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Anger over executive salaries is fast turning into a witch hunt. We’ve no longer just down on financiers, but also on state employees, on teachers, on just about everyone. It seems everyone — except ourselves, of course — is paid too much.

And the latest target is non-profit execs. According to a piece in the NYTimes, New Jersey and Vermont are both looking to limit salaries of execs at non-profits that have contracts with the state. New Hampshire is scrutinizing heads of non-profit hospitals. And of course Washington is getting into the act:

On Capitol Hill, four senators this spring refused to approve a $425 million package of federal grants for the Boys & Girls Clubs of America after staff members looked at the organization’s tax forms as part of a routine vetting process and were surprised to learn that the organization paid its chief executive almost $1 million in 2008 — $510,774 in salary and bonus and $477,817 in retirement and other benefits.

“A nearly $1 million salary and benefit package for a nonprofit executive is not only questionable on its face but also raises questions about how the organization manages its finances in other areas,” said Senator Tom Coburn, Republican of Oklahoma.

Allow me to disagree. In these days of hyper-inflationary salaries, a $1 million package is not that big at all. C’mon — Lloyd Blankfein’s $9 million bonus represented a huge cut! And these numbers are including contributions to retirement funds and bonuses (which most often really are linked to performance — programs offered, funds raised, etc.).

Many of these people really have proven to be stellar leaders, the types of folks who would easily command multi-million packages if they worked for the private sector. And in many cases, their work is almost identical to their private sector counterparts. Do you really believe that operating a non-profit hospital is a cushier job than operating a for-profit one? That curating an art museum is easier than running a private art collection? Or that opening new Boys & Girls Clubs is somehow less logistically grueling than opening the same number of Starbucks?

Kudos to Rick Goings, who sits on Boys & Girls board and loudly, uncategorically defends the nearly-million-dollar pay package that Roxanne Spillett, its leader, pulled down in 2008:

Mr. Goings noted that during Ms. Spillett’s 14-year tenure as chief executive, the number of clubs had risen to 4,000 from 800 and the combined revenue of the national office and the local clubs jumped to $1.4 billion from $438 million.

“They don’t seem to appreciate that the Boys & Girls Clubs today are a fairly sophisticated business run by fairly sophisticated business people,” said Mr. Goings, who is also chief executive of Tupperware Brands. “Do they really think we’d waste their money? Or anyone’s money?”

I’m as against excessive pay as anyone. But we still pay mega-millions to people whose sole contribution to society is pushing useless (and often toxic) pieces of paper around. So do I mind if we pay close to $1 million to people who are effectively running organizations that genuinely bring aid and comfort and health to human beings? Not at all.

Okay, okay, we know I’m one of the fogies, the folks who insist that the old days — whoops, ’scuse me, I mean the good old days — were better in many respects than the techno-crazed present. Anyone who’s been in my home has seen proof of my fogiedom — I use a VCR instead of Tivo, I have a 19” tube TV (two of them, in fact), I lovingly use chamois cloths on my collection of vinyl albums.

So it was with delight that I read in the New York Times magazine that even the IPhone generation is coming around to my way of thinking — and actually paying for the privilege of turning back the techno-clock.

Progress toward perfection has genuine skeptics, who insist on sticking with marginalized tools. The newer thing may seem less flawed or simply easier, such traditionalists insist, but it sacrifices warmth, soul, depth, personality, chance and the human touch. They must have a point, because practically every antiquated creative process ends up inspiring some kind of digital filter, effect or add-on designed explicitly to mimic its singular properties. The upshot is a form of progress toward perfecting flaws.

Examples abound. There’s a new digital camera that produces “a soft, out-of-focus feel that brings back the feeling of your old Super 8mm home movies.” IZotope Vinyl recording software lets users “create authentic ‘vinyl’ simulation,” right down to filters to suggest the amount of dust on a record and the degree of warping. There’s software that mimics handwriting — we’re not talking calligraphy here, we’re talking messy, smudgy scrawls.

And don’t think for a moment that these items are languishing. There’s an I-Phone app that turns pics snapped with the smartphone into dead ringers for ones “taken with an unreliable plastic camera.” According to the Times piece, this month it was the 17th-most-popular paid app in the iTunes store.

The craving for simpler times, in the form of older products, is no new thing, of course. Antiques have always been coveted. And remember, as kids, how we used to try to scuff our new sneakers so they looked lived in — and how, as young adults, we preferred pre-washed faded jeans?

