '70s) the ever growing environmental requirements. The paper work alone was enough to make US made steel uncompetitive in the world, and even in the US, market. Meanwhile, as the US government added direct and indirect taxes to the US industries, it was helping the Europeans and Japanese 'rebuild', in effect subsidizing their modernization and greatly adding to their competitiveness.

Your comment about 'countries that rape the environment and exploit their workers' I don't really understand. First when countries (say china) gets richer they will change their workers and environment laws and second, the difference in salary is so huge that the don't have to put in effort to stay competitive.

Think it through. For example: China builds a steel industry. They have no laws protecting the environment or don't enforce the laws they have. They skimp on the expenses to get anything beyond the barest safety measures. The working conditions are unhealthy, stressing the minds and bodies of the workers. The workers receive a compensation enabling them to live only a very poor life. The government does not tax the steel industry and perhaps even subsidizes it. Net result, Chinese steel is vastly cheaper than any other, and the steel industries in all other countries (unless socialized) shut down. THEN! China gets richer, the unbalances are partially rectified. But in the meanwhile, the Chinese steel industry has existed all along and continues to exist. That of every other country is long shut down. To reopen and rebuild or modernize those plants is too expensive to be practical. Thus, that industry is lost 'forever' to the other countries.

Yes, some country behind China on the modernization curve can then do the same to China. However, that does not get the industry back into the original 'industrial' nations. And while the process is going on, the air, the land, and the sea are all being destroyed by pollution.

Do you understand now?

--Pete

[eppie]

Hi,
Think it through. For example: China builds a steel industry. They have no laws protecting the environment or don't enforce the laws they have. They skimp on the expenses to get anything beyond the barest safety measures. The working conditions are unhealthy, stressing the minds and bodies of the workers. The workers receive a compensation enabling them to live only a very poor life. The government does not tax the steel industry and perhaps even subsidizes it. Net result, Chinese steel is vastly cheaper than any other, and the steel industries in all other countries (unless socialized) shut down. THEN! China gets richer, the unbalances are partially rectified. But in the meanwhile, the Chinese steel industry has existed all along and continues to exist. That of every other country is long shut down. To reopen and rebuild or modernize those plants is too expensive to be practical. Thus, that industry is lost 'forever' to the other countries.

Yes, some country behind China on the modernization curve can then do the same to China. However, that does not get the industry back into the original 'industrial' nations. And while the process is going on, the air, the land, and the sea are all being destroyed by pollution.

Do you understand now?

--Pete

Of course this happens, and of course I understand, but that is (even without trading restrictions) still capitalism at it simplest. You cannot expect a country that is changing so fast and has such an economic growth to directly work with the same standards of workers rights than we have. When a country gets richer, people get richer and richer people want better rights....this is how things change.

Even when a country would be able to start producing and directly conforming to all standards it would be able to produce for a fraction of what you can in the US.......just look at the price of a kilo of rice in different countries. In the end 'ideally' (according to capitalism) this would result in a global redistribution of wealth.
And if you are in one of the richer countries....that means that at least your relative wealth will decrease.
Anyway for you in the US the problems are far less then e.g. in A small country like Holland. We will not have enough space and natural resources to support our population with food and goods.

[Den]

Pete pretty much summed it up. Our own cheapness was the downfall of American Industry.

Besides, you couldn't pay me to live within 500 (maybe 1000?) miles of Chicago.

[kandrathe]

Of course this happens, and of course I understand, but that is (even without trading restrictions) still capitalism at it simplest. You cannot expect a country that is changing so fast and has such an economic growth to directly work with the same standards of workers rights than we have. When a country gets richer, people get richer and richer people want better rights....this is how things change.

Even when a country would be able to start producing and directly conforming to all standards it would be able to produce for a fraction of what you can in the US.......just look at the price of a kilo of rice in different countries. In the end 'ideally' (according to capitalism) this would result in a global redistribution of wealth.
And if you are in one of the richer countries....that means that at least your relative wealth will decrease.
Anyway for you in the US the problems are far less then e.g. in A small country like Holland. We will not have enough space and natural resources to support our population with food and goods.

There are many factors at play.

The first has been discussed, that of internationalization. For whatever reasons (labor, environmental, tax laws), it is cheaper to buy some components/commodities from overseas, and ship them back to the US than to mine/make the materials here.

Another, is production efficiency. The total number of industrial jobs world wide is dropping, due to technological and process advances in manufacturing. We can do more with fewer people.

