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> Are you going to stick around and try to dig out the company without a retention bonus? No. You have a couple of times framed opposition to executive bonuses

> Are you going to stick around and try to dig out the company without a retention bonus? No. You have a couple of times framed opposition to executive bonuses in these situations as "simple" and "emotional", while expressing an appreciation for "creative destruction". So, if an executive would rather leave than turn a company around while tightening their own belt -- especially given that some of these executives can be assumed to be at least partly responsible for the company's plight anyway -- then why not encourage them to leave, and open the door for a more creative, new executive? Imagine if, instead of paying extortionate sums of cash to retain the architects of their destruction, large companies created an entirely new market for c-levels that wanted to specialize in turnarounds.

lend000 6y ago
What you're describing sounds nice but apparently the incentives don't support it (perhaps because it's better to keep the people who know all about their company than contract execs who know nothing about the company or perhaps even the industry). I agree with part of what you are saying, hence my tirade about how Chapter 11 bankruptcy laws need reform. But what bothers me is that most people just assume the executives (who mostly aren't even responsible for their pay) are evil, without understanding how everyone acted rationally and morally under the incentives of the broken system. The fact that it's happening on such a broad scale should be a clue that the system is broken, rather than a statistically significant collection of individuals. Just to spell it out for everyone, there are a few actions happening here, highly incentivized by the system. I doubt many of the self righteous commenters here would do anything differently put in a position to make any of these decisions. 1. You are a major shareholder of a company. The company cannot pay its debts. The debts are greater than the company's assets. You have two options. Vote to file chapter 7 (liquidate to the debtors and get nothing) or file chapter 11 (get the court to forgive as much debt as possible and maybe you will get something back if the company turns itself around). Many of the major shareholders hold significant portions of their net worth in one company, or are institutions (e.g. Vanguard) which have a responsibility to do the financially prudent thing for mom and pop investors like you and me. 2. Predictably, the shareholders voted to file chapter 11. This has already happened. Given that it has happened, you want to give the company the best chance of making a recovery and returning value to shareholders. It makes sense to partially restore executive salaries with retention bonuses, so that you have leadership to keep the company afloat while restructuring. Note that most of these salaries would have been heavily impacted by the bankruptcy filing, in which options and RSU's (the majority of most exec salaries) are now nearly worthless. So you sign a retention bonus as soon as you know bankruptcy is inevitable. Don't hate the players, hate the game. As I tried to elucidate in this thread, the problem is not any immoral actors, but the power of corporate chapter 11 bankruptcy and the fact that creditors' do not get to vote on the likelihood of it being a better ROI for them. It's simpler to blame it on the evil greedy executives (which makes no sense in this case) or try to make all sorts of band-aid amendments to how you can give bonuses to executives during a bankruptcy, but that misses the core problem.
- rectang 6y ago
  > Don't hate the players, hate the game. Who's going to get in the way if we try to change the rules of the game? The players, naturally. The system produces an immoral result because it is in the interest of immoral actors to keep it that way. I have no confidence whatsoever that any reforms will make it past them.
  - lend000 6y ago
    Which players are going to aggressively lobby for this? Only ones who are in the early stages of declaring bankruptcy (not the deepest pockets). Whereas creditors (big banks) probably have more sway, and would benefit from chapter 11 to be weaker. What you're saying is intellectually lazy and bordering on /r/conspiracy. You shouldn't stop identifying, understanding, and petitioning to fix the problem simply because you think you might get some pushback.
    - rectang 6y ago
      > Which players are going to aggressively lobby for this? Corporate executives, of course. It is in their interest to ensure they maximize their benefit at all stages of the business life cycle. Any attack that could negatively affect executive compensation at any time will be staunchly opposed, out of principle. Their arguments we can anticipate, we have seen already in this thread: the business needs their unique talent and deep knowledge, they are doing the business a favor by not jumping ship, it is only just that they be compensated... > What you're saying is intellectually lazy and bordering on /r/conspiracy. You shouldn't stop identifying, understanding, and petitioning to fix the problem simply because you think you might get some pushback. I believe the more fundamental problem is mythologizing of corporate executives, and I am not afraid of pushback, such as I am receiving in this very exchange.
      - lend000 6y ago
        I think you overestimate how many executives think bankruptcy "could happen to them." It's almost as if you are mythologizing them as some omniscient, conniving villains. In any case, this is a very strange justification for doing nothing (instead of advocating to fix chapter 11).
mcrae 6y ago
You’re assuming that there is a pool of hypothetical executives who are a) familiar with the industry, b) familiar with the company, c) available, and d) willing to earn an amount less than what the existing executives are offered here, and e) willing to take a very risky job that will likely end fairly shortly. I’m not an expert but it seems like these people may not exist and that keeping the existing management on may be in the shareholders’ interest.
- daniel-cussen 6y ago
  Promote internally. That's what generally happens in the military under similar conditions. Xenophon wrote about the march of the 10,000 Greek mercenaries whose officers were murdered by the Persians, inside Persia. They elected new officers, swearing to obey their orders, and fought their way out of Persia, returning the survivors to Greece.
  - mcrae 6y ago
    Yes but... and I'm sorry to point out the obvious, but these executives haven't been murdered by Persians. They've just been paid a relatively trivial amount to do their jobs for a few months. And who's to stay the internally-promoted folks will demand any less payment? Anyways, sounds like you're just opposed to these payments fundamentally despite all of the rational arguments that have been elucidated in this thread in support of them.
    - R0b0t1 6y ago
      He's arguing the support is nonsensical considering the facts. That you disagree is your opinion.
  - sokoloff 6y ago
    If you thought those internal candidates were better, why didn’t you promote them before? Either you think they’re not, or you think that now you have evidence they are based on the fact that the current execs drove the thing to the brink. That’s a fair piece of data for a lot of cases, but I don’t think that’s the case for a lot of pandemic-shutdown-induced cases that we’re seeing now.

