Category: Editorial

I love my Uncle. He’s always been there for me and he is the best Uncle I could ever want.

But my Uncle has a serious problem.

You see, my Uncle is a bit of a dreamer, and in recent years every business he’s started has ended in failure. He’s articulate and bright, so he gets hired to run huge, multi-billion dollar businesses across the country. But each time, despite his good intentions, he always drives the business bankrupt.

So while my Uncle used to be rich, today my Uncle is bankrupt. Miraculously, he has held onto his businesses and continues to try to make them work. But his monthly bills on them are 150% more than his income! Sadly, he’s already tapped out everyone in our family to finance his debt. Each of us that is working owes about $150k to help him get out of debt.

The worst part is that my Uncle has stopped listening to the family. Because of his position, a lot of outsiders want to manipulate my Uncle, and they do so over and over again. This is probably what hurts his businesses most.

Obviously, this has been extremely stressful for our family – so much so that recently we’ve started fighting. Half of us want to cut my Uncle off and tell him “enough is enough!” But we all love my Uncle and so the other half really wants to see him succeed in his next endeavor. Since he won’t listen to us, some of us have stopped giving him his allowance, and now he’s really angry. He says that we promised him an allowance and that we have to keep giving it. But times are hard on all of us, and he’s making it worse.

And of course, as is typical with my Uncle every four years or so, he has a new business venture he wants to start. The business sounds great and he makes a compelling pitch for it. If it works it might help a lot of people! But my Uncle’s track record is so poor. He’s got so much debt and other problems, that we just have to say no. This is going to be a tough lesson for my poor Uncle, but he’s risking the financial security of the entire family now. We simply can’t allow him to ruin all of us.

So, Uncle Sam – God Bless you. I love you and always will. I hope you recover, but for now I have to cut you off. Once you have your existing businesses in order, we can talk again. But until then, I can’t help you take on more challenges. You need to finish what you start before you start more.

Love,
Your devoted nephew, Mike.

The US debt is a big problem (currently ~$16T, or about ~$50K per person). I’m willing to do my share to help pay it off. To do this, I need the government to commit to a sustainable plan so that I’m not just throwing good money after bad.

Thus I make this promise:

If Washington can make spending match tax receipts, I will donate an extra $1,000,000 to the USA to help pay down the debt.

For a long time, my voicemail wasn’t set up. People got mad at me.

So I setup my voicemail, and now it has a greeting. But I don’t listen to messages. People get mad at me again.

The trouble with voicemail is its just too inefficient. I have to dial-in, wait for it to connect, listen to the rambling, and then act on it. The whole process is quite maddening – 20-30 seconds each! I know that at this very moment I have voicemails from my sister and brother, and I even have spare time. But the mere thought of the painful process makes me not do it. I’d rather write a whole blog post about how I hate listening to voicemail.

Hmm… I wonder how many messages I’ve got queued up?

I’m generally a pretty free-market kind of guy. But, when it comes to CEO pay, there is no doubt in my mind that America is screwed up and that the free market is failing us. This isn’t the biggest of our problems, but it raises unnecessary doubt about “corporate greed” and about the livelihood of the American Dream.

If you don’t believe me, check out some of the compensation paid to CEOs of companies that are losing massive amounts of money:

• Aubrey McClendon, Chesapeake Energy, paid $18.6M while the company lost $5.8B.
• Carol Bartz, Yahoo, paid $39.0M in the same year she’s fired.
• Timothy Armour, Janus Capital, paid $11.4M while the company lost $757.1M.
• Rupert Murdoch, News Corp, paid $18.0M while the company lost $3.4B.
• Robert Stevens, Lockheed Martin, paid $21.7M while the company lost $3.0B.
• Daniel Hesse, Sprint, paid $10.3M while the company lost $2.4B.
• Gregory Brown/Sanjay Jha, Motorola, paid $11.7M while the company lost $111M.
• Ronald Hovsepian, Novell, paid $5.2M while the company lost $214.6M.
• William Klesse, Valero, paid $11.3M while the company lost $353M.
• Klaus Kleinfeld, Alcoa, paid $14.3M while the company lost $985M.
• Ahmad Chatila, MEMC Electronic Materials, paid $16.7M while the company lost -$68.3M.
• The list goes on and on…

Still not convinced? Why do CEOs get golden parachutes? Why did Leo Apotheker get paid $25M after getting fired 11mos into the job? Do you get one? It makes no sense to ever have a guaranteed payout even if you screw up.

Mark Cuban once again puts this in perspective by demonstrating that the risk-reward for CEOs is out of whack.

Fortunately, it is easy to fix.

The free market should remain free. If a company wants to pay a CEO $50M in advance, they are free to do so. But the Board of Directors, whose sole responsibility is to the shareholders best interests, needs to be able to prove that such a plan is good for the shareholders. If not, the Directors need to be held personally liable.

I’d like to see the SEC adopt new rules about executive pay – including any form of guaranteed pay, pay for non-performance, pay while the company is losing money, or pay for early termination. These rules should outline a very strict and narrow definition for when such compensation would be “good for shareholders”. Common sense should win out here, and the right answer is “almost never”. We all know that if an employee isn’t working out you should fire them with impunity. CEO’s are no exception.

As for the CEOs that are already beneficiaries of guaranteed payouts – if they have any character at all, they should forfeit these benefits and ask their Board of Directors to rework their compensation to something in line with what the rest of the company gets.

I called AT&T today. Here is the approximate transcript from the call:

me: Hi, I’d like to make a change to my service.

att: Ok, what would you like to change?

me: I’d like to cancel my free Call Dropping Service.

att: Ok, I’m loading your account now, one minute.

me: Thanks.

att: I’m sorry, sir, we’ don’t have any Call Dropping Service.

me: Are you sure? Don’t use AT&T?

The operator was quite nice and helped lookup a variety of other AT&T services as well. She checked to see if they had a “Call Scrambling” service, as well as a “Automatic Call Blocking” service (where AT&T automatically doesn’t deliver a call). The last one tripped her up because they do have a service by that name, but she didn’t understand that I had never configured it and that I seemed to be describing having used it.

Eventually I got bored and hung up. Thank you to the patient operator. I still hate AT&T though.