Another, is materials sciences. We no longer rely on steel for fabrication as we once did. Automobiles are being constructed with a mix of various metal, and non-metal composites. So, ecological effects on the steel industry include regulating smoke stacks, but also CAFE standards in reducing the weights of vehicles.

Need to run, so I'll add more later.

[Occhidiangela]

Hi,
We pissed away our heavy industries in the '60s and '70s. Didn't learn a damned thing from that. We lost our light industries gradually over the second half of the last century. Didn't learn anything from that, either. We've been shipping a lot of our commercial jobs overseas. Not learning much from that as far as I can tell.

When I lived in Italy, there was a monthly strike by workers at a steel plant that had been closed for a decade, and whose heavy equipment was being shipped to China monthly, on ships that pulled into Pozzuoli harbor.

Americans aren't the only fools in the global market.

Occhi

[kandrathe]

When I lived in Italy, there was a monthly strike by workers at a steel plant that had been closed for a decade, and whose heavy equipment was being shipped to China monthly, on ships that pulled into Pozzuoli harbor.

Americans aren't the only fools in the global market.

Occhi

Yes, a local strike is meaningless in a global market. At the other end of the spectrum, how many open H1B visas does the US have to import foreign white collar workers? The US is pretty well known for brain drain in science and engineering. There are some exceptions, like embryonic cell biology, and nuclear physics. Much of the problems in Ohio, Michigan, and the exa-burbs of Chicago are due to a lack of diversification in their economies. In my locality, Minnesota, our government has conciously recruited diverse industries to offset the losses of northern Minnesota iron mining shut down. Minnesota could be a real "economic Mecca" if it weren't for the unusually high corporate taxes here that tempt companies to relocate. We have most everything else a burgeoning company would need to be successful. Our cold winters and hot summers scare away the faint of heart, and gold brickers. BTW, Arizona and Nevada are #1 and #2 for state growth in GDP, which mirrors their population growth.

For our international friends, I like this map. :) I guess it has some inaccuracies, but it punctuates the sheer size of the US economy.

[Kevin]

For our international friends, I like this map. :) I guess it has some inaccuracies, but it punctuates the sheer size of the US economy.

Yeah it doesn't quite match when I do some table matching between https://www.cia.govbrary/publications/th...r/2001rank.html (for the world) and http://en.wikipedia.org/wiki/List_of_U.S._...P_%28nominal%29 for the states (I couldn't find a better source for the states, I'm not a huge fan of relying on wikipedia but I had issues getting the BEA stuff to display nicely and it was easy to verify the wiki info).

But yeah it does show the stupid size of the US economy, though I do like how the CIA fact book lists the European Union as a single entity in it's rankings to get a good comparison there and it makes sense to rank all the countries that do accept the Euro clumped like that. The individual countries are still listed, so it does mean you have to subtract 2 from all the numbers to get the 'real' ranking since the world and the EU are in the list.

[eppie]

For our international friends, I like this map. :) I guess it has some inaccuracies, but it punctuates the sheer size of the US economy.

I am Pennsylvania....yeeeeeeeee.

As I said before, what is happening is nothing strange. The other possibility would be no labour laws and no environmental laws.....well I rather work in a country that has these.
I mean if minimum wage does not exist anymore for sure you will get inflation, house prices will tumble (even more) nobody will be able to afford a car (not even one from asia) etc.
A rich country just needs to stay innovative and makes sure to do the right investments. Referring to the energy thread, if a country like Holland wants to ensure a hassle free future, we need to make sure that we can produce our own energy. Maybe wind and sun are more expensive now, but when our oil and gas are gone....we'd better have something in place.
For the US (and western europe), as I said before our wealth especially relatively will decrease, it is up to us to make the increase of wealth in other countries (which gives us a much better market to buy our stuff) not at the cost of our own wealth. A city that gets deserted is just an insignificant thing (except for people that live there of course). Still with lower ground and house prices in a while companies might settle there again, who knows.

[kandrathe]

I am Pennsylvania....yeeeeeeeee.

Pennsylvania Dutch!

As I said before, what is happening is nothing strange. The other possibility would be no labour laws and no environmental laws.....well I rather work in a country that has these.

Right, this is how industrialism started even in Britain and the US. Child labor, unsafe conditions, open sewage waste, raping the land of resources, etc.

I mean if minimum wage does not exist anymore for sure you will get inflation, house prices will tumble (even more) nobody will be able to afford a car (not even one from asia) etc.

