SENATE BILL: Executive Compensation Act of 2014 (Redraft Vetoed)

[Lumine]

Nay.

[DC Al Fine]

Nay

[🐒Gods of Prosperity🔱🐲💸]

Nay

[Fmr. Pres. Duke]

Probably heading for a redraft here. I'm unlikely to sign this with part 4 included, as it is too much of an intrusion on a company's stock and does nothing to accomplish the goal of lessening executive compensation. If anything, executives will receive even more 5 years after retirement, as markets typically increase over time.

I am fine with the rest of the bill though.

[President Tyrion]

If anything, executives will receive even more 5 years after retirement, as markets typically increase over time.

That's a thing people know, though. Why wouldn't that get factored into the cost of compensation, consciously or subconsciously? I'm sure it wouldn't be perfect, since humans aren't rational decision-makers, but most people who make such deferred payments would at least account for inflation in the payment type.

[Fmr. Pres. Duke]

If you have learned anything, dear Tyrion, it is that humans are not irrational, despite what economics will tell you - and I usually buy into most of what I have studied in that field. I doubt section 4 would do anything to curb executive compensation.

In fact, I wouldn't be surprised to see options being used more to make up for the fact that executives wouldn't be allowed to cash them in while working! Think of the inflation, they will say! As with all measures to limit executive compensation, they usually have the opposite effect on what we intend; see: capping the tax write off for executive compensation, which led to this whole stock compensation in the first place.

Either one of us could be right on this matter, but I just fear that this would have an opposite effect and executives may do better in the long term. Yeah, they may be poorer while they work, but that wouldn't last. And we run the risk of having high executive turnover because people will move around in order to cash in on their options. If people want to get their money, they will find a way to do it.

Let's not forget the lengths people will go to satisfy their greed.

[Southern Senator North Carolina Yankee]

So what do you suggest to address the reversing the trend towards stock based compensation, Mr. President? Reversing the tax write-off?

[Fmr. Pres. Duke]

So what do you suggest to address the reversing the trend towards stock based compensation, Mr. President? Reversing the tax write-off?

I don't know if that will have any effect anymore now that companies have moved in that direction. What I do believe is requiring companies to force executives not to sell until 5 years after leaving a company is not the answer. I don't even know what it really aims to accomplish besides encouraging executives to leave companies sooner rather than later to be able to cash in on their stock faster.

We had this debate previously and put in some regulations to increase shareholder awareness. Beyond that, I am not sure. I'm afraid imposing the cap as we did in the 1990s opened pandoras box.

[Southern Senator North Carolina Yankee]

Reluctant Nay


Took a look at the Private Securities Litigation Reform Act of 1995, and it had and interesting vote divide with Kennedy and Harkin voting Aye and many Conservative Dems against it. But it seems like the primary purpose was tort reform or the equivalent thereof. While I might be interested in amending it, I am hessitant to repeal it entirely.

[Adam Griffin]

Aye

[Cincinnatus]

Vote on the Executive Compensation Act of 2014:

Aye (5): Griffin, Tyrion, Alfred, bore, and TNF
Nay (5): Yankee, shua, DC, Lumine, and Goldwater
Abstain (0):

Didn't Vote (0):

The vote is tied.

[Cincinnatus]

Aye

[Fmr. Pres. Duke]

I can smell that redraft train coming!

[President Tyrion]

If you have learned anything, dear Tyrion, it is that humans are not irrational, despite what economics will tell you - and I usually buy into most of what I have studied in that field. I doubt section 4 would do anything to curb executive compensation.

In fact, I wouldn't be surprised to see options being used more to make up for the fact that executives wouldn't be allowed to cash them in while working! Think of the inflation, they will say! As with all measures to limit executive compensation, they usually have the opposite effect on what we intend; see: capping the tax write off for executive compensation, which led to this whole stock compensation in the first place.

Either one of us could be right on this matter, but I just fear that this would have an opposite effect and executives may do better in the long term. Yeah, they may be poorer while they work, but that wouldn't last. And we run the risk of having high executive turnover because people will move around in order to cash in on their options. If people want to get their money, they will find a way to do it.

Let's not forget the lengths people will go to satisfy their greed.

Humans aren't irrational?

Maybe it's just a definition of terms issue, but I define "rational" decision-making as making the best decision all the time. I guess if you want to be pedantic, the best decision is hardly an objective term, but, anyway, that is beside the point.

What I'm saying is that humans will inherently make mistakes. Such is life. Not every decision will be the right one, is all I'm saying.

