ba1025

I don't think i was arguing against mobility. my point was the gap between high earners and the avg American

ba1025

The plan would provide executives with bonuses of an estimated $21.5 million every six months that Delphi operates in bankruptcy and cash payouts of $88 million when the company emerges. It is subject to approval by the bankruptcy court and is scheduled to be discussed at a hearing in Manhattan next Tuesday.

Compensation experts have criticized the proposal as being too generous to management at a time when Delphi's low-level workers are being asked to absorb large cuts in pay and benefits.

A spokeswoman for Delphi did not return a call seeking comment. In the past, it has not commented on pending litigation.

But Delphi, the auto-parts supplier that filed for Chapter 11 bankruptcy protection on Oct. 8, has argued that the pay plan is necessary to ensure that its executives stay around to bring the company back to health over the next year or 18 months..... the same executives in charge when it went into bankruptcy.

What ever happened to pay for performance and personal responsibility?l
This is what just happened

ORE than two years ago, the Delphi Corporation, an automotive parts giant, filed for bankruptcy protection. Even as it asked workers, creditors and owners to accept big losses, Delphi requested a lush executive pay package that included $87 million in cash bonuses to be paid to top managers upon the company’s exit from bankruptcy. It was a wonderful example of unshared sacrifice that has become deplorably common in corporate America.
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Columnist Page: Gretchen Morgenson

Last week, Robert D. Drain, a federal bankruptcy judge in the Southern District of New York overseeing the Delphi bankruptcy, held a hearing to approve the company’s reorganization plan. Delphi hopes to exit bankruptcy this spring.

During the hearing, Judge Drain, who spent roughly an hour on the terms of the payouts and the compensation consultant who devised them, said he would approve Delphi’s bankruptcy exit plan only if the $87 million in incentive pay slated for management was reduced sharply, to $16.5 million. Delphi agreed to the cuts.

Judge Drain’s ruling is a service to every shareholder who feels ripped off by executives and the compensation consultants who serve them. His discussion of the packages brings a pragmatism to the topic of executive pay that is sorely lacking in corporate boardrooms. Let’s hope it is also noted by the compensation committees of public companies’ boards.

The pay packages came up in court because two unions representing Delphi workers in the bankruptcy objected to them. One, the United Automobile Workers, was represented by Peter D. DeChiara at Cohen, Weiss & Simon in New York. The other was the International Union of Electronic Workers-Communication Workers of America, represented by Tom Kennedy, lead partner at Kennedy, Jennik & Murray, also in New York.

“We believe it is the largest reduction in proposed management compensation ever imposed by a bankruptcy court,” Mr. Kennedy said last week. “The management compensation package was admittedly over market in many respects, and the judge concluded that Delphi did not support the proposed compensation plan with adequate demonstration that it was typical or appropriate.”

The consultant used by Delphi’s board to design the pay plan and defend it in court was Nick Bubnovich, of Watson Wyatt Worldwide. Mr. Bubnovich said that the $87 million reward was justified if managers were able to bring Delphi out of bankruptcy.

But in court, Judge Drain undressed Mr. Bubnovich’s position. He noted that the consultant could provide no explanation for why he tied the $87 million to the sole criterion of Delphi’s emergence from bankruptcy protection.

“The question raised by the unions, and frankly by me, is whether that analytical process bears any relation to reality,” the judge said in the hearing, according to a court transcript. “Mr. Bubnovich was candid in saying that the approach was a ‘novel one.’ He had not seen it before in his lengthy experience in Chapter 11 cases. To the contrary, he testified that as far as emergence cash bonus awards were concerned, such rewards were rare or not the norm in Chapter 11 cases and in far lower amounts.”

Through a spokesman, Mr. Bubnovich declined to comment.

IT was not that the executives operating Delphi in Chapter 11, led by the chief executive, Robert S. Miller, did not deserve an award, the judge said. Rather, it was the amount of the cash award and the matter of an “equivalence of sacrifice” that led Judge Drain to his conclusion.

“I should note, finally, that we are talking about actual dollars here in a debtor that is seeking to raise exit financing and can use every dollar that it has, another reason to be skeptical with regard to the asserted reasonableness of the $87 million cash emergence bonus,” the judge said.

