I thought this was worth adding to this thread. At least someone (at
Credit Suisse) has a sense of humor about exec compensation. It was
probably someone's six-year old daughter who suggested it over family
dinner-time, but hey ... we need some new blood in management, right?

http://www.cnbc.com/id/28306986

dapperdobbs <GeorgeCFL[at]hotmail.com> writes:

- quote -

No. The average of the top 26 hedge fund managers worked out
to that $363million. The overall average is vastly lower.
They are probably generally still way overcompensated, but
it's a lot better to damn them with the right numbers. Two
of them alone was responsible for skewing the number a whole
lot - the top two earners got $1.5billion and $1billion each.

Average hedge and mutual fund manager comp overall - not
just the folks at the very top - is still something on the
order of $3-400,000/yr. A lot - a hell of a lot - but not
the jaw-dropping numbers that make headlines.

- quote -

Madoff's blowup has put a variety of folks who'd invested
with him out of business. Not the least of which were
several charity foundations who'd made that mistake. The
consequences are quite ugly. Not a widespread economic
disaster, nor the market distortion that, say, an overnight
wind-down of LTCM would have caused (since Madoff seems
not to have actually invested the money thereby, his blowup
won't have the disinvesting consequences). But there are
certainly folks a couple of steps away who are being hurt
by this pretty badly.




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On Dec 14, 8:21*pm, dapperdobbs <George...[at]hotmail.com> wrote:
- quote -

I think that either you misheard them, or they got something wrong.
Googling "hedge fund assets 2006" gives a figure of $1.89 trillion
under management, which would make compensation/assets equal to 37%.
That is practically impossible, since the typical hedge fund structure
is 2% of assets and 20% of profits.

#hedge funds 2,000
avg compensation 350,000,000
total compensation 700,000,000,000
hedge fund assets 1,890,000,000,000
compensation/assets 37%

On Dec 15, 12:43*am, Ron Peterson <r...[at]shell.core.com> wrote:
- quote -

Ron,

Thank you for that link. It is interesting. I was under the impression
that probably 35% of all funds simply never voted, because their
turnover was high. Apparently, I was wrong about how they vote on
compensation - but only 1% of proxies included that issue.

In 1985 I recall Mobil's CEO got a $3.5 million dollar package. I
wonder how, adjusted for inflation, that compares to today's CEO's
'package'. As I recall recently, GIS's CEO takes a $20 million total,
options included. WB's Thomson took away $6.7 million *cash* and could
have exercised and sold options in excess of $100 million if WB had
recovered to $50 within 3-5 years (now that's gross).

What I fear is that directors fall into a 'mind-set' that compensation
must be huge. I wish I understood more about 'aligning executive's
interests with those of the company' - because right now it looks like
a big fat cop-out to me. I try to select well-managed companies, but
often hold my nose over the CEO making twice what his second gets,
which is twice what the third gets, and so on down. And the thing with
Disney and Ovitz (and later "me too" packages) really make me sick.
One agrees, then another, and pretty soon everyone wants a gold hula-
hoop. Tens of millions for a few months work? Ethics drop out, and
that will reflect in the quality of decisions. Where's that "Against"
box ... ?

George.

On Dec 14, 6:26*pm, dapperdobbs <George...[at]hotmail.com> wrote:

- quote -

http://www.ici.org/statements/remark...vens_spch.html
has some comments on how funds vote their shares.

I frequently fail to vote my shares because it's not clear as to what
is in my best interest.

--
Ron

On Dec 14, 7:54*pm, beliav...[at]aol.com wrote:
- quote -

Beliav -

CNBC reported that of the 2,000 hedge funds in 2006 the *average*
compensation was $350 million. CNBC also reported that was taxed at
capital gains tax rates of 15%. I'm not trying to be contentious,
here, but honestly, I do not believe for a moment that all hedge funds
have no spill-over into the broader economy. LTCM (Long Term Capital
Management) for example had $4 billion some-odd in capital near its
demise (via bank bailout) in 1998 - but they "had" to be bailed out
because they controlled over $114 billion. If those bonds were dumped
in liquidation, the FRB felt it would cause a world-wide financial
crisis on top of the one (1998) already unfolding.

