Thursday, February 9, 2012

Yves Smith: Establishment Hack

Back in mid-December of last year (2011), I got into a bit of a row with Yves Smith.  I had accused her in a comment on her site of misleading her readers.  Specifically, in response to this post, I commented:
I don’t have a ready answer to this problem of CEO greed and narcissism.
Truly, Yves, that is the single most ignorant comments I’ve seen from you, and you are not ignorant. I must therefore ascribe it to faux populism intended to stir up and distract your “progressive” readers.
As you well know, in public companies, CEOs do NOT set their own salaries. Instead, the Board typically appoints a Compensation Committee to do so (and for the entire executive team, as well). Compensation Committees typically articulate a compensation philosophy (e.g., we target the 50th percentile in total compensation among our peers), and they hire a third party consultant like Radford, Compensia or Mercer to provide the comparables and make recommendations about executive compensation according to the comparables and numerous other metrics. 
Since the CEO does not set her own salary, her greed and narcissism are completely irrelevant. Whatever she wants, it is not her decision. it is the Board’s, and the Board is ultimately accountable to the shareholders (at least in theory, a theory that will never be practiced because people like you aim the masses’ anger at the recipients of unjust rewards, not those who bestow those rewards). 
What everybody here needs to face is that the system is rewarding the CEOs with ever higher salaries because the results they are achieving are precisely what the system views as success. Think it through. What you view as failure the “system” views as success. That is the ONLY way to explain what Yves misdescribes as “greed” and to truly understand what we actually face, which is directed evil and not merely ignorant, irrational shit that just seems to happen.
This is reality, folks. Your anger at CEOs is misguided as even many CEOs are but servants of the system, just like you but for the fact they work in the Master’s house instead of the Master’s fields. 
But you CAN change this dynamic. If you want to try and make a difference in companies whose CEOs you think are overpaid, buy a single share of stock in each of those companies, attend the shareholder meetings, and ask tough questions of the management and Board, who typically attend. Heck, consider putting your own shareholder initiative on the ballot of the Annual Meeting for a vote. Make sure to read the company’s by-laws and watch for announcements regarding the Annual Meeting to ensure you can meet the deadlines for shareholder ballot measures. 
If you’re really angry at CEO salaries, I just told you how to do something about them, something Yves’ faux populism prevents you from even thinking about. But if you enjoy revelling in your impotent fury against a false meme, by all means continue doing so. I’m sure Yves will help you, if that is your goal. 
But think about it. A share of BAC is $5.23. For less than a Benjamin Franklin, you can buy a share of Goldman Sachs. I invite you to Occupy Shareholder Meetings.
She responded in comments and then with an email to me stating "your comment was utterly out of line."  I took it right back to her, stating in email:

Which part? The part that informed people how CEO compensation is actually determined? The part that informed people about how to make a difference and accomplish real progress in view of the stated goals of your site? Or the part that called you out for distracting people from accomplishing those goals?
The first and second were merely truth, the third was merely my opinion. My guess is all three parts upset you, but particularly the first two. If I had merely opined that you were intentionally misleading people without providing any factual support, you would not have been so upset, as you could have merely dismissed everything I said. But that is not possible in the full context of what I said. I clearly transgressed the First Law of Power.
It is your site, so feel free to do whatever you want with my comment, I won't remark anywhere on what you did with my comment. Why? You were my sole audience for the comment. Mission accomplished?
Still, when you calm down, ponder on what I said. Whether you realize it or not, what you are doing is making the world safe for the forces you claim to oppose. This sad fact is why I was happy to issue a comment that you might view as "utterly out of line."
I hope you actually live up to the ideals you espouse and are not just another false prophet of progress. To that extent, I wish you luck.
She came back with the following response:
I already responded in comments.

You are way off base and you know it. The forms and the substance of what happens are two different matters. I cannot believe you write that CEOs are servants of the system. That is utterly incorrect.
You accused me of acting in bad faith and wanting merely to whip up my readers. That is dead wrong and completely unacceptable.
To which I responded:
Well, at least we get to the crux of the harm you think I caused you.

Thank you for the explanation. I don't agree that I am off base at all (let alone way off base). I have personal experience to back me up. I don't think you do.
In any event, I did not say that ALL CEOs are servants of the system, I said that MANY are. And that's just a fact. Every CEO I've known personally has been a servant of the system, not its master, but I agree that folks like the Koch brothers are not. (These are typically newly-minted CEOs.)
A final question for you: if you were acting in good faith and all that happened as a result was that your readers got whipped up, do your intentions matter?
And let's be clear, that's all that happened (or will happen). 
Thanks again for the response.
Yves' reply:
I know quite a few people in search (ex the big firms) who worked on board and CEO searches, as well as senior member of HR departments involved in C level comp decisions, and also am friends with attorneys who've negotiated multiple CEO compensation agreements. I suspect my data set is at least as good as yours. They've had a ringside seat on comp decisions.

If your data points are the CEOs, do you really think they are candid with you about how the process serves them? They have both their reputations and their need to believe their pay is merited arguing against honesty.
My response (which ultimately proved to be the last word):
Your data set may well be better than mine. I just ask you to accept that your data set is not complete. I do. 
Over the last several weeks (months actually), I have been dealing with a comp consultant hired by the Board and hostile towards the CEO. I have had a ringside seat, as you say. 
I have made no attempt to argue that CEOs deserve their compensation because, according to my personal metrics, they don't. And I don't care about arguments they make to the contrary. A large percentage of people who rise to that level are sociopaths, egomaniacs, or both. I cannot and will not defend them. 
My argument is that others need to accept the fact that our personal metrics of merit don't matter, that we need to accept that what the CEOs do passes as meritorious under the operative metrics of the system, and we need to attack the metrics and the system that rewards CEOs for dismantling what is left of the society the Enlightenment wrought. 
Accepting reality as true does not mean you believe that is the way things ought to be, but it is the first step towards changing reality, if you are inclined to do so.
Since this interchange, I stopped commenting at NC, but this week I broke down and submitted a comment, which made it through moderation.  My second (and truly final) comment to NC was not so lucky.  It was in response to this post about the mortgage settlement:
Let’s press the rewind button:
Yves said:
Note that this announcement effectively blows up the 50 state attorney general settlement talks.
I said:
Schneiderman is going to show the rest of the AGs how to play ball with the banksters. Just watch. He’s doing the opposite of blowing up the settlement talks: he’s going to make them a reality. He’s going to show how achieving the same results as what the broader set of talks are suggesting will be widely accepted by the voters of the state. The states need money, and the banksters are happy to pay them “fines” because they know they’ll get those fines back with a lot of interest.
Yves reassured us, saying:
Schneiderman is AG basically over the Democratic Party’s dead body. Cuomo and the NY Dem machine didn’t and haven’t supported him. And remember, there is more to financial services than big banks. Investors are mad as hell about what has happened (both the bailouts and continued abuses) and some are capable of writing large checks
I replied:
Party affiliation is irrelevant. Whether Schneiderman and Cuomo are friends is irrelevant. You don’t need to be associated with or like someobody to learn by watching how they succeed or fail.
No bankster is going to go to jail. No crimes will be found. Agreements will be struck that provide immunity to the banksters and money in the form of fines to New York State, and that money will be taken out of bank reserves created courtesy of the initial bailout, QE1 and QE2. Fines mean nothing when you’re paying with other people’s money.
[done with excerpt; turning to new comment]  
And don’t forget to read what attempter and DownSouth wrote. While they no longer comment here, they have something to say.
While I didn’t get the details right, I was right in the macro sense. Schneiderman was not the “Great White Hope” that others (especially Yves) made him out to be.
So-called “progressivism” is a dead letter. You cannot expect to incrementally improve a fundamentally corrupt system for which progressives are as much to blame as so-called conservatives.
Societal evolution is no longer available as an option. Sorry.
This comment still has not shown up over at NC, nor do I expect it to do so in spite of the fact that the criticism I offered Yves was considerably mild compared to what "conservative" troll heap on her on a daily basis.  The problem with my criticism, as mild as it was, is that it is too credible to reveal to her gullible followers.  Stated plainly: Yves Smith is a propagandist for the Establishment she pretends to criticize.  Yves Smith, Establishment Hack.