Ok, you lost me. Wages are a factor of supply and demand, and in this case it is people skilled in the desired craft. If you have a shortage of skilled labor, the wages go up. In some countries like India, there are few curbs on population growth so in a way its like each birth is devaluing the labor pool. House prices are also a factor of supply and demand. The problem we have in the US currently is that the quasi government institution of Fannie Mae and Freddy Mac pressured banks to underwrite loans that were likely to default. This made the lending market skittish, and froze the available money for lending. Voila! Can't sell the house, and can't borrow to build new ones, so the bubble pops, housing market stalls and values descend. It was a problem of liquidity, and over pricing. It goes to show that when government gets involved they can muck up just about anything.

A rich country just needs to stay innovative and makes sure to do the right investments.

Well, countries are no longer rich compared to the citizens who live in them. Wealth is really very ethereal for those who have much of it as it is tied up in stocks, funds, holdings, and various other assets. Countries can craft policies and enact laws that encourage or discourage certain activities to be done within their borders. I guess if you nationalize (socialize) a particular business sector, then the nation could control wealth (like Mr. Chavez of Venezuela).

Referring to the energy thread, if a country like Holland wants to ensure a hassle free future, we need to make sure that we can produce our own energy. Maybe wind and sun are more expensive now, but when our oil and gas are gone....we'd better have something in place.

Trust me. You will need more than wind and sun, or you will be buying power from France or Germany.

For the US (and western Europe), as I said before our wealth especially relatively will decrease, it is up to us to make the increase of wealth in other countries (which gives us a much better market to buy our stuff) not at the cost of our own wealth. A city that gets deserted is just an insignificant thing (except for people that live there of course). Still with lower ground and house prices in a while companies might settle there again, who knows.

Actually, the mobility of people is like another vote (with their feet). Those places have serious problems to which their city and state governments are not responding well, similar to what happened between East and West Germany after the wall fell. The poor left to go where they could be richer. Ghost towns, like Leipzig, are probably not that uncommon in the former East Germany either. Often, somebody gets a good idea and reforms the area causing people to want to live there again. Take Las Vegas, why is it the fastest growing city in the US? It's in the middle of a desert.

[eppie]

Ok, you lost me. Wages are a factor of supply and demand, and in this case it is people skilled in the desired craft.

My point is that a country like the US (lets forget your true statement that wealth is more in people than in countries now) or in western Europe, we keep a certain standard because we consume. If wages go down people can consume less....and for a company like Ford this is a major problem.
We have been coping with this because we were able to get dirt cheap stuff from low wage countries, and all kinds of very shady trade restrictions.
Anyway this meant that slowly companies 'had' to move abroad because the income and cost gap between rich and poor became too big. This meant that you could keep getting your US brands, even if the stuff was (partly) made in other countries. If companies would not move out they would become too expensive for their own people but also for other countries to do trade with.

Take the weak dollar at the moment. If an international company at this moment has to decide where to put a new office or factory they will choose for the US and not for western Europe if they can.

I actually think we keep repeating ourselves and mean the same thing.
My only point is that I would not want to blame somebody for this.

[Tris]

Pennsylvania Dutch!Right, this is how industrialism started even in Britain and the US. Child labor, unsafe conditions, open sewage waste, raping the land of resources, etc.Ok, you lost me. Wages are a factor of supply and demand, and in this case it is people skilled in the desired craft. If you have a shortage of skilled labor, the wages go up. In some countries like India, there are few curbs on population growth so in a way its like each birth is devaluing the labor pool. House prices are also a factor of supply and demand. The problem we have in the US currently is that the quasi government institution of Fannie Mae and Freddy Mac pressured banks to underwrite loans that were likely to default. This made the lending market skittish, and froze the available money for lending. Voila! Can't sell the house, and can't borrow to build new ones, so the bubble pops, housing market stalls and values descend. It was a problem of liquidity, and over pricing. It goes to show that when government gets involved they can muck up just about anything.Well, countries are no longer rich compared to the citizens who live in them. Wealth is really very ethereal for those who have much of it as it is tied up in stocks, funds, holdings, and various other assets. Countries can craft policies and enact laws that encourage or discourage certain activities to be done within their borders. I guess if you nationalize (socialize) a particular business sector, then the nation could control wealth (like Mr. Chavez of Venezuela).Trust me. You will need more than wind and sun, or you will be buying power from France or Germany.Actually, the mobility of people is like another vote (with their feet). Those places have serious problems to which their city and state governments are not responding well, similar to what happened between East and West Germany after the wall fell. The poor left to go where they could be richer. Ghost towns, like Leipzig, are probably not that uncommon in the former East Germany either. Often, somebody gets a good idea and reforms the area causing people to want to live there again. Take Las Vegas, why is it the fastest growing city in the US? It's in the middle of a desert.

