Friday, September 20, 2002


LI has been desperately searching for something else to write about besides the upcoming war. The reason, of course, is that the war has become naturalized in American politics -- there are no parties that oppose it; like Winter, or the next storm, it is simply coming. This sense of onset -- of a thing that is impervious to human will, even as it is foreseeably disastrous to human beings -- is crucial to power as it is envisioned by dreamers of total authority. Total authority, after all, is a piece of nature. Death, flood, storm, lightning -- the bit players in mad Lear's dance on the heath -- these, once associated, as though by necessity, with the "leader', insinuate themselves into the mood of dissent, turning dissent from the expectation of persuasion to the easy desperation of emotional expression. So dissenters turn to invective and alienating names -- Bush as fascist, or the like. When the opposition indulges wholeheartedly in caricature, it loses its force as opposition. Better to play Lear's fool -- to make that narrow passage between outrageous and salient comments.

Robert Fiske, in the Independent, has some interesting comments on the weapons inspectors -- the supposed dupes of whose works the likes of Cheney (in his incarnation as V.P., not in his incarnation as the Iraq-friendly CEO of Haliburtan) is so scornful. The direction of their dupehood is given a spin by Fiske.

"But for now, the Americans have been sandbagged. It will take at least 25 days to put the UN inspection team together, another 60 for their preliminary assessment � always assuming they are given "unfettered" access to all Iraqi government facilities -- then another 60 days for further inspections. In other words, George Bush's latest war has been delayed by more than five months. Saddam, of course, must have his own worries. Back in 1996, the Iraqis were already accusing the UN inspectorate of working with the Israelis.

Major Scott Ritter, Iraq's nemesis-turned-saviour, was indeed � as an inspector � regularly travelling to Tel Aviv to consult Israeli intelligence. Then Saddam accused the UN inspectors of working for the CIA. And he was right. The United States, it emerged, was using the UN's Baghdad offices to bug Iraq's government communications. And once the inspectors were withdrawn in 1998 and the US and Britain launched "Operation Desert Fox", it turned out that virtually every one of the bombing targets had been visited by UN inspectors over the previous six months. Far from being an inspectorate, the UN lads � though they didn't all know it � had been acting as forward air controllers, drawing up an American hit list rather than monitoring compliance with UN resolutions."

Bush is going to get a fearful opposition to go on record supporting a war in spite of UN inspectors, with the really silly mantra that the UN goal is disarmament, and that the U.S. will be the instrument of that goal in spite of the U.N. The silliness resides in the fact that the two sides are certainly not separate. As the Bush people know, if S.H. did "disarm," the claim would have to be verified by -- arms inspection. In fact, we all know that. The beserk tilt against logic itself, and the demand for encouragement from the Democrats, is a sad spectacle quite in keeping with the beginnings of the Bush regime: from usurpation to tin star militarism. Haven't we seen this Western before?

Wednesday, September 18, 2002


Commoditizing exec compensation: a modest proposal

The news about Oracle comes, in LI's opinion, at just the right time. Larry Ellison should be a poster boy for bad corporate behavior. His total compensation package came in at number one in the Forbes CEO pay list. How did he win the greed sweepstakes? By taking home a cool 706 million dollars in stock options that he exercised. Ellison has a little gimmick he plays -- he paid himself, officially, a dollar in salary last year. Well, who needs a salary when your company dilutes its stock to the extent recorded by Mercury News

"Oracle CEO Ellison collected $706 million after exercising stock options and immediately selling the shares in January 2001. The gain meant Ellison set a record in business history for realized annual compensation -- which excludes the value of unexercised options. He received no salary, bonus or other pay last year. Oracle stock fell 61 percent to $15.30 during the fiscal year ended May 2001."

We just wrote a little review for the National Post about an Enron book. It hasn't been published yet. We excized a last paragraph considering extensively the underconsidered reason that executive total compensation has exploded: the insulated nature of the job market in upper management. It is a bit of a joke calling upper management a job market -- it seems more like the Big Fix.

Instead of seeking a market solution -- in other words, how do you make executive culture more competitive -- and letting that drive compensation downward, the idea that executives are something 'special' prevails among compensation reformers. The latest reform is reported this morning in the NYT

"A panel of business leaders proposed changes yesterday in the way corporations pay their top executives. Included in the changes are the prior disclosure of executive stock sales and the uniform treatment of stock options as expenses.

The panel, the Commission on Public Trust and Private Enterprise, was convened in June by the Conference Board, a research group based in New York. The group joined a long list of organizations offering recommendations on overhauling the way corporations govern themselves."

The panel's suggestions are good:

"Other proposals announced yesterday included a recommendation that companies seek shareholders' approval before stock options are repriced and that executives hold shares for a longer period before selling. In addition, the group recommended that compensation committees of corporate boards, not management, retain and direct the activities of outside consultants."