Brian Foley, an expert in executive pay and the owner of an independent compensation consulting firm in White Plains, studied the Delphi plan in late 2005 and found it excessive. “It is truly refreshing to see a bankruptcy court judge carving one of these management exit packages back,” Mr. Foley said. “It doesn’t happen as often as it should.”

A Delphi spokesman said the company was pleased that the judge approved the emergence plan. He said the compensation committee of the board would decide how to allocate the $16.5 million.

Each company is different, of course. But the Delphi ruling shows that, in the rarefied air of the corporate boardroom, the amount of money thrown at hired hands is often ridiculous and baseless. In Judge Drain’s courtroom, where common sense appears to reign, the payouts shrank significantly. The judge’s ruling benefited almost all the stakeholders in Delphi.

If he retires from the bench, Judge Drain is not likely to be asked to lead a compensation committee of a company’s board. That’s a shame, because his judiciousness would serve shareholders well. What exactly did the workers get for helping the company recovery? A Judge came through lets wait for the appeal. I think 16.9 million divided by upper Management is still pretty sweet. Joe Worker took a 50% paycut. What sacrifice did upper management take?

Perhaps Delphi has entered into some side agreement to provide additional compensation to executives in years to come, but if that is not the case, the Delphi reorganization plan seems like strong evidence of extraordinary elasticity in the market for executive services.

there is the rub

Anyway I think Delphi management effectively poisoned the labor well in Detroit when they tried to take those HUGE bonuses after asking for huge givebacks from labor. They were greedy. the idea they needed huge bonus guarantees to stick around speaks to how little loyalty upper management had to the company. the union members were getting paycuts and trying to save the company but the execs needed incentive pay to do it???

Shek

But mobility is an important factor to consider. Since you either don't understand my question or don't want to answer it, I'll go ahead.

Ten years ago, LeBron James was growing up in a poor household. Today, he is worth hundreds of millions and has a stated goal of becoming the first billionaire in basetball.

When we look at the median, as one person swimming against 300,000,000, by crossing over from the bottom quintile to way up in the top quintile of wealth, he moves the median income by an infintesimally small number. However, his wealth creation doesn't destroy other's wealth (people volunteer to see his on-court exploits and to purchase his endorsed products).

He has a small impact on the mean wealth (probably around $1-2, since his hundreds of millions of wealth is against a population of 300,000,000). However, his impact on mean wealth is huge by orders of magnitude when compared to his impact on median wealth.

Bringing this back to income inequality, these statistics are generally used to argue that the rich are simply getting richer and that the poor are being left behind. LeBron provides a case of a poor person becoming a very rich person. I doubt that you'd see many people upset by his large wealth. Instead, he's more likely to be touted as living the American Dream, a poor person who made it big and inspires others to dream big.

When you hear his story, it can be an inspiration and an illustration of one path of the American Dream. When presented as a faceless static statistic (which is what income equality is), it becomes what is wrong with America.

Now, there are certainly rich that are getting richer, but we know from past studies that 4 out of every 5 millionaires is self-made, and so we shouldn't allow superficial analysis of statistics to tell the wrong story. The average story then in the upper income/wealth brackets is that the poor are becoming rich.

__________________
"So little pains do the vulgar take in the investigation of truth, accepting readily the first story that comes to hand." Thucydides 1.20.3

Shek

Let's think about one of the most basic concepts in economics. If Delphi went under, what would the compensation of union workers be at their next job they got? What about the executives? What did the shareholders board say?

ba1025

Delphi did go under. Isn't that what bankruptcy is? You really don't seem to be able to explain away the bonuses they set up for themselves. Let me. It was greed. As to economics and executive compensation.it wasn't labor greed. it was management greed. What would you think management is different than labor? of course they wanted every nickel they could. it would appear teh courts also disagreed with the plan and the only question now is if delphi managed to back end sweet heart deals to get around a court decision. Watch for that in the next year or two.

