Freddie Mac CEO gets $19.8 million in 2007

http://www.msnbc.msn.com/id/25740405/

7/18/2008 5:14:40 PM

stop hating my freedoms

7/18/2008 5:27:53 PM

Boards and CEOs certainly do seem to have a symbiotic relationship these days.

7/19/2008 12:25:37 AM

One thing I don't get with all of these bank meltdowns...

why the fuck don't we see mass firing at the highest executive levels?

(that's a rhetorical question)

I rarely like to see government intervention, but if the taxpayers are going to bail out some of these companies, there needs to be a federally mandated housecleaning starting at the top. Portions or all of their salaries should be forfeit, and in some cases, re-imbursed.

7/19/2008 8:11:33 AM

This is an area in which we might be able to find some agreement. While I do believe that employee and employer should be able to negotiate compensation at whatever level they both agree on no matter how much it is, I also think that pay should be appropriately linked to performance. After all, it doesn't increase shareholders' value to overcompensate those that don't effectively and efficiently achieve established organizational goals.

7/19/2008 8:17:10 AM

^ kinda hard to negotiate compensation when yr fired

7/19/2008 9:33:19 AM

Well, a CEO has two ways they can run a company. They can always do what is safe and chase a small reasonable return, or they can take risks and push the frontiers of technology. Yes, the latter is more likely to turn your $10 share into a $0 share, but it is also more likely to turn that $10 share into a $100 share. As such, the risky strategy produces an equal chance of losing $10 and gaining $90; if an investor spreads the risk among lots of companies, as all investors today do, then if for every company that loses you $10 another gains you $90, obviously investors and society are better served by risk takers.

This is why most companies make CEO compensation NOT performance related. A CEO that is affraid of losing his severance package is not going to take risks. As such, this is why even companies that are wholly owned by a handful of investors investing their own money tend to have the most generous severance packages in the hope of isolating the CEO from failure in the hope of fostering a sense of risk taking.

Now, as members of society, would you prefer to have companies playing it safe and bringing you the same products they have always had? Or would you like to have them being dynamic and willing to experiment with new ways of doing things?

As such, leave the CEOs alone to negotiate with their bosses and limit the push to making sure those investors bear the full cost of their willfull experimentation. Afterall, presumably their other experiments turned out better than this one and they have enough money to handle the loss here. This assumption breaks down if third parties start to sholder the burden of these failures, such as appears to be happening with Feddie and Fannie. As Freddie and Fannie are not primarily middle-men for other institutions I suspect a slow collapse could be tollerated, as they are broken up and sold of to pay back debts, such as the money owed to the Government, with next to nothing being returned to investors.

7/19/2008 2:03:28 PM

Quote :

"why the fuck don't we see mass firing at the highest executive levels?"

There have been plenty...

Quote :

"Senior Wall Street executives haven't escaped unscathed. Six chief executive officers, eight presidents or other officers and at least 19 division heads have lost their jobs as a result of the subprime meltdown. Citigroup CEO Charles O. ``Chuck'' Prince, Merrill CEO Stan O'Neal, Bear Stearns CEO James ``Jimmy'' Cayne and UBS AG CEO Peter Wuffli were the highest- ranking casualties. Compared with the fallout after public markets slammed shut on speculative Internet companies in 2001, more high-level Wall Street executives are losing jobs in the current crisis, according to Gustavo Dolfino, president of New York-based executive search firm Whiterock Group LLC. When the dot-com boom ended, the people who lost jobs were predominantly rank and file, he said. "

http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=aTARUhP3w5xE

7/19/2008 2:40:19 PM

now now, Im sure they all have multi-million dollar severance packages

7/19/2008 2:49:50 PM

LoneSnark, your post doesn't address the OP at all. You're just rambling about how CEOs shouldn't be accountable for failure which is bullshit because they're rewarded for success.

Unless if by "push the frontiers of technology" you really mean "hand out a bunch of shitty loans that have no chance of being re-paid." Then you might be correct. But I have a feeling that's not what you mean. Because no one in the world could possibly be that stupid.

[Edited on July 19, 2008 at 3:36 PM. Reason : ]

7/19/2008 3:32:02 PM

Whether CEOs get punished for risk taking is not up to us and should not be up to Congress. I have explained why the bosses of CEOs, shareholders, choose not to punish CEOs, if you have a problem with my explanation then offer one of your own.

That said, if a housing bubble had not occured the those loans would have been wildly profitable. These people are not stupid, they just failed to predict an event that has never happened before. I guess if the antiChrist reigns in 1000 years of fire you are going to call insurance company CEOs idiots for insuring property damaged in the ensuing chaos?

[Edited on July 19, 2008 at 5:11 PM. Reason : .,.]

7/19/2008 5:03:55 PM

Well if pigs had wings they'd fly. I don't see how rewarding these people for a failure in the economy that they helped create is reasonable at all though.

7/19/2008 5:37:19 PM

You know, if you don't like it, there is a simple solution: don't buy stock in companies that pay outlandish salaries to their CEOs. Don't reward companies that reward failure. Don't encourage them.

If your viewpoint is backed by a sufficient number of shareholders, things will change. Chances are they are not, and thus they won't.

You may as well be complaining about professional sports players' salaries, however, for all of this complaining is worth. I mean, a good baseball player has a 2/3 failure rate - and they make millions of dollars. (ZOMG, oh how do we reward failure!)

7/19/2008 6:16:06 PM

Quote :

"That said, if a housing bubble had not occured the those loans would have been wildly profitable."

um, what do you think caused the housing bubble in the first place?

suddenly, hordes of people who would never have been granted loans in the past are handed loans, which increases demand faster than the supply of homes, artifically increasing the value of the homes. Then speculators jumped in the fray, pushing home prices up even further, and so on.
This was nothing more than a glorified ponzi scheme.

