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I've actually helped manage a company in financial distress. Here's reality: - First, most executives have little impact on the specific event that put the fir

I've actually helped manage a company in financial distress. Here's reality: - First, most executives have little impact on the specific event that put the firm under. (I was a senior marketing person; the building burned down. Fire safety was most assuredly NOT within my purview or even something I could ask about) - Running a business in financial distress basically sucks. Take your job and make it 10 X harder. You're basically running a startup, except your credit is officially shot, your employees know layoffs are coming, your competitors and customers know you're vulnerable, and key personnel with families are saying to hell with this, I want to be sure my kid is going to college (and bailing out). - I'll go one better, speaking from experience. Most key executives can take part of the business with them. So when they leave, part of what little is left of the company leaves with them (customers, technology, capabilities). What are you going to do, sue? bwahahah. Good luck, your lawyers are already swamped... - Most executives are actually reasonable talented people. They have value on the open market. Often significant and freed of any golden handcuffs they once wore. - Oh yeah... there is a high probability of failure or other drastic changes. So promises are worthless. Our leadership structure changed three times in five months. You have no guarantees that the person who made a promise will be in a position to honor it (or even be around). Turnarounds are a cash-only game. So unless you like working for free - in hell... the current system is the only way to get decent talent to stay.

II2II 6y ago
There is no denying that it takes skill and hard work to keep a business afloat in these times, or that it is stressful, or that it is easier to walk away than deal with the situation. On the other hand, very few businesses are the product of a small subset of its people. In many businesses, such as some of the businesses mentioned in this article, it isn't a question of whether those other people can afford to send their children to college. They already knew the answer to that question: they cannot. Instead, it is a question of whether they provide their family with the bare essentials. I am not suggesting that executives should sacrifice themselves for the benefit of the company or other employees. What I am suggesting is that it is immoral to take more when others are given less. If you disagree with that, that's fine. Consider it an ideological difference. Yet it is also important to realize that there are people who would disagree with both of us, that those who have more also have an obligation to sacrifice more in a time of crisis.
- texasbigdata 6y ago
  Look at American business composition statistics. Most businesses are small. A few people totally matter.
- waheoo 6y ago
  > What I am suggesting is that it is immoral to take more when others are given less. You mean like how America takes more than the rest of the world? I think the underlying problem here is that executive salaries and bonuses are at too higher multiples. Much higher than historical norms. Not many would complain about an exec getting a bonus during this time if it was actually reasonable in the first place.
  - mjburgess 6y ago
    Sure they would. These "time of crisis" instincts are very primitive, as are most emotional reactions of this kind. To makes sense of them just imagine an extended family operating, c. 100k years ago. The idea is this: in a time of crisis (say, very low food) how immoral it would be for the father (, etc.) to take much more than the mother (etc.). And these feels very plausible. It is in the nature of a family to expect sacrifce. It is these small-scale familial impulses that ideologues often rationalise (on both left and right). What economics as a (rough) science is meant to provide us with is a way of transcending these impulses. These microeconomic explanations should persuade us that they are being misapplied in this case, and "familial-crisis" thinking cannot plausibly apply to a buisness. However most people cannot really critically relate to their own emotional instincts, and so often explaining the microeconomics is shouting into the wind.
    - darkerside 6y ago
      I think this is your point but helping spell it out. The father in this case is probably the best shot at obtaining more food for the starving family and needs energy to do so.
      - clairity 6y ago
avs733 6y ago
- First, most executives have little impact on success of a firm in the best of times - Working for a business in financial distress basically sucks.
- mostlyghostly 6y ago
  Find better executives :)
bryanrasmussen 6y ago
>- First, most executives have little impact on the specific event that put the firm under. (I was a senior marketing person; the building burned down. without stats I gotta think your case is an outlier, and in many other companies having financial difficulties a senior marketing person might have more impact (although I think impact is generally supposed to be at a higher level than senior marketing)
- learnstats2 6y ago
  Also - fire contingency planning is quite literally the executives' job. They may have perceived that as a small risk, or it may not have been on their radar, but that was their decision. Why do they get rewarded first?
fizixer 6y ago
So what you're trying to say is that execs getting these kind of bonuses in a financially distressed company is not unlike vultures feeding on a carcass, except that in this case the vultures were nurtured by the same "person" that's now the carcass, for years and probably decades, AND, it's part of the job of the vulture to keep the "person" from becoming the carcass. Note-to-self: Stay away from vulture-minded execs. Note-to-investors: Keep an eye on and go the extra mile in rooting out the vulture-minded execs in your companies, before shit hits the fan.
- sokoloff 6y ago
  Investors would probably do well to find executives to run their companies who know about market value/comps, know that $X is greater than $X/2 for all positive values of $X, and make decisions based on that knowledge. If their market value elsewhere and their replacement’s demand here is $X and the company’s current projected comp is $X/2, that’s only tenable for a very short time.
rm445 6y ago
Complete tangent to your interesting post, but in companies that build a good safety culture, fire safety is within everyone's purview and something anyone can ask about. In the organisation I work at, the marketing manager could totally raise safety issues. It's surprising until you start to think about it, at a certain size, many companies are very much at existential risk from a building fire.
kelnos 6y ago
> First, most executives have little impact on the specific event that put the firm under. (I was a senior marketing person; the building burned down. Fire safety was most assuredly NOT within my purview or even something I could ask about) That's perhaps reasonable for you, but business succession planning and disaster contingency planning is the job of the board and executive team. They made a choice to discount the possibility of a building fire taking out the business, and that's a failure they should be accountable for. Or, worse, they didn't make a choice, and didn't even think of that risk. And yet now they're being "rewarded" with a bonus so they'll stick around to fix their mistake after it's too late? At the end of the day you have a company full of people, and you're going to lay most of them off. Given the financial distress the company is in, they're not going to get much of a severance package, especially since you "need" to throw much of the remaining money at the executive team to keep them around. And for what, really? So a bunch of high-paid executives can pat themselves on the back that they "heroically" brought a company back from the brink? That's little comfort to the people who got laid off and struggled to find a new job before their severance ran out.
- darkerside 6y ago
  Do you have an alternative proposal?
- mostlyghostly 6y ago
  You're assuming: a) the risk can be neatly packaged and mitigated b) the cost of appropriately mitigating that risk wouldn't preclude running the business. Long tail risks exist in every business, that rare event that takes the whole thing down. There are tons of them. Each of which has a .00001% chance of happening. The consumer brand version of this having one of your employees say some stupid shit in at bar (on video) or the summer intern like the wrong tweet, at which point a woke mob descends upon your brand with pitchforks at the ready.... There is no practical way to mitigate this. You can do the basics (don't hire assholes) but it's open season from there. I've always thought the most thankless job in the world is running HR or PR at a massive retail company like Wal-mart or Macdonalds. You're one redneck idiot away from being on the national news (for doing or saying something most reasonable humans would never dream of) and you have literally hundreds of thousands of these people showing up for work each day. At which point, you get the soul crushing task of getting on national television to explain the conduct of the moron in question and explain how it doesn't represent some embedded policy of the company to encourage <bad thing>. Better yet - you get do this every couple of months, since you have hundreds of thousands of these morons. Statistically, it becomes a predictable process.