But the difference is, we thought old things were better — that hand-made antique furniture, for example, was better made than modern assembly-line items. The current nostalgia craze seems aimed at the fact that the technologies of the past were charmingly flawed. And the psychological reasoning the Times writer offers seems to ring true:

The unifying theme is the link between the flawed and the interesting. A boringly perfect digital picture of a flower makes no impression. But an equally boring one marred by (digitally recreated) light leaks, exposure mistakes and focus inconsistencies presses the aesthetic button that suggests deeper meaning. Specifically, the image looks like one from a time before taking a thousand pictures in a weekend was routine. It taps into a language that predates digital abundance in order to layer on implied significance where, as often as not, none exists.

All that may be well and good. Personally, I’m just delighted to discover that instead of being a luddite, I’m actually on the cutting edge. Be impressed, all you IPhone owners! Unless you use the right apps to disguise your modernity, I have been officially declared cooler than you!

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Remember social investing’s good old days?

Before Apartheid was struck down, a growing number of socially conscious investors refused to own shares in Chase Manhattan and other companies that invested in South Africa.  No one particularly cared who was running the companies, they cared about the policies.

Many social investors still refuse to own shares in companies that sell tobacco — or in mutual funds that hold shares in such companies.  “Green” funds have become a staple of the investor landscape, comprised of shares of companies that have been deemed environmental good actors by the environmental movement. (Ironically, I think BP was once considered good to go for such funds…)  Again, none of those investors buy or sell shares because of  who is or is not occupying the corner office, only on  the company’s proven track record on the particular issue in question.

Which explains the jaundiced reaction I am having to the reason that BP has decided to toss its foot-in-mouth-disease-afflicted CEO:

This uncertainty about BP’s future business, its ultimate liabilities and its public relations debacle continue to weigh on the company’s share price, which is down about 40 percent since the spill started.

“The key issue now is whether investors and BP’s board think Tony Hayward is the right person to move the company forward,” said Matthew J. Slaughter, a professor at Dartmouth College’s Tuck School of Business. “Is this a BP problem or is this a Tony Hayward problem?”

<…>

Regardless of who leads the company, BP’s top executives have a lot to tackle. They need to convince the company’s constituents — its shareholders, regulators and government officials in the United States and other countries where BP has operations — that BP can pay all costs related to the spill, clean up the Gulf Coast, and still manage to grow its business around the world, analysts said.

via As BP Lays Out Future, It Will Not Include Tony Hayward – NYTimes.com.

Yeah, well, it should have to convince investors of one heck of a lot more.  The “problem” here is the fact that BP has demonstrated flagrant disregard for the safety or its workers and of the oceans in which it operates. That it appears to be stalling on paying damages to fishermen and others whose livelihood the oil spill has pretty much destroyed.  That it doctored the photographs of its spill cleanup that appear on its web site.

All this is reprehensible in its own right, whether or not it can afford its liabilities, or whether Robert Dudley, the guy who is  replacing Hayward, turns out to be a slick, smooth talker.

Dudley, in fact, is a pretty slick choice on the part of BP’s board.  He is BP’s most senior American executive, in charge of BP’s Gulf of Mexico operations.  Presumably he’ll have a better idea of how to deal with the American press, of how to properly use American idioms (e.g., he’ll know better than to use “small people” as a synonym for hard-working folks), of how to position BP as simultaneously blameless and deeply remorseful (in the world of spin, there is no such thing as an oxymoron).  And he undoubtedly has experience hobnobbing with American politicos — experience that BP sorely needs right now, since Congress has been rumbling about banning the company from new offshore ventures.

There’s no indication that he has any firmer moral compass than any other BP executive.  But to hear analysts speak, that does not — and should not — matter one whit to investors:

Bruce Lanni, an energy portfolio strategist at Nollenberger Capital Partners, said the fact that no more oil was spilling the gulf was “an inflection point” for BP.

“There are a lot of good things now going in BP’s favor,” Mr. Lanni said. “There has been an overreaction to the cost of the spill. BP has the opportunity to emerge as a stronger company. I think this is where investors are missing a window of opportunity.”

Some investors, however, are still concerned about the ultimate price tag for the spill. Uncertainty over BP’s liabilities is keeping its shares under considerable pressure, although they rebounded somewhat in recent weeks. BP stock closed at $36.86 on Friday, valuing the company at $115 billion.

“Right now the market is just guessing what the liability might be for BP,” Jay Singhania, a vice president at Westwood Management. “If BP could help outline exactly what the costs would be, then investors could gain more confidence.”

This would be a pretty good time for the socially conscious investing community to wake up. Say you don’t want a change in faces and accents, but a demonstrable change in policy and behavior.  And if you don’t get that, publicly, loudly, dump the shares.

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There’s nothing surprising about the latest — and probably final — report that Ken Feinberg,  who is about to trade his role as Washington’s pay czar for one as it’s BP czar, just issued about excess bonuses at beleaguered banks.

