The Great Debate

Executive bonuses: heads you lose, tails I gain

Professor Tamar Frankel– Tamar Frankel, a professor at Boston University School of Law, is author of “Trust and Honesty, America’s Business Culture at a Crossroad.” The views expressed are her own. –

The debate over corporate executive bonus payments should be put in perspective.  Some say that the executives did not earn these bonuses and don’t deserve the millions in parting payments that they received.  But if parting payments were specified in the executives’ contracts they must be paid.  A binding contract is binding.

But what if the payments were made at the discretion of a board of directors, as bonuses usually are?  Can such bonus payments be retrieved from the executives?  Probably not.  Unless the executives failed to give the board accurate information, or illegally caused the payments, they are entitled to retain them.

But directors who approved bonus payments notwithstanding the corporations’ losses may not be as free of liability.  Unlike salaries, bonuses are usually paid at the discretion of the employers.  They are awarded not as a matter of right but as a recognition that the recipients have done a good job.  In the past, most were tied to the “performance” of the corporations, usually defined in terms of higher profits or higher share prices.

The lore was that “executive talent” must be rewarded with money or stars would migrate elsewhere. And without such talent the corporation — and America — would be lost.  But this wisdom has now extended to non-performance situations where talented executives received bonuses no matter what happened to their corporations. The current crisis might not have been their fault, the reasoning went.  They did their job.  They performed well.  They worked as hard as they did years before.  Why should they be punished because the economy is in recession?

A revenue and legalization lesson from FDR

James Saft Great Debate – James Saft is a Reuters columnist. The opinions expressed are his own. –

(Correcting name of academic to Peter Reuter on Feb 27)

Want to help fund the bank bailout, ease California’s budget crisis and shore up strained U.S. finances? Legalize drugs, tax the trade and save on interdiction, domestic enforcement and the prison and court system.

I’m only partly joking.

It won’t solve all of the U.S.’s problems and lord knows will cause some new ones, but the money is undeniably big enough to make a dent.

Too many hopes pinned on EU bank

paul-taylor– Paul Taylor is a Reuters columnist. The opinions expressed are his own –

It works more like a sprinkler than a power hose, but the European Investment Bank has a role to play in preventing a financial inferno from sweeping across central and eastern Europe.

The trouble is that politicians have overloaded the European Union’s long-term lending arm with exaggerated expectations, calling on it like a fire brigade in every emergency, from saving credit-starved small firms to greening the car industry, combating the energy crisis and fighting climate change.

Ad strategy at root of Facebook privacy row

ericauchard1– Eric Auchard is a Reuters columnist. The opinions expressed are his own –

Social networking phenomenon Facebook has beaten out arch-rival and former market leader MySpace by most measures of popularity, except the one that pays the bills.

While Facebook has outpaced MySpace in bringing in members — it has 175 million active users at the latest count, compared with around 130 million for MySpace — it has struggled make money from them. While MySpace is closing in on $1 billion in revenues, Facebook generated less than $300 million in sales last year, reports say.

Commodities send coded clues on inflation

John Kemp Great Debate– John Kemp is a Reuters columnist. The views expressed are his own –

After an 8-year period of remarkable stability, the ratio between gold and oil prices has broken down spectacularly.

The relative rise in gold is consistent with other indications that the market is bracing for a delayed upturn in inflation between 2010 and 2012.

Let housing find its clearing price

James Saft Great Debate – James Saft is a Reuters columnist. The opinions expressed are his own –

The U.S. government should just get out of the way and allow the crash in U.S. housing; the market is too big, has too far to fall and Americans’ finances are too strained.

President Barack Obama’s measures, unveiled on Wednesday, are part of a $275 billion plan to try and stabilize the housing market and prevent foreclosures. It aims to encourage lenders and their agents to cut repayments for homeowners in difficulties to lower, more affordable levels as well as other steps.

Say it with philanthropy

combojulie- Matthew Bishop and Michael Green are the authors of “Philanthrocapitalism: How the Rich Can Save the World.” They blog regularly at Philanthrocapitalism. Their views are their own. -

Bankers keep telling us how sorry they are for getting the world into the current economic mess, but the public doesn’t seem to want to accept their apology. To show they mean it, the rich need to discover philanthrocapitalism and start to give back to society – for their sakes and ours.

Reckless financiers are public enemy number one and everyone seems to be enjoying the schadenfreude of watching them squirm in front of Congressional and Parliamentary inquisitions. Cathartic as these spectacles may be, it doesn’t seem that the bankers are going to be let off the hook that easily.

Sickness and death are no way to regulate food

 Diana Furchtgott-Roth– Diana Furchtgott-Roth is a senior fellow at the Hudson Institute and former chief economist at the U.S. Department of Labor. The views expressed are her own. —

The discovery of the salmonella-tainted peanut butter produced and sold by the Peanut Corporation of America at one of its plants, at Blakely, GA, raises a vital question for all Americans.  Does the Food and Drug Administration have the resources to ensure the safety of America’s domestic and imported food supply?

The Agriculture Department does a good job of inspecting animal-based products such as meat, poultry, and dairy, but the remaining part of the food supply that falls under the jurisdiction of the FDA is a different kettle of fish.  The FDA is failing to oversee adequately its share of food and cannot guarantee the safety of foreign food imports.

Goodbye to rugged American individualism?

Bernd Debusmann - Great Debate– Bernd Debusmann is a Reuters columnist. The opinions expressed are his own. –

Shock!! Horror!! The United States is becoming more like Europe! The rugged individualism that makes up part of the country’s self-image may be doomed. Paternalism threatens to throttle enterprise and initiative.

That has been the reaction of Republican leaders to the $787 billion stimulus package President Barack Obama signed this week after a contentious debate that echoed arguments made more than 80 years ago on the eve of the Great Depression.

“We were challenged with the choice of the American system of rugged individualism or the choice of a European system of diametrically opposed doctrines – doctrines of paternalism and state socialism,” Herbert Hoover said in his closing campaign speech for the 1928 presidential elections he won comfortably. The European ideas, he said, undermined the initiative and enterprise that propelled Americans to “unparalleled greatness.”

Geithner’s hair of the dog plan for banks

jimsaftcolumn– James Saft is a Reuters columnist. The opinions expressed are his own. –

U.S. plans for a public-private fund to buy up toxic assets are likely to amount to a fig leaf with which to hide subsidies to failing banks.

It is also, inevitably, an entirely new subsidy to outside investors, who by definition will only participate if they get better terms than now available in what we formerly thought of as the free market.