We both know what a travesty executive compensation committees are right? i don't need to explain how corrupt that process has become or the mechanism of the corruption do I? You already know who is on those committees right?

ba1025

I don't think telling poor kids to practice basketball real hard and maybe you too can skip college and go from high school to the NBA and get out of poverty like Lebron James. He seems a poor role model. In some ways he was typical though. he was in poverty as a child. he left it as an adult. After all most impoverished Americans are kids. Why is the African American poverty rate so high year after year if there is all this mobility? U.S. Government Does Relatively Little to Lessen Child Poverty Rates not exactly a bragging point

Anyway I will stay in my union. You're welcome to stay out of one. A man is well w/in his rights to close his factory doors rather than unionize just as his workers are w/in there rights to try to unionize. Unions can strike and companies can replace them. I wouldn't change a thing about the system. I am particularly grateful that we live in a system where we can disagree and it isn't like our economic philosophies are a religion like you said.

Shek

LeBron James path is just one, as I stated. However, we can generalize from his experience, which is find something that you are good at and love, and then pursue that.

If you want to figure out the African American poverty rate, the first place to start is household demographics.

Shek

Are you going to answer the questions or not? There are three players here: workers, management/execs, and shareholders. We cannot just think of this as a workers vs. management/execs fight, as we leave out the third party.

7thsfsniper

I don't hate anyone! I feel sorry for them. And my lifes actions have shown that I care about the many, not just the few.

__________________
The nation which forgets its defenders will itself be forgotten

7thsfsniper

I never once said I want gov't intervention! What I said was;
The walkout has fully or partially shut down 30 General Motors Corp. plants, Axle's largest customer. More than 40,000 workers have been laid off.

3500 people who won't make a little sacrifice to save the company they work for and 40,000 pay the price. This is greed, greed, greed. This is not sustainable in any society. I thought for a while you where not a typical liberal, but now I see that you are doing the lib tactic of putting words in my mouth when you cannot make a valid argument. You know its not right for others to suffer just because you can't have everything you want! remember when I said I have a hard time discussing this with people like yourself? Well, you're beginning to have a spinout. I really can't see a valid point to any of your arguments. The few cannot work for the many and sustain an economy muchless a civilization.

ba1025

I have trouble understanding how they can post a profit and not fund their pensions.

ba1025

You should read up on American Axle. They cut medical and payments of disability to laid of workers and disabled ones.
They increased executive pay substantially this year
They refuse to show the Union the books to prove they need the givebacks
They are asking for a base pay cut from 28 dollars to 14.50 dollars
They are a proftable company not one posting losses
Sacrifice to save a company should be shared.

Officer of Engineers

$100mil profit for a company the size of FORD means that they've actually made zero.

__________________
Chimo

Shek

What does the balance sheet say for the pension fund assets vs. liabilities? What are the future projections on the balance sheet? What is the opportunity cost of moving money into the pension fund where it is less liquid, compared to putting the money elsewhere? How does this decision on where to put money affect future profitability? How does the their sale of Jaguar and Land Rover affect their pension fund decisions?

Statistics without analysis are worthless. Answer these questions and then we can actually make a judgement about whether Ford is making the right decisions.

Gun Grape

Posted it on another thread.

In 2002 He was recognized as a Michigan person of the year. A little from that article
So how much money did those $70.00 an hour employees wager? You don't put your own money up and not hope to make big on it. He deserves the raise.
He is also running more than one plant. Its a global operation.In addition to locations in the United States (Michigan, New York, Ohio and Indiana), AAM also has offices or facilities in Brazil, China, Germany, India, Japan,Luxembourg, Mexico, Poland, South Korea, Thailand and the United Kingdom(England and Scotland)

All he is asking is that the union accepts the same wage in his factories that they do in his competitors. Vice 3x higher than the going wage.

They have already signed union agreements with their workers in Mexico and the UK.

Crap, My lawyer only charges me $85.00 an hour. Maybe both of us should have got a job as a $70.00 an hour forklift operator at this plant.

Has the union waived the workers dues, since they are living on strike pay?

After a certain time on Workmans Comp disability, you do lay people off. In Fl its either 1 yr or when the WC Board says they can no longer do the job, or a job with your company. Why would you want to keep someone disabled, and not working on your rolls?