Sorry, these loans were doomed to fail from the start. What made them possible is the CDO market which basically passed the time bomb off onto someone else.

[Edited on July 19, 2008 at 9:31 PM. Reason : sdaf]

7/19/2008 9:30:43 PM

Quote :

"LoneSnark: Well, a CEO has two ways they can run a company. They can always do what is safe and chase a small reasonable return, or they can take risks and push the frontiers of technology. Yes, the latter is more likely to turn your $10 share into a $0 share, but it is also more likely to turn that $10 share into a $100 share. As such, the risky strategy produces an equal chance of losing $10 and gaining $90; if an investor spreads the risk among lots of companies, as all investors today do, then if for every company that loses you $10 another gains you $90, obviously investors and society are better served by risk takers. This is why most companies make CEO compensation NOT performance related. A CEO that is affraid of losing his severance package is not going to take risks. As such, this is why even companies that are wholly owned by a handful of investors investing their own money tend to have the most generous severance packages in the hope of isolating the CEO from failure in the hope of fostering a sense of risk taking. Now, as members of society, would you prefer to have companies playing it safe and bringing you the same products they have always had? Or would you like to have them being dynamic and willing to experiment with new ways of doing things? As such, leave the CEOs alone to negotiate with their bosses and limit the push to making sure those investors bear the full cost of their willfull experimentation. Afterall, presumably their other experiments turned out better than this one and they have enough money to handle the loss here. This assumption breaks down if third parties start to sholder the burden of these failures, such as appears to be happening with Feddie and Fannie. As Freddie and Fannie are not primarily middle-men for other institutions I suspect a slow collapse could be tollerated, as they are broken up and sold of to pay back debts, such as the money owed to the Government, with next to nothing being returned to investors."

Where is all this "dynamic and willing to experiment" shit? Are you talking about the minty breath strips they added to toothpaste? Maybe it's that brilliant Swiffer wet jet (now infused with Lemon Verbana-scented dog shit!)? Or perhaps you're referring to the years it took car companies to take a serious look at hybrid technology?

More likely, these risky experiments include bold moves like cutting wages and benefits...

Hey, you cut wages and benefits, you bring in more profit, which makes shareholders happy, which just might inspire those shareholders to incentivize their CEO to "experiment" even more... ?

And since when does it take a 20 million dollar net to get someone to take risks? And why such pathetic nets for the workers? They seem to be the number one risk-takers since their livelihoods are actually at risk...

I just don't believe that CEOs are risk-taking and working millions of dollars harders than the workers. After all, CEOs have to take a lot of time off to spend their money...




All I can find on the subject is article after article talking about how lots of shareholders are disatisfied with current levels of compensation. "Payment for failure" isn't so hot after all.

[Edited on July 20, 2008 at 1:24 AM. Reason : Time for bed.]

7/20/2008 1:18:02 AM

We need more women in TSB because their arguing strategies will cancel out some of the morons.

7/20/2008 1:35:21 AM

No, Bridget, risk taking like investing in alternative energy, outsourcing to China, robotic product assembly, going green, and anything else that costs more money than the company has and might still turn out less productive than the old way of doing things. A sizeable fraction of all US firms go belly up every year, and if you look at most of them you will find a risk taken that resulted in disaster.

Now, apparently you believe workers are stupid, just as you believe investors are stupid, and they do not realize their employers are taking risks. Afterall, keeping a sensible level of savings and an up-to-date resume just seems too difficult.

Well, people are not stupid, that is why workers in such risky companies tend to get paid more than their peers with similar qualifications working for stable operators such as the government. They could have quit as soon as a unrisky job openned up elsewhere, but they felt the benefits exceeded the costs. Should we really be outraged when these costs finally come home to roost? If so, then in the event that risky firms go long periods without failure should not non-risky firm employees be outraged that they accepted too large a pay cut?

7/20/2008 2:51:03 AM

Yeah whatever you guys.

What the CEO does is really like 300 times more important than what any average employee does.

7/20/2008 5:05:52 AM

Quote :

"These people are not stupid, they just failed to predict an event that has never happened before. "

Actually, it happened in Japan in 1987, but good try

7/20/2008 1:35:27 PM

Or maybe they knew it was gonna happen, but they also knew nothing bad would happen to them so they allowed it while getting ridiculously rich for a couple of years.

7/20/2008 1:54:59 PM

That was a commercial property collapse, the Japanese residential populace does not default on mortgages, but nice try at sarcasm.

7/20/2008 2:59:55 PM

i thought these were like quasi government entities anyways

7/20/2008 4:00:05 PM

^^ I thought it was more specifically real-estate (though certainly inner-city), accompanying the stock market boom they were having.

One of my regular blogs

http://www.japaneconomynews.com/

insists that even today there's some hankey-pankey going on with the high class office space market in Tokyo.

7/20/2008 4:23:52 PM

Quote :

"As such, leave the CEOs alone to negotiate with their bosses "

In the private world..fine. If stock-holders allow CEOs to trash the company and reap a huge salary for it..that's their business. Heck, I could've trashed it for a lot less than $18 million.

But we're talking about a gov't-backed company...where we all suffer when the CEO screws up. For the same reason I don't want the gov't supporting artists, I don't want it supporting loan-companies. Running it is too subjective, our tax money is at the mercy of one CEO who is using his own financial acumen to experiment and push the frontiers etc.

Our gov't should be providing a safe environment to do business within, not actually running the companies with our money.

7/21/2008 1:45:53 AM