[extropy-chat] CEO pay and markets

[Mike Lorrey]

--- Al Brooks <kerry_prez at yahoo.com> wrote:

> Do artificial markets exist? I was brought up to think junk food and
> cigarettes, for example, are artificial markets. But you could say
> they have value in some market niche, correct?
> You get to a certain age to realize everything you think is based on
> your upbringing and what you want to retain over the years...

Junk food? Last time I checked, there was little regulation or taxation
of junk food, so no, no artificial market there.

Cigarettes? Highly taxed, so, yes, the market size is artificially
larger than it could be because prices are artificially inflated by
taxes. The presence of addictive nicotine in the product ensures the
user pays more than is reasonable more frequently than is reasonable.

You could say that sugar and caffiene in junk food serve similar ends,
though sugar is a nutrient and thus has utility, as does caffiene for
being a stimulant and therefore an improver of productivity. Anything
with utility in being useful for producing greater value, itself has
real value. Whether the value matches the price paid is another
question entirely (which one might add to nicotine products as well).

Calling junk food and cigarettes 'artificial markets' is as much a
puritanical judgement as anything, without bringing facts to bear.

Back to the topic at hand: CEO compensation. Are BoD members deluded to
irrationality in executive compensation? Hard to tell if you don't
actually talk to such people. Recent events, such as the Carly Fiorina
debacle at HP, of execs getting large sums of money to leave, are hard
to explain if you discount the behavior as merely 'go away' money to
avoid a potentially even more costly contract lawsuit. Beyond mere
legal costs of defending against such suits, the negative publicity
impacts both sales bottom lines as well as stock prices.

If it is the job of top execs to create shareholder value, it is the
job of BOD members to protect existing value as well as hire people who
can create greater value. Sometimes protecting existing value is all a
board can shoot for in the short term, and that is worth buying off the
exhorbitant demands of someone they want to see gone.

Mike Lorrey
Vice-Chair, 2nd District, Libertarian Party of NH
"Necessity is the plea for every infringement of human freedom.
It is the argument of tyrants; it is the creed of slaves."
                                      -William Pitt (1759-1806) 
Blog: http://intlib.blogspot.com


	
		
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