Not Enough Bullets

Now that the Federal Reserve is attempting to push the US economy into a recession, US companies are frantically redesigning their benefit plans for senior executives, because stock options suck when the stock price falls.

Nothing much to protect the the companies, or their normal employees, because senior executives have decided that senior executives ridiculous pay packages must be preserved, because ……… Capitalism!!!

There needs to be legislation to prevent this sort of routine looting of American businesses:

Executives at some of America’s publicly listed companies will earn millions of dollars in equity-based bonuses this year because sympathetic boards have reworked their incentive plans — even though stock market declines have wiped trillions of dollars off corporate valuations.

Companies adjusted bonus plans in 2020 to account for the coronavirus pandemic and have since revisited pay and eased performance assessments in response to inflation, energy crises and other macroeconomic problems, said Matteo Tonello, a managing director at the Conference Board, an economic research organisation.

Among them are hard drive manufacturer Western Digital, which this month said it paid chief executive David Goeckeler $32mn, up from $17mn in 2021, after scrapping performance goals tied to its share price. Western Digital’s shares are down more than 47 per cent in 2022, compared to about a loss of 22 per cent for the S&P 500 index.

Aircraft parts manufacturer AAR Corp said last month that chief John Holmes was awarded $7.3mn in stock to compensate him for pay lost due to bonus restrictions applied to companies that took Covid-19 relief funds from the government.

Office furniture company MillerKnoll, which makes Aeron chairs and Noguchi tables, paid its chief executive Andrea Owen $1mn this year after adjusting annual bonus criteria for all eligible employees to compensate for “ongoing supply chain constraints”. 

………

Medical products manufacturers Abiomed and Bio-Rad Laboratories dropped options as part of executive pay packages in favour of stock, establishing “a less risky mix of equity for executives”, according to VerityData.

Udemy, an education technology company that went public last year, this month said it cancelled a performance-based option grant given to president Gregory Brown and replaced it with stock to pay out as long as he stays with the company. Its share price is down 50 per cent since its initial public offering last year.

Senior executives are supposed to be rewarded for improving shareholder value, hence stock options, that only have value if the stock price rises.

Now that we are no longer in a bull market, the senior executives will be rewarded for ……… Heads I win, tails you lose economics.

The US business is a self serving rent-seeking morass of corruption.