I don't particularly intend Section 4 to cut executive compensation. I intend for it to change the incentives surround executive compensation. Indeed, I do not believe that executives should not earn money, in general. If we can incentivize (apparently Krugman doesn't want me to use that as a verb, but who cares?) better work from executives, then they do indeed deserve a higher salary than they might otherwise. Maybe conservatives and liberals have different ideas of what an executive might deserve to begin with (or maybe not), but the fact remains that I want to make all workers, from the factory to the boardroom, work better. Good work is a good economy.

Why did I drop that diatribe? Because I think this system would incentivize better long term decisions, and thus result in better work by executives. Inflationary expectations do beget inflation, and inflation in the market functions differently as inflation in buying power; both of these statements are true. So there is likely the end result that executives may receive more compensation from this bill, in raw buying power terms. I don't really see that as an issue; executives who get $10 in Year 1 should be able to grow that money with the market until Year 5, and the increased diversification of not having the money tied in one company has value as well. But hell, if you want to spin this as a bill that might increase compensation, that might be a reason for conservatives to vote for it; I don't really mind the route to the conclusion insofar as I enjoy the conclusion itself.

[Fmr. Pres. Duke]

My biggest concern with section 4 really comes down to turnover. Companies need certainty in markets and with their executive team, and I fear that if we put this law into place, we will see high executive turnover because they wish to cash out earlier rather than later. The only way to curb this would be to force them to work for a company for X number of years, but that is far too many strings attached than makes me comfortable, and probably not legal.

This isn't slavery after all. It's a basic right to be able to move around as you please assuming there is no non-compete contract in place.

[President Tyrion]

My biggest concern with section 4 really comes down to turnover. Companies need certainty in markets and with their executive team, and I fear that if we put this law into place, we will see high executive turnover because they wish to cash out earlier rather than later. The only way to curb this would be to force them to work for a company for X number of years, but that is far too many strings attached than makes me comfortable, and probably not legal.

This isn't slavery after all. It's a basic right to be able to move around as you please assuming there is no non-compete contract in place.

Well, I'm not sure why you'd bring up a counter-plan only to call it slavery

In any case, I don't think this would promote turnover. If you leave a company immediately, you sacrifice your earning potential with that company. Think of it this way: I offer you $500 (adjusted for inflation as time passes) five years after you leave your job. Do you quit your job now just to get that $500 sooner? Are you really going to risk unemployment just to get that money sooner? That just wouldn't make sense. You'd have to have another job lined up to even consider it, and, even then, it would have to be a job equal to or better than the job you have currently (not to mention the underlying costs of switching jobs).

[Fmr. Pres. Duke]

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Tyrion, I like to knock even my own alternatives sometimes

The way I see it is this: exec signs a contract with stock compensation to work for company A. He decides shortly after, say 5 years, that he wants to cash those in, so he leaves and takes a job with company B so he can cash in his stock from company A. This becomes an ongoing problem. Executives typically can find new jobs and high paying jobs at that, and "experience" may not mean as much because of the new law. Companies and individuals will do a lot to get their money.

I just view this as creating unnecessary hoops that will only hurt our job market because it encourages turnover and will cause a lack of continuity in the marketplace. Companies changing high level executives is a big, big deal. If we had a better reason for this, maybe I could support it, but as of now, I just can't. Sorry. We can still be friends though.

Thus, I am offering this redraft.

[Southern Senator North Carolina Yankee]

THe sponsor has the right to choose between voting on the redraft or withdrawing the bill. If he requests a vote and it fails, he will then have the option to resume debate or send it back as is to the President.

[President Tyrion]

Yankee, I would like to vote on the redraft. I do not want to withdraw the bill.

There aren't enough votes for a veto override, are there? I'll accept the current version, but I'd rather have the original. In any case, I'd rather pass this than not at all, even if it's a lot weaker than I originally intended.

[Cincinnatus]

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A vote is now open on the aforementioned redraft.  Please vote Aye, Nay, or Abstain.

[H.E. VOLODYMYR ZELENKSYY]

Aye.

[Southern Senator North Carolina Yankee]

Yankee, I would like to vote on the redraft. I do not want to withdraw the bill.

There aren't enough votes for a veto override, are there? I'll accept the current version, but I'd rather have the original. In any case, I'd rather pass this than not at all, even if it's a lot weaker than I originally intended.

We are on different wavelengths (me and the President here) and with regards to my vote, the changed section really doesn't affect it one way or the other. My main concern was full repeal contained in clause 1, which merely would open the door to a lot of junk lawsuits and that seems a rather imprecise and costly way to acheive this objective in my opinion. I mean Ted Kennedy voted for the law in question as did Tom Harkin.

[Goldwater]

Abstain

[bore]

Aye

[TNF]

Aye