Mmm... open sewage... reminds me of Cleveland during the big power failure in Aug. 2003 caused by... Ohio Edison (no First Energy, an RD Shell company) failing to spend the money to clear its right-of-ways around high-tension lines.

It wasn't all Fannie and Freddie (yeah, that's not right but it looks better:P). Private lenders made their fair share of subprime loans without government assistance. I think part of this came from the booming housing market, if the customer can pay off the mortgage fine. If the customer can't, then can forclose on it and sell it for more than the loan. This seemed to be a driving force here in Naples, FL, where housing prices just got compeltely out of control (average house cost in City of Naples was appx. $1.3M U.S.) Also, I believe that some of the victims of predatory lending deserve scrutiny. One example from CNN: A person making $10/hr as a security guard got an appx. $435,000 U.S. loan for a house. Now, I'm not agreeing with the loan structure, etc. but there is one question. At $10/hr, even with no interest, that's 43,500 hours of work just for the home loan. At 2,000 hours per year, that's 22 years just for the loan. Yes, I know mortgages can go for 30 years, but even if it were a 30 year product, that's still 1,400-1,500 hours per year just for the mortgage. I do have to ask myself, what was this person thinking?

R.E. Lost Wages. There's a certain "aura" about the place. Where else in the US can you so easily lose all your money, pick up a half dozen STD's, and come back to your house feeling like slime? LV, like many bubbles was sort of self-continuing. Once rapid growth starts, potential works start flocking in to handle the growing population. Florida has seen it several times, which contributed to its boom then bust growth pattern (if you know where to look in all parts of the state, you'll find poured concrete shells from an earlier 20th century boom). The next thing that fuels growth, is rapant speculation in the housing market. Lots of homes in LV were build/sold for/to people who had no intention of ever moving there, but aquired ther property to flip. Such persons may have acquired a mortgage knowing that they couldn't pay more than 6 months of payments, but anticipated flipping the property by then. When the housing market softened, they suddenly found themselves without a means to unload the property while still facing a hefty mortgage. Result? Foreclosure.

Part of the OH issue is a mindset problem, something I ran into when looking for a patent position up there, and something that I believe is prevalent in other industries. It goes something like this: My grand-daddy was a steel worker, my daddy was a steel worker, I was a steel worker until some <Insert derogatory term for Asians here> stole my job, I can't make anything other than steel. For the patent side it was more like: The firm was founded by a mech. engineer, our partners are all mech. engineers, and by god we aren't hiring any damned non-mech. engineers.

R.E. labor, I don't believe that it's supply and demand, and here's why. There's a difference between labor and other goods/services. Nobody "needs" a Bentley Continental convertible, everybody needs a job, just liek everybody needs certain essentials for life. Anytime you have people in a need situation, you can pay them less than market price for what they do, and more than market price for what they have to buy. Executives are a bit of a different lot with the good-ole boy and you scratch my back I scratch yours mindset going strong. You can't tell me that there there is a big enough difference in "supply" of capable executives and the average worker to justify the >400 fold difference in compensation. On a one-one correlation, that would mean less than 1 person per million in the U.S. is capable of running corporation X. I don't buy that. Nor, do I buy that a CEO, CFO, COO, CIO, and any other C-level exec contributes any where near the rediculous compensation they receive. Oh golly, firm profits are down 50%, we're still gonna pay all our C-levels bonuses, they'll just be 5% smaller... um yeah, er... that's called performance pay, uh huh.

R.E. local governments, etc. When I was in Akron during an election year, there were several alleged probelms with voting in NE Ohio. One big one that received a good deal of coverage, even from non-traditional media, was how the polling locations scheduled voting. In some working class precincts, the polls did not open until after 9:00AM and closed before 5:00PM. while in the higher end areas polls opened at about 7:00AM and stayed open until about 7:00PM. There were also indications that workers were flatly denied a break to vote in the precincts where the polls started late and closed early. Effectively in those areas, workers couldn't vote at all. It also helped that box after box of uncounted ballots were stacked in a NE Ohio storage facility:P

Local govt's part 2. The City of Canton (I think it was them, or else Starke County and Jackson/Green) entered into an agreement with Sterilite the makers of really crappy plastic storage containers to keep the sterilite facility in Canton. Sterilite agreed to certain terms as consideration for hefty concessions from Canton (no tax, no this, no that, payment of certain income taxes, etc.) As of when I left in Oct. 2006, Sterilite had followed through on exactly 0% of its obligations, and was pretty much telling Canton that if the city enforced the agreement, it was going elsewhere. When are cities going to wake up and realize that the corporations will screw them in every chance they get? Canton isn't the only one... Rudy and NY with the Yankees, Baltimore and Art/Ravens, Detroit and the Big 3 (Poletown anybody?) Sometimes I really think that the city leaders are on the take, maybe that's due to the fact that my family comes from Chi-town and I've lived in NE Ohio for a bit.

