not enough executives have gone to jail

**lzhang** Tue Jan 09, 2007 1:40 am

not enough executives have gone to jail
See the interview with Charles T. Munger on executive compensation issue @ http://www.latimes.com/business/la-fi-munger1jan01,1,6675443.story

**blast_investor** Tue Jan 09, 2007 12:36 pm

Re: not enough executives have gone to jail
The whole CEO and management compensation is in messy state.

A system that allows sham like Massey Energy CEO to exist while shareholders still unable to change in big way is not perfect.

However, my attitude is: where is perfect system in the world? None exist. I have to live it to make investing profitable.

The problem lies on the fact is that in theory, shareholders vote for directors, directors check and balance the CEO and work for interest of shareholders. In reality, shareholders do not understand business or books behind the company, many directors have closer relationship to CEO and work for CEO interest instead. Public shareholders do not have power compared to insiders. It is the CEO and management who control the company, not public shareholders.

Without control of board, I believe the most important issue for shareholders to check against management is 2 things, insider ownership and insider buying.

When CEO/management can get free shares and stocks out of norm, they will not buy shares with their own money, they will not do insider buying.

The second rule is total amount of dollar (including shares, stocks) in the context of earning of a company. In other word, the majority of profit or earning a company generates should go to its owner: shareholders. The management profit/earning cut should be minority portion, preferably less than 10% - 20% of earning.

lzhang wrote: See the interview with Charles T. Munger on executive compensation issue @ http://www.latimes.com/business/la-fi-munger1jan01,1,6675443.story