Bob Foster's Blog » Big Business

A Fair Day’s Pay?

Bob Foster — Tue, 23 Feb 2010 19:18:32 +0000

Many have wondered where the folks in the big corporation boardrooms were while their companies were tanking, and then taking taxpayer money to stay alive. Well, maybe it was a case of not wanting to rock the boat, because board members of big corporations are paid quite well to maintain the status quo of executive management.

As an example: BusinessWeek recently published the pay records of 10 of the highest paid board members of various big-name companies. The average pay to sit on the boards of these companies was $1,686,297 for the year 2008.

The highest paid of the group was Anthony P. Terracciano, who was paid $4,789,993 for sitting on the board of SLM—a giant student loan company. To Terracciano’s credit, he also turned down more compensation in the form of bonuses and additional stock options.

The biggest problem for most directors is that, because of the Sarbanes-Oxley legislation, they have had to increase their annual hours worked from an average of about 100 hours per year, to an average of about 225 hours per year.

A fair day’s pay for a fair day’s work?

China Overtakes U.S. Car Market

Bob Foster — Mon, 21 Dec 2009 19:10:16 +0000

The Associated Press recently published a report saying that the Chinese now buy more cars and trucks than Americans. It appears that over 12.7 million new cars will be sold in China compared to about 10.3 million projected to be sold in America. This is the first time ever that any country has surpassed the U.S. in new car sales.

This could have been good news for the U.S. because China loves GM’s Buick…they consider it a luxury car. But alas, China requires that Buick build it’s cars in China—not the United States. Interesting concept.

Well, that at least should help GM’s bottom line even if it doesn’t make any new jobs in the U.S.

Who Controls Big Business?

Bob Foster — Tue, 17 Nov 2009 18:06:39 +0000

Many folks have been criticizing the Boards of Directors of big companies for not controlling their CEOs, and for allowing their companies to get into serious financial trouble (among other things). Of course the board members are elected by the Shareholders, who essentially “own” the companies and who are responsible for electing the right people to oversee their ownership.

But, just who are these shareholders? I ran across an interesting statistic the other day that pretty well answers that question. In 1960, 92% of the stock of American companies was individually held by private citizens…everyday people who elected the Board of Directors of the companies they held stock in.

Today…75% of the stock of American companies is held by “institutions.” This includes mutual funds, pension funds, Wall Street funds, and “other” large block investors. It is the fund and plan administrators who pick and vote-in the directors—not the individual stock owners.

In addition, I recently read a review of a report, put out by the Zurich-based Swiss Federal Institute of Technology, which studied 24,877 stocks in 48 countries. This report determined that the “backbone” of each country’s financial market “…consisted of remarkably few shareholders.”

Here is what the report said about American companies: “…while each American company may link to many owners, …analysis found that the owners varied little from stock to stock, meaning that comparatively few hands are holding the reins of the entire market.”

So, it appears that big companies are controlled by other big companies. Is it any wonder that everyday private citizens have little say on how the world economy functions? Or even how our own stock ownership is handled, because we cannot compete with the massive blocks of stock under control of “other” big businesses.

This sounds a little incestuous to me—does it to you?