[kandrathe]

Part of the OH issue is a mindset problem

But, your solution was the typical one. Move to where there is not the mindset problem. You are a part of the mobility of labor that emigrated away from the "bad place". If they pay you poorly, you can move. If they treat you badly, you can move. To a different job, or a different place.

R.E. labor, I don't believe that it's supply and demand, and here's why.There's a difference between labor and other goods/services. Nobody "needs" a Bentley Continental convertible, everybody needs a job, just like everybody needs certain essentials for life.

I see your point, although I think you over estimate "need". An 18 year old doesn't need a job as much as a person who has obligations. We choose our obligations, whether that be student loans, mortgages, dependents, etc. The freedom from this "need" is savings and investments, because as you build up capital it becomes self sustaining. The other point you make is the "knowledge" of your worth. If labor understands its value and bargains accordingly, then if you take a job for below market you are eroding labors value. If management offers higher than market, then they are inflating the cost of labor. Both need to understand the true value ($/hr) of labor in order to bargain a just wage. The internet helps by allowing the employers see the entire pool of laborers, and allowing labor to see what employers are willing to pay. Yes, there will be collusion and nepotism, and all the other biases that exist in every other "contract". The premise of collective bargaining allows workers to negotiate in large blocks, but that as we know is fraught with abuse in execution. I've actually seen more "golden handcuffs" than I've seen employees kept at too low a wage.

You can't tell me that there there is a big enough difference in "supply" of capable executives and the average worker to justify the >400 fold difference in compensation. On a one-one correlation, that would mean less than 1 person per million in the U.S. is capable of running corporation X. I don't buy that. Nor, do I buy that a CEO, CFO, COO, CIO, and any other C-level exec contributes any where near the ridiculous compensation they receive. ...

You have multiple factors in the escalation of executive pay, including risk, leadership(a rare skill), and experience(skill). So yes, maybe 1 in 50 is qualified to lead, and add in the accountability to shareholders (e.g. signing the 10Q), and their multiple years of skills and service. Ideally, a person who fits that description would get paid more than the laborer who's wage is based on skill alone. Ultimately its the owners/shareholders of the company who decide what is equitable and if the companies salary structure is in line. Everything else I've read is merely wage slave jealousy.

When I was in Akron during an election year, there were several alleged problems with voting in NE Ohio. ...

People should organize a "sick out" in protest. Or, if they have a referendum process get "election day" to be declared an optional holiday.

Sometimes I really think that the city leaders are on the take, maybe that's due to the fact that my family comes from Chi-town and I've lived in NE Ohio for a bit.

Oh, I'm sure they are sometimes. You can tell when the cities goals conflict with the city residents. My little town flushed the mayor and entire city council a few years back after their civic development plan was going to triple local taxes, force everyone onto city water, and re-pave every street adding sidewalks and street lights. With them out, the big developers got the message and all the projects disappeared, life goes on as usual, and taxes are stable (except for the school). The graft is usually in the form of "Hey, Mr Mayor, how about we come over to your house to help you with that project for no charge." Nothing that is easily traced. The bigger the city, the easier it is to hide the graft.

[eppie]

Everything else I've read is merely wage slave jealousy.

This is the big discussion stopper. So whenever somebody is making more money then us, we are not allowed to criticize this person?

I have no problems with big salaries for CEOs. The problem I have is that they will never be held responsible when they make a mess. Before the internet bubble burst, and also now before the mortgage crisis, many CEOs that were just going with the flow of favorable economic conditions, turned out to be crap at their job. Theoretically this would have such a person fired and hold accountable, however practically they get send home with a big amount of money....without ever having taken any risk (it was not their company they just led it). This is possible because shareholders (the big ones) need quick profit and long term goals are of no interest. This can hardly be called a fair thing, and for sure doesn't have anything to do with jealousy.

Remember the CEO of Bear Stearns (if I am correct, it could also have been another of the big investment banks) got rewarded for losing billions of dollars with 126 million dollar go-away bonus plus an office with assistant in Manhattan for 2 years.