II2II 6y ago

There is no denying that it takes skill and hard work to keep a business afloat in these times, or that it is stressful, or that it is easier to walk away than deal with the situation. On the other hand, very few businesses are the product of a small subset of its people. In many businesses, such as some of the businesses mentioned in this article, it isn't a question of whether those other people can afford to send their children to college. They already knew the answer to that question: they cannot. Instead, it is a question of whether they provide their family with the bare essentials. I am not suggesting that executives should sacrifice themselves for the benefit of the company or other employees. What I am suggesting is that it is immoral to take more when others are given less. If you disagree with that, that's fine. Consider it an ideological difference. Yet it is also important to realize that there are people who would disagree with both of us, that those who have more also have an obligation to sacrifice more in a time of crisis.

texasbigdata 6y ago
Look at American business composition statistics. Most businesses are small. A few people totally matter.
waheoo 6y ago
> What I am suggesting is that it is immoral to take more when others are given less. You mean like how America takes more than the rest of the world? I think the underlying problem here is that executive salaries and bonuses are at too higher multiples. Much higher than historical norms. Not many would complain about an exec getting a bonus during this time if it was actually reasonable in the first place.
- mjburgess 6y ago
  Sure they would. These "time of crisis" instincts are very primitive, as are most emotional reactions of this kind. To makes sense of them just imagine an extended family operating, c. 100k years ago. The idea is this: in a time of crisis (say, very low food) how immoral it would be for the father (, etc.) to take much more than the mother (etc.). And these feels very plausible. It is in the nature of a family to expect sacrifce. It is these small-scale familial impulses that ideologues often rationalise (on both left and right). What economics as a (rough) science is meant to provide us with is a way of transcending these impulses. These microeconomic explanations should persuade us that they are being misapplied in this case, and "familial-crisis" thinking cannot plausibly apply to a buisness. However most people cannot really critically relate to their own emotional instincts, and so often explaining the microeconomics is shouting into the wind.
  - darkerside 6y ago
    I think this is your point but helping spell it out. The father in this case is probably the best shot at obtaining more food for the starving family and needs energy to do so.
    - clairity 6y ago

avs733 6y ago

- First, most executives have little impact on success of a firm in the best of times - Working for a business in financial distress basically sucks.

mostlyghostly 6y ago
Find better executives :)

bryanrasmussen 6y ago

>- First, most executives have little impact on the specific event that put the firm under. (I was a senior marketing person; the building burned down. without stats I gotta think your case is an outlier, and in many other companies having financial difficulties a senior marketing person might have more impact (although I think impact is generally supposed to be at a higher level than senior marketing)

learnstats2 6y ago
Also - fire contingency planning is quite literally the executives' job. They may have perceived that as a small risk, or it may not have been on their radar, but that was their decision. Why do they get rewarded first?

fizixer 6y ago

So what you're trying to say is that execs getting these kind of bonuses in a financially distressed company is not unlike vultures feeding on a carcass, except that in this case the vultures were nurtured by the same "person" that's now the carcass, for years and probably decades, AND, it's part of the job of the vulture to keep the "person" from becoming the carcass. Note-to-self: Stay away from vulture-minded execs. Note-to-investors: Keep an eye on and go the extra mile in rooting out the vulture-minded execs in your companies, before shit hits the fan.

sokoloff 6y ago
Investors would probably do well to find executives to run their companies who know about market value/comps, know that $X is greater than $X/2 for all positive values of $X, and make decisions based on that knowledge. If their market value elsewhere and their replacement’s demand here is $X and the company’s current projected comp is $X/2, that’s only tenable for a very short time.

rm445 6y ago

Complete tangent to your interesting post, but in companies that build a good safety culture, fire safety is within everyone's purview and something anyone can ask about. In the organisation I work at, the marketing manager could totally raise safety issues. It's surprising until you start to think about it, at a certain size, many companies are very much at existential risk from a building fire.

kelnos 6y ago

> First, most executives have little impact on the specific event that put the firm under. (I was a senior marketing person; the building burned down. Fire safety was most assuredly NOT within my purview or even something I could ask about) That's perhaps reasonable for you, but business succession planning and disaster contingency planning is the job of the board and executive team. They made a choice to discount the possibility of a building fire taking out the business, and that's a failure they should be accountable for. Or, worse, they didn't make a choice, and didn't even think of that risk. And yet now they're being "rewarded" with a bonus so they'll stick around to fix their mistake after it's too late? At the end of the day you have a company full of people, and you're going to lay most of them off. Given the financial distress the company is in, they're not going to get much of a severance package, especially since you "need" to throw much of the remaining money at the executive team to keep them around. And for what, really? So a bunch of high-paid executives can pat themselves on the back that they "heroically" brought a company back from the brink? That's little comfort to the people who got laid off and struggled to find a new job before their severance ran out.

darkerside 6y ago
Do you have an alternative proposal?
mostlyghostly 6y ago
You're assuming: a) the risk can be neatly packaged and mitigated b) the cost of appropriately mitigating that risk wouldn't preclude running the business. Long tail risks exist in every business, that rare event that takes the whole thing down. There are tons of them. Each of which has a .00001% chance of happening. The consumer brand version of this having one of your employees say some stupid shit in at bar (on video) or the summer intern like the wrong tweet, at which point a woke mob descends upon your brand with pitchforks at the ready.... There is no practical way to mitigate this. You can do the basics (don't hire assholes) but it's open season from there. I've always thought the most thankless job in the world is running HR or PR at a massive retail company like Wal-mart or Macdonalds. You're one redneck idiot away from being on the national news (for doing or saying something most reasonable humans would never dream of) and you have literally hundreds of thousands of these people showing up for work each day. At which point, you get the soul crushing task of getting on national television to explain the conduct of the moron in question and explain how it doesn't represent some embedded policy of the company to encourage <bad thing>. Better yet - you get do this every couple of months, since you have hundreds of thousands of these morons. Statistically, it becomes a predictable process.