Thursday, December 28, 2006

Executive Severance

I'm not going to get into the issue of executive compensation (yet), though I will say the number of executives I've met or heard of who actually have the impact implied by their compensation is vanishingly small. No, can we talk about executive severance instead? Good.

Here's the thing: severance is meant to recognize the efforts a person has put into the company and smooth the transition to a new job. If someone gets axed because of changed business circumstances, I think it's right to compensate them for that in a way that eases the pain while allowing the company to get on with those changed circumstances. If a company gets bought and an executive is redundant, the same principles should apply; one shouldn't avoid making the right decision for the shareholders because one is afraid of suddenly being out of a job.

But what about when an executive isn't doing what they're supposed to be doing, or doesn't agree with where the company is going? Anyone else would be fired, or would resign and go find work somewhere else. Strangely, though, this doesn't seem to happen in the executive ranks, where salary anywhere from 6 months to 18 months, plus other perks seems to be the rule. At my previous company we had

  • The VP of engineering who couldn't make a decision and whose directors spent a lot of time talking among themselves figuring out how to get around the VP so stuff could actually happen; dude got dismissed with 6 months salary and went off rock-climbing for a while. I'm pretty sure we never called him up for assistance during that "transition period"
  • The VP of Operations (as in data center operations) who hadn't a clue about computer networks, spent more time trying to sneak favorable (and exceptional) stock option grants for himself (in his role as General Counsel) past the CEO, and got fired for incompetence. 6 months severance because, being a lawyer, he was happy to sue the company and the board determined that legal costs would be more than the 6-months' salary.
  • The VP of Sales who went to the board to tell them he could run the company way better than the current CEO, only to find that they thought things were going quite fine. He stayed on the payroll, not doing anything for the company, until he found a job someplace else.

You would think that reading about the myriad other companies where this crap goes on would make me feel better about this stuff, but it doesn't. I am mystified as to why these institutional investors that own most of these companies are willing to put up with it. All I can think is that (a) they deal with large amounts of money, so these numbers don't seem so large, and (b) it's only a couple people at a time; lord knows if the company were so generous with the rank-and-file when they laid them off, there'd be hell to pay. Just ask the workers at Delphi.

What is the point of all my rambling? It is this: where is the incentive for the executive to perform well, if they know that should they be dismissed for doing a poor job, they're going to continue with their already-large salary for a nice long time? So many people are motivated to work extra hard, even when trying to meet ridiculous goals set by executives who have no real sense of the level of effort involved, because they're afraid if they don't do what they're told, they'll be fired, often with no severance at all. Have executives somehow risen above such base concerns that they wouldn't be similarly motivated? Hardly.

Ridiculous executive severance remains because it's set by executives who like that perk of their own jobs. But the company would be better served by a little fear in the executive wing. Indeed it would.

Monday, October 09, 2006


Relationships are a funny thing. Early in our relationship, my wife and I used to argue about whether you should expect your partner to "complete" you, or whether a relationship can survive (or at least avoid dysfunction) only if you both come to it as two complete individuals. Whether you're two halves of a whole, a single soul in two bodies, a yin and a yang, whatever, or two somethings orbiting around each other, held together by mutual attraction. Over time, I've come to the conclusion that the answer is "yes".

To look at us, my wife and I are almost two sides of the same coin; perhaps a coin with some melted spots where you can't really distinguish the two sides. I never realized with how many things, from the trivial to the significant, there are actually opposite ways to accomplish them. There are two ways to hang shirts (facing left or facing right); two ways to fold napkins and sheets (final fold on the bottom/top edge, or on the left/right edge); two ways to think of the color "peach" (the inside of the fruit, or the outside of the fruit). The list goes on and on. This morning I told her about an available freezer that "doesn't run all the time" meaning that, unlike our current freezer, it actually stays cold without having to run all the time, while she wondered if I wanted to use it like an armoire since it didn't work all the time. She's usually the emotional one, while I'm rational, but when I get emotional she calms right down. She tends to focus on the negative ("these bathrobes are scratchy; how Mendocino") while I tend to focus on the positive ("yeah, but the barn cat is really sweet"). Over the years we've rubbed off on each other some -- she'll focus more on the view while I'll see the can of Campbell's Soup in the cupboard in "Witness" -- but overall.... no.

My point is simply this: if you're lucky, opposites attract. A different perspective can teach you things about the world you would never have found on your own. You balance each other's weaknesses. Is that completion, or orbit? "Yes." Happy anniversary, sweetie.

Tuesday, August 22, 2006

Retelling an Old Joke

President Bush decides he wants to create a national appreciation day for either the sun or the moon, but he can't decide which one. It has to be the one that's most important to us, but he can't make up his mind.

So he calls in his science advisers and asks them, which is more important: the sun or the moon? They talk to him about fusion and reflection and refraction and rotation and photosynthesis and convection until his head is spinning.

He thanks them for coming in and thinks for a bit, which makes his head spin even more. So he calls in Dick Cheney.