But they merely hint at what is needed to break the monopolistic practices that structure the interlocking interests of corporate boards, top executives, and 'consultants.' What is needed, with execs, was what was needed with electricity, natural gas, and metals: a way of commoditizing them, trading them, and hedging against exec compensation volatility. Is LI suggesting a futures market in executive compensation? Well, something like that. We need to make those compensation packages transparent; we need a way to index them; and we need to use that index to make executives compete among each other for positions, rather than having the holders of positions compete for the executives. It is as simple as that. The way in which corporations compete for executive talent makes sense if, indeed, the corporation is in a relatively new field -- such as PCs, in the late eighties. But as the field matures, prices for those executives should go down. Furthermore, those compensation packages shouldn't lift the compensation awarded to executives in more mature fields. Just that has been happening, however. One of the forces that drives Mergers and Acquisitions is the incentive, among the management class, to create something like a new field, and to then justify inflated compensation as the product of an unstable management situation. This is one of the reasons that M&As are a notoriously bad bet -- historically, they have a well known tendency to create underperforming companies.

However, don't expect LIs suggestion -- or any suggestion that we let the magic of the market-place intrude into the magic kingdoms of CEO-land -- to ever be taken seriously. That is, until boards of directors become real jobs, instead of part time honorariums, and those boards then begin to eye the incipient indexes that already exist -- the annual CEO salary list by Forbes, for instance -- and use it as an opportunity to cut exec cost.

Monday, September 16, 2002


The politics of war and popularity has been one of the great perils of democracy since Pitt the Younger played the patriot card in 1793. �We cannot arrange with our enemy in the present conjuncture, without abandoning the interest of mankind,� Burke wrote, in his �Letters �on the Proposals for Peace with the Regicide Directory of France,� which was Burke�s way of having it two ways: he simulated a moral interest such that the state could not refuse it, while pretending to decry any who would try to force the state to serve ideological interests. The latter was the letter of his indictment of the French revolutionaries � he claimed that they committed crimes in the name of an abstraction. Notice that the abstraction for which the French Revolutionaries were committing crimes was: the interest of mankind. Burke�s objections to the French Revolution became de facto state doctrine under Pitt - which is when the odd delusion was forged that the British empire was not simply a way of aggrandizing British interest, but was instead, mystically, in the interests of the subdued. This, of course, is the True Doctrine of the Neo-Con believers. The case Burke made carried the burden of legitimacy throughout the British-French conflict, up to 1815, and wrought havoc on the rights of Englishmen, as well as on their money.

This two-fold legitimation of war, which seeks to engraft its justification into the very tissue of the state�s legitimacy, is the path used to make any who oppose war unpatriotic, or enemies of the state. It�s a very fine maneuver, and it is being used now by the Bush regime to shift the boundaries of the war debate: it is no longer about the need for it, but the time we will have it. The social ostracism of the peace party is the practical correlate to the inevitability of war, the last few month�s media Muzak: a pervasive perversion of real reasons which operates much like Muzak, that pervasive perversion of real music, to obstruct thought. So those nations which might oppose our Iraqi action are discredited in sometimes laughable acts of propaganda. In the Sunday NYT, for instance, there was an article about the close ties between Iraq and France � ties that were, of course, cut during the Gulf war. There was even a graf showing the nations that traded with Iraq, and the arms they supplied, from Russia to France. Hey ho, however: there was no place there for the U.S. or the U.K. We�ve already published a partial inventory of products that went to Iraq from the U.S., taken from Jentleson�s book. Our sardonic laughter about the chart was increased by the fact that the Sunday NYT also published an article about businesses using misleading charts to disguise their true financial state.

:While other academic research over the last decade has established that financial charts are often designed to paint a rosier corporate picture than the numbers warrant, a study by Deanna Oxender Burgess, an accounting professor at Florida Gulf Coast University, goes a step further. It examined the effect of the chart design on readers of annual reports, who are mainly investors, stock analysts and shareholders.

"Dr. Burgess found that even slight distortions in a chart changed readers' perceptions of the information. "The danger is that people believe there's more growth than there really is or that performance isn't as poor, which could influence investment decisions," said Dr. Burgess, who conducted focus groups with 80 stockbrokers, bankers, accountants and business students."

Slight distortions in a chart � like the exclusion of two nations that, at one time, were making money on shipping those substances and technologies to Iraq that they now use to justify �regime change?� That's what I call a slight distortion.

Sometimes, coincidence really is the best artist.

Southern California Death Trip

    “He was kind but he changed and I killed him,” reads the caption of the photo of a woman in an old tabloid. She was headed to ...