With the financial system on the verge of collapse in late 2008, a group of troubled banks doled out more than $2 billion in bonuses and other payments to their highest earners. Now, the federal authority on banker pay says that nearly 80 percent of that sum was unmerited.

In a report to be released on Friday, Kenneth R. Feinberg, the Obama administration’s special master for executive compensation, is expected to name 17 financial companies that made questionable payouts totaling $1.58 billion immediately after accepting billions of dollars of taxpayer aid, according to two government officials with knowledge of his findings who requested anonymity because of the sensitivity of the report.

via Feinberg Says Bonuses Paid by Troubled Banks Were Unmerited – NYTimes.com.

Yeah, Ken, we knew that. And it ticks us off mightily. (No, that’s not the royal or editorial “we” — I’m assuming that I’m speaking for the vast majority of Americans).

But we also know there’s not a darned thing you can do about it. Most of those companies have already repaid their bailout funds, pretty much removing them from your jurisdiction.  And even at those that are still officially in Washington’s debt — and thus under it’s thumb –  many of those payouts were made under the terms of ironclad contracts written long before the economy imploded.

But the one thing that we can do is shame them.  So what really bothered me is this:  “Mr. Feinberg is not expected to name individual executives who received the highest awards. ”

Why the heck not? Seems to me, traders and others who genuinely believe they earned that money should be proud to tell the world of their stellar performance.  Andrew Hall, the Phibro trader at Citigroup who received a $100 million bonus (amidst such public anger that Citigroup had to sell the unit), never showed the slightest embarrassment about it.  Way he saw it, he made tons for his employer, why shouldn’t he grab a huge chunk of the wealth?  Truthfully, I can’t argue with him about that.

But those who know that their performance probably warranted a payout of at most $1 for the year should at least be held up to scorn. If nothing else, it could shame them into donating a huge chunk of their ill-gotten gains to charities, which sorely need the infusions right about now.

I don’t know of anything in privacy law that makes it illegal to publish the names and compensation packages of high earners.  Indeed, by law proxies must include information about compensation  packages of  top officers.  And the argument for anonymity that was offered back when AIG gave $165 million of our money to its people — that their lives would be in danger — doesn’t cut it for me.  All rich people are at risk of being ripped off — drive a BMW through a poor neighborhood, see how safe you feel.   If you got a huge bonus that you didn’t deserve, then spend some of it on round-the-clock security, if it makes you feel safer.  Not my problem. I just want your name out there — your country club colleagues will applaud you, but others will spit.  I’d rather get the money back, but I’ll settle for that.

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General Motors just spent $3.5 billion to buy Americredit, a subprime lender. I guess it’s good news — first, that G.M. actually HAS $3.5 billion (probably from the huge revenues it’s been reaping in China), and second, that it can now give Americans an easier path to buying its cars.

But the news still sent a shiver down my spine. Subprime lending — isn’t that what toppled several once-stellar financial firms, and came close to toppling the entire economy?

G.M.’s motives, of course, are clear. This from today’s New York Times:

“Our dealers have been telling us that not having an in-house finance arm hurt our ability to finance certain loans and leases,” Edward E. Whitacre Jr., G.M.’s chief executive, said in a conference call. “It hurt our ability to meet rising customer demand for G.M. cars and trucks. Now we’re going to fix that.”

In fact, some experts say that the ability to extend financing could boost G.M.’s domestic sales by 20%. Hard to argue with that.

What worries me, though, is that dealers make money when they sell cars, so won’t they be monumentally tempted to extend credit to people with poor chances of paying it back? Is there a real difference between a sub-prime car loan and a sub-prime mortgage?

I’m probably over-reacting. If someone defaults on a $15,000 loan, it’s not as dangerous to the company — or to the economy — as when someone defaults on a $500,000 loan. Nor is repossessing and reselling a car as complicated as foreclosing on a mortgage. And there are an awful lot of people with low credit scores who, in fact, are safe bets for repaying loans. Jesse Toprak, the vice president of industry trends and insights at TrueCar.com, makes a good case for that:

Mr. Toprak said many consumers have low credit scores because of isolated negative events like late bill payments but otherwise pose a low risk of default. As a result, they are being turned away by lenders who tightened their credit standards after subprime mortgages helped cause the recession.

“They’re basically being ignored simply because of the paranoia. It used to be there was lending like drunken sailors, but now it’s the opposite,” Mr. Toprak said. “If G.M. can fill in that void, there’s a big potential for return for them.”

Fersure. But why would we believe that Americredit and GM dealers would be any better at filtering out the potential deadbeats from the safe bets? Are they really that much smarter — and that much more conservative — than the pre-recession mortage brokers? I have no reason to believe they are. And as I said above, a dealer will do most anything to make a sale.

Again, I hope I’m having an unwarranted, knee-jerk negative reaction. But I don’t