This is only possible because in the higher management/board/shareholder there is no normal supply and demand and because the real value of a CEO can never be calculated (having a net loss might be a good job of the CEO because others would have lost more etc.) but often these contracts are ridiculous.

[Tris]

There have been other Golden Parachute benefactors. Usually the golden parachute is in the contract before the CEO is fired. I often times have to ask myself: isn't this just asking for failure in that position? I have a problem with a contract that says, I succeed I get paid rediculous amounts of money, I fail I get paid rediculous amounts of money. Where's the incentive to do better? It's not like you aren't going to be able to move to a different company, even if the one you're at falls on its ass. I'll say this, if I was operating under one of those massive benefit if fail to meet objective/goal contracts, I'd be a lot wealthier during my job search:P

Don't get me wrong, there are some executives worth what they get paid, they're just few and far between. One that comes to mind is from a far earlier era, Schwab, Carnegie's righthand man for a long time. Iacoca (sp?) is another one.

It just seems different from a situation involving a partnership where you *need* a partnership agreement in case something happens. Partner becomes incapacitated, dies, goes bankrupt, etc. the partnership dies under default rules (automatic dissolution). Therefore, you need a document that addresses reorganization,

[--Pete]

Hi,

Many good points

Don't have time to address this right now, but one nit that's driving me crazy: That's 're' not 'R.E.' It's the Latin for 'things' or 'concerning' (res) and not an abbreviation. Thus, e.g., 'republic' = 'public things' -- i.e., 'the concerns of the people'. :D

--Pete

[Occhidiangela]

This is the big discussion stopper. So whenever somebody is making more money then us, we are not allowed to criticize this person?

Why are you criticizing someone because he or she makes more money than you?

As to CEO salaries, I have an issue, being a shareholder in a number of companies, with the board throwing money at people who don't produce.

Occhi

[kandrathe]

This is the big discussion stopper. So whenever somebody is making more money then us, we are not allowed to criticize this person?

Sure. You can criticize and complain about it being unfair if you like, but I'm just saying it's the owners of the company that need to hold their management accountable. If you are an owner or a shareholder, you have a voice at the shareholders meetings. Otherwise if you are an employee, complain or leave the company if the company salary structure stinks. If you are merely an outside observer, then accurately "it is none of your business".

The problem I have is that they will never be held responsible when they make a mess. Before the internet bubble burst, and also now before the mortgage crisis, many CEOs that were just going with the flow of favorable economic conditions, turned out to be crap at their job. Theoretically this would have such a person fired and hold accountable, however practically they get send home with a big amount of money....without ever having taken any risk (it was not their company they just led it). This is possible because shareholders (the big ones) need quick profit and long term goals are of no interest. This can hardly be called a fair thing, and for sure doesn't have anything to do with jealousy.

Shareholders should take notice of the hiring arrangements for their upper management, including any "Golden Parachutes" and other such nonsense.

Remember the CEO of Bear Stearns (if I am correct, it could also have been another of the big investment banks) got rewarded for losing billions of dollars with 126 million dollar go-away bonus plus an office with assistant in Manhattan for 2 years.

Look, here is one case. "his contract agreement extended his employment contract through 2009, where he is guaranteed three times his base salary, plus a cash payment equal to three times the greater of his average bonus or the incentive bonus paid the previous year. Net value: $87.8 million." So, contract had 3 more years and he got 3 x base + 3 x bonus, plus the value of the shares he sold(in his case, $140 million in stock options). What gets a little out of line is that the company usually includes a large chunk of Class A stock as a signing bonus, thus inspiring the new CEO to manage wisely. After vesting, that stock is often calculated as a part of the severance, when really it was a part of the overall employment incentive. And, all that for slashing 10,900 jobs at Countrywide, and an 81% decline in Countrywide stock value over the last year. So, again, shouldn't the contract have language in it distinguishing a severance package difference for good performance, or poor performance? Was it Mazilo's fault he negotiated the deal, or the company that hired him? Do you think that contract needed board of directors approval? Shareholders elect the board to oversee the value of their investment.

This is only possible because in the higher management/board/shareholder there is no normal supply and demand and because the real value of a CEO can never be calculated (having a net loss might be a good job of the CEO because others would have lost more etc.) but often these contracts are ridiculous.

I agree. It's the contracts that are ridiculous(and the lawyers who write them), and shareholders and boards of directors should do a better job of limiting compensation for poor performance.