The bailout we are in now is simply banks who took on hedge-fund type
leverage.

Modoff was self-contained with investors as losers. The banks on the
other hand leveraged *everyone's* deposits, and continue to do so, and
they are obviously not self-contained. Nor was LTCM. Why these
'people' should get filthy rich - at hedge funds, banks, insurance
companies, and other related disasters is beyond me. I also feel that
healthy companies' compensation packages are way out of line, and
could be brought back to reality through shareholder proxy votes.

- George

On Dec 14, 3:12*pm, dapperdobbs <George...[at]hotmail.com> wrote:

- quote -

Hedge fund managers don't get "salaries" of $350 million. A few very
sucecssful ones earn such performance fees when their funds are large
and do extremely well. Since no one is forced to invest in a hedge
fund, and since the fees are disclosed ahead of time, I don't think
the government should set limits on such performance fees.

On Dec 14, 3:54*pm, Don <dwz...[at]telus.net> wrote:
- quote -

I.e. fund managers are a subset, as are CEO's of now defunct financial
companies. Ten of them? Twenty? I own only a small number of one
mutual fund's shares ... they were overweighted in financials.
Obviously, the dog ate their homework (i.e. they did not do it).

- quote -

Precisely - in the theory, the analyst department is entirely
segregated from the portfolio management (pm). Some family of funds
"pm's" are fed from the same companies to choose from. Others begin
with the SP500, with the idea that they will not stray far from their
'benchmark'. I think that's why index funds became popular. I believe
size of fund determines the 25x pay, but to me, it's a linear
rationalization of excess.

I vote company proposals as I see fit. But how do funds, funds with
high turnover, and index funds vote their shares? If more people
invested in individual companies instead of being passive, would that
affect compensation?

- George

On 2008-12-14 12:12:55 -0800, dapperdobbs <GeorgeCFL[at]hotmail.com> said:

- quote -

Suppose the manager of fund A gets a 2 million and the manager of fund
B, with similar investment goals, gets 50 million. We should ask: In
what way does fund B differ from fund A? Has it had superior
performance in the past? What is manager B's record and investment
skills, and are they really worth 25 times more than manager A? Or is
manager B very bad at his job compared to A?

My guess is that you would not often find a big difference in the past
performance of the two funds. In fact, I would bet that the two funds
invest in many of the same companies, and that differences in decision
making about the choices are limited to a relatively few possible
investments. Anyway, we know past performance does not guarantee future
results. So why does one manager get 25 times as much compensation as
another? Does someone believe his unusual expertise will bring
remarkable results in the future? Who believes that?

Another question: We are paying attention to excessive compensation for
managers, but what about other officers in the companies and their
boards of directors? Are managers alone in dipping into the pot, or
they paid those huge salaries because others who do the hiring and
firing are dipping into the pot too?

Norak - As regards voting shares against excessive exec compensation,
I've voted against nominees many times (my tiny number is like one
vote per citizen - it DOES count). But I believe mutual fund managers
fall into the same category of overcompensated execs. Really, if
someone can't manage their personal affairs on less than $5 million a
year, is he r-e-a-l-l-y qualified to run a company? It's turned into a
club of people who have no conception of the meaning of production.

Look at the number of mutual funds who had more than 12% of their so-
called risk adjusted asset allocation in financials such as FNM, FRE,
AIG and so on. Ya' think they did in-depth analysis before putting up
hundreds of millions of dollars (e.g. $1.6 billion into WB)?
Naaaahhhh.

Anyone who owns funds should put pressure on their fund to vote
against some of the ridiculous pay packages, such as MER had, and
maybe we'll see an end to the $350 million dollar annual salaries paid
to hedge fund heads in 2006?

If there is excessive executive compensation to the point where it is
a detriment to the company's profitability, active investors can fix
the problem because shareholders can sell the stock or vote to change
the company. However, if passive investors outnumber active investors,
then couldn't executives get away with higher compensation?