The VP talks to him about oil and solar power and hydrogen made using solar power, and it all becomes clear.

The next day, the President holds a press conference to announce that tomorrow will be National Moon Appreciation Day, because after due deliberation and consultation he has determined that it is the moon that is most important to us: the moon lights up the night, while the sun only shines during the daytime, when we don't need it.

Sunday, August 20, 2006

Health Care Not Insurance

Can we talk for a bit about the health insurance crisis in this country? It's been bugging me for a while.

For starters, it's not a Health Insurance crisis, it's a Health Care crisis. Complaining about all the people who are uninsured implicitly agrees that the best way to provide health care to people is through an insurance plan.

Have you ever thought what it would be like if Auto Insurance were the same as Health Insurance? Whenever you took your car to the mechanic, you'd pay a $10 copay. There'd be in-network mechanics and out-of-network mechanics. Maybe you'd have to pay 10% of the cost of any repair, to try and give you an incentive to shop around, but really it's just to reduce the cost to the insurance company and incent you to try and get by without the repair. Mechanics would have elevated prices that would be their official rate for things, but they'd discount them heavily for the insurance companies, so anyone without Auto Insurance would be getting doubly-reamed.

It all sounds pretty silly, doesn't it?

Insurance was created to distribute risk, to allow people to gamble on the luck of the world. As a side-effect, it enabled people to take more risks than they otherwise would have, which enabled us to move the society forward faster than we could have done if individuals had been forced to carry the whole risk of a venture.

People's health has nothing to do with this.

People get sick through all sorts of mechanisms, and most of them come down to chance. Sure there are illnesses that are due to lifestyle choices (smoking / drinking / obesity -- though that last one is starting to show signs of being partly due to viral infection or differences in intestinal flora), but guys who, in their twenties, get staph infections in their blood that build up on their heart valve and break off and travel up into their brain...that's not a lifestyle choice, that's just bad luck. And it can happen to anyone at any time.

So why should handling all this be subject to the profit motive? Why the insane salaries for insurance executives, and the excessive marketing dollars, and the motivation to only insure the healthy? There are those who point out the difference in administrative costs between private and public health care (read: medicare) is 10x, while others, such as The Council for Affordable Health Insurance like to play around with the numbers to reduce the difference (ignoring the reality that one of the reasons the "hidden" administrative costs of medicare are hidden is because they are inherently part of running the government). Even playing with the numbers doesn't bring the levels in line with each other -- they are left only with trying to justify the higher costs saying they help keep costs low by reducing fraud. But there already are many people who work for medicare looking to reduce fraud; my stepmother used to do this work for the state of wisconsin.

If the private sector and the market are so great at keeping medical costs down, why have they utterly failed to do so? Why are we as a country paying so much more for health care and getting so much less?

People say that the private sector performs more efficiently because the profit motive incents them to keep costs under control. What prevents those same controls from working in the public sector, without the added burden of having to show a profit? If it's only a matter of incenting the administrators appropriately, those mechanisms are just as available to the public sector as to the private. With the added benefit of making defrauding the health care system a criminal offense, not a civil one.

The goal of anyone looking at health care should not be to ensure that everyone has health insurance, it should be to ensure that everyone has health care. Only then can we really put in place the mechanisms to take care of all our citizens.

Friday, August 11, 2006

Don't Be Afraid of the Ketchup

Let me say this and get it over with: if we have to rely on overworked TSA employees at the airport to protect us from terrorists, then we are in seriously deep doo-doo. We're now expected to not bring on board any liquids or gels, not even little tubes of toothpaste, for fear that they could be combined into an explosive device. Are we next going to be required to travel naked? While some might enjoy an exotic-erotic plane flight, the reality is that there will always be people who can think of ways to get stuff on board. Adding checks for whatever has been tried in the past is not the answer; addressing the root motivations of terrorism is.

While the ideology espoused by fanatical islamists provides a pathway, people don't step on that road because they fundamentally believe it. They tread that path for the same reason people join gangs: they are disenfranchised, feel powerless, have no hope for the future, and are looking for something to belong to. Until we find ways to overcome the main weakness of capitalism -- the tendency to widen the disparity between the haves and the have-nots, and the amorality of corporations -- we will continue to be threatened in this way.

Even if we lost 10 full airliners a year to terrorists, it would still be safer to fly than to drive.

Friday, August 04, 2006

I'm a firm believer in something I believe to be obvious to most people, but I'm not taking any chances: your background colors your perceptions. More than that, it can make it impossible for you to see things at all. So before I start posting to this here blog, I thought I'd be upfront with you, about me. I'm a tall, white man who grew up in the midwest as the son of a well-respected professor of mathematics. This comes with a certain amount of baggage (way over the carry-on limit), but I can handle it. I'm accustomed to at least being listened to, and often get my way. I don't expect people to run into me in the store, or ignore me in other situations. I've got an intellectual understanding of what it is to be poor, but let's face it: I've never gone hungry or had to choose which bills to pay. I'm used to having choices. So now you know.