lend000 6y ago

What you're describing sounds nice but apparently the incentives don't support it (perhaps because it's better to keep the people who know all about their company than contract execs who know nothing about the company or perhaps even the industry). I agree with part of what you are saying, hence my tirade about how Chapter 11 bankruptcy laws need reform. But what bothers me is that most people just assume the executives (who mostly aren't even responsible for their pay) are evil, without understanding how everyone acted rationally and morally under the incentives of the broken system. The fact that it's happening on such a broad scale should be a clue that the system is broken, rather than a statistically significant collection of individuals. Just to spell it out for everyone, there are a few actions happening here, highly incentivized by the system. I doubt many of the self righteous commenters here would do anything differently put in a position to make any of these decisions. 1. You are a major shareholder of a company. The company cannot pay its debts. The debts are greater than the company's assets. You have two options. Vote to file chapter 7 (liquidate to the debtors and get nothing) or file chapter 11 (get the court to forgive as much debt as possible and maybe you will get something back if the company turns itself around). Many of the major shareholders hold significant portions of their net worth in one company, or are institutions (e.g. Vanguard) which have a responsibility to do the financially prudent thing for mom and pop investors like you and me. 2. Predictably, the shareholders voted to file chapter 11. This has already happened. Given that it has happened, you want to give the company the best chance of making a recovery and returning value to shareholders. It makes sense to partially restore executive salaries with retention bonuses, so that you have leadership to keep the company afloat while restructuring. Note that most of these salaries would have been heavily impacted by the bankruptcy filing, in which options and RSU's (the majority of most exec salaries) are now nearly worthless. So you sign a retention bonus as soon as you know bankruptcy is inevitable. Don't hate the players, hate the game. As I tried to elucidate in this thread, the problem is not any immoral actors, but the power of corporate chapter 11 bankruptcy and the fact that creditors' do not get to vote on the likelihood of it being a better ROI for them. It's simpler to blame it on the evil greedy executives (which makes no sense in this case) or try to make all sorts of band-aid amendments to how you can give bonuses to executives during a bankruptcy, but that misses the core problem.

rectang 6y ago
> Don't hate the players, hate the game. Who's going to get in the way if we try to change the rules of the game? The players, naturally. The system produces an immoral result because it is in the interest of immoral actors to keep it that way. I have no confidence whatsoever that any reforms will make it past them.
- lend000 6y ago
  Which players are going to aggressively lobby for this? Only ones who are in the early stages of declaring bankruptcy (not the deepest pockets). Whereas creditors (big banks) probably have more sway, and would benefit from chapter 11 to be weaker. What you're saying is intellectually lazy and bordering on /r/conspiracy. You shouldn't stop identifying, understanding, and petitioning to fix the problem simply because you think you might get some pushback.
  - rectang 6y ago
    > Which players are going to aggressively lobby for this? Corporate executives, of course. It is in their interest to ensure they maximize their benefit at all stages of the business life cycle. Any attack that could negatively affect executive compensation at any time will be staunchly opposed, out of principle. Their arguments we can anticipate, we have seen already in this thread: the business needs their unique talent and deep knowledge, they are doing the business a favor by not jumping ship, it is only just that they be compensated... > What you're saying is intellectually lazy and bordering on /r/conspiracy. You shouldn't stop identifying, understanding, and petitioning to fix the problem simply because you think you might get some pushback. I believe the more fundamental problem is mythologizing of corporate executives, and I am not afraid of pushback, such as I am receiving in this very exchange.
    - lend000 6y ago
      I think you overestimate how many executives think bankruptcy "could happen to them." It's almost as if you are mythologizing them as some omniscient, conniving villains. In any case, this is a very strange justification for doing nothing (instead of advocating to fix chapter 11).

mcrae 6y ago

You’re assuming that there is a pool of hypothetical executives who are a) familiar with the industry, b) familiar with the company, c) available, and d) willing to earn an amount less than what the existing executives are offered here, and e) willing to take a very risky job that will likely end fairly shortly. I’m not an expert but it seems like these people may not exist and that keeping the existing management on may be in the shareholders’ interest.

daniel-cussen 6y ago
Promote internally. That's what generally happens in the military under similar conditions. Xenophon wrote about the march of the 10,000 Greek mercenaries whose officers were murdered by the Persians, inside Persia. They elected new officers, swearing to obey their orders, and fought their way out of Persia, returning the survivors to Greece.
- mcrae 6y ago
  Yes but... and I'm sorry to point out the obvious, but these executives haven't been murdered by Persians. They've just been paid a relatively trivial amount to do their jobs for a few months. And who's to stay the internally-promoted folks will demand any less payment? Anyways, sounds like you're just opposed to these payments fundamentally despite all of the rational arguments that have been elucidated in this thread in support of them.
  - R0b0t1 6y ago
    He's arguing the support is nonsensical considering the facts. That you disagree is your opinion.
- sokoloff 6y ago
  If you thought those internal candidates were better, why didn’t you promote them before? Either you think they’re not, or you think that now you have evidence they are based on the fact that the current execs drove the thing to the brink. That’s a fair piece of data for a lot of cases, but I don’t think that’s the case for a lot of pandemic-shutdown-induced cases that we’re seeing now.