Comments on: Chutes packed and ready to be deployed at Sun http://insidehpc.com/2009/06/17/chutes-packed-and-ready-to-be-deployed-at-sun/ HPC News Without the Noise for Supercomputing Professionals | insideHPC Sun, 19 May 2013 10:46:54 +0000 hourly 1 http://wordpress.org/?v=3.1.1 By: John West http://insidehpc.com/2009/06/17/chutes-packed-and-ready-to-be-deployed-at-sun/#comment-169928 John West Thu, 18 Jun 2009 01:41:27 +0000 http://insidehpc.com/?p=5635#comment-169928 I don't argue that Sun is fundamentally different, but this is because I do not believe that executive salaries are systemically egregious or absurd as you suggest. There is a direct link to markets and executive salaries -- if investors didn't believe in the executive team, or didn't believe they were worth what they were being paid, they simply would not buy the stock of the company. Stock plummets, and company either fails or installs new management in response. Either way, temporary inappropriate deviations from "fair pay" are corrected. If stockholders (i.e., owners) do not take this action against a company, either they do not believe the salaries are out of line (and they are the owners, which makes them by definition correct), or they are not doing their job. Even if the owners aren't doing their jobs and salaries ARE out of line at a particular company, it isn't part of the salary receiver's obligation to return salary that is above his value, in the same way that no one would expect a company earning more than "it's fair share" of profits in some (non-monopolistic, properly operating) market would expect that company to ignore its fiduciary responsibility to shareholders to maximize profits by returning those profits that were above its "fair share." In a free, efficient market (information is evenly distributed) an item of value -- any item from talent to paintings by van Gogh -- is worth what the highest bidder is willing to pay for it. This is true by definition. You may not feel that any one van Gogh is worth $136M, but Japanese businessman Ryoei Saito did feel that the portrait of Dr. Gachet was worth that much when he bought it in 1990, and that is what he paid for it. Oracle and Sun believe that it is worth $12M to get rid of Jonathan Schwartz, and is willing to pay it. Therefore, he is, by definition. It is modern sport (although by no means a modern, or original, phenomenon) to take aim at "those people" who are making "way too much money." The simple weight of popular opinion is not enough to make an idea correct. If you want a nice thought experiment about where this line of populist thought leads, read "Atlas Shrugged". I don’t argue that Sun is fundamentally different, but this is because I do not believe that executive salaries are systemically egregious or absurd as you suggest.

There is a direct link to markets and executive salaries — if investors didn’t believe in the executive team, or didn’t believe they were worth what they were being paid, they simply would not buy the stock of the company. Stock plummets, and company either fails or installs new management in response. Either way, temporary inappropriate deviations from “fair pay” are corrected. If stockholders (i.e., owners) do not take this action against a company, either they do not believe the salaries are out of line (and they are the owners, which makes them by definition correct), or they are not doing their job.

Even if the owners aren’t doing their jobs and salaries ARE out of line at a particular company, it isn’t part of the salary receiver’s obligation to return salary that is above his value, in the same way that no one would expect a company earning more than “it’s fair share” of profits in some (non-monopolistic, properly operating) market would expect that company to ignore its fiduciary responsibility to shareholders to maximize profits by returning those profits that were above its “fair share.”

In a free, efficient market (information is evenly distributed) an item of value — any item from talent to paintings by van Gogh — is worth what the highest bidder is willing to pay for it. This is true by definition. You may not feel that any one van Gogh is worth $136M, but Japanese businessman Ryoei Saito did feel that the portrait of Dr. Gachet was worth that much when he bought it in 1990, and that is what he paid for it. Oracle and Sun believe that it is worth $12M to get rid of Jonathan Schwartz, and is willing to pay it. Therefore, he is, by definition.

It is modern sport (although by no means a modern, or original, phenomenon) to take aim at “those people” who are making “way too much money.” The simple weight of popular opinion is not enough to make an idea correct. If you want a nice thought experiment about where this line of populist thought leads, read “Atlas Shrugged”.

]]> By: Mark Hahn http://insidehpc.com/2009/06/17/chutes-packed-and-ready-to-be-deployed-at-sun/#comment-169896 Mark Hahn Wed, 17 Jun 2009 21:17:59 +0000 http://insidehpc.com/?p=5635#comment-169896 "whatever the market will bear" is an interesting concept. unfortunately, there's little feedback from the market to influence executive salaries, especially parachutes. the market will bear absurd packages, since the only link from the market to such decisions is the Board, and that's normally stacked with similarly over-compensated executives from other companies. so what it ends up being is "as much as they can get away with". and that's the problem. imagine a different world where the board actually tried to represent shareholder interests, and routinely fired executives of companies which are failing. how badly does the company value need to suffer before the executives are to blame? traditionally the argument against this approach have claimed that super(compensated) execs are necessary to make the company work, and without them, the company will fail. most recently (and egregiously) that argument was made for the obscene compensation packages for failing financial companies. most people disbelieve this argument; how is Sun fundamentally different? “whatever the market will bear” is an interesting concept. unfortunately, there’s little feedback from the market to influence executive salaries, especially parachutes. the market will bear absurd packages, since the only link from the market to such decisions is the Board, and that’s normally stacked with similarly over-compensated executives from other companies. so what it ends up being is “as much as they can get away with”. and that’s the problem.

imagine a different world where the board actually tried to represent shareholder interests, and routinely fired executives of companies which are failing. how badly does the company value need to suffer before the executives are to blame?

traditionally the argument against this approach have claimed that super(compensated) execs are necessary to make the company work, and without them, the company will fail. most recently (and egregiously) that argument was made for the obscene compensation packages for failing financial companies. most people disbelieve this argument; how is Sun fundamentally different?

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