
Originally Posted by
exchemist
I'm not sure who you have in mind by "management". The managers in a company are employees just like the shop floor worker. Profits are not a "take", "skimmed off" by management. The profits are made by, and belong to, the company itself, which either reinvests them or passes them out to shareholders via a dividend.
Except when AIG executives decide to give themselves their bonuses, but elsewhere Boeing is telling its manufacturing workers they need to take a pay cut.
Since management ultimately gets to decide what everyone's paycheck will be (including their own), there's this huge conflict of interests.
If a manager pockets company profits that is embezzlement and is a criminal offence.
You mean if he pockets company profits without going through the proper channels, right?
If he and the other managers feel they are all entitled to a big bonus, and they vote on it, and agree that they are entitled to it, that's not "embezzlement".
It's basically the exact same thing, but with proper paperwork.
Profit is determined, not by managers deciding what "cut" to impose, but on what the market will bear. A successful company is one which sells something that people are prepared to pay enough for to leave something over, after all the raw material, labour and other expenses have been paid and after allowance for depreciation of capital assets. That something over is the profit, so it the
resultant of the other elements. The skill of the management is in holding down the costs while finding opportunities to sell things that are valued by customers.
While the skill/efforts of assembly line workers of holding down costs, or increasing product quality, typically commands no such reward.
I'm not disagreeing that exceptional effort should be rewarded. I think that concept should apply to everyone. Not just a few. And (more importantly) that the reward should in fact depend on how exceptional the effort was.
AIG executives taking a bonus after they've plummeted their company into ruin and had to be bailed out doesn't look to me like an example of rewarding "skill of management at holding down costs while finding opportunities to sell things that are valued by customers."
It looks more to me like an abuse of power. Management simply raiding the company treasury because they can.
And before anyone indulges any c.19th notions of shareholders as the baddies (in top hats, smoking cigars at the races, while the workers eke out a miserable existence supplementing their wages by stuffing boys up chimneys, etc etc,) it is worth recalling who these shareholders typically are nowadays - that is, for a large part, pension funds.
These are the pension funds that provide for the workers and managers in retirement, so it is you and me, our friends and relations.
There is plenty wrong with modern capitalism, but it does nobody any favours to stigmatise fictitious stereotypes, when we are all involved, both as "exploited" labour and as beneficiaries, one way or another.
The shareholders are getting screwed in all of this too.
They have barely more control over the company than the assembly line workers do. In theory they have absolute power. But in practice, that power is next to impossible to make practical use of unless someone can organize a vote or something.
I imagine the shareholders of AIG would have liked to have taken back those bonuses and put them in the company treasury.
If you invest in a corporation these days, you're not so much investing in a company as you are investing it in a bunch of managers, who will then do with it whatever they please, and give you back a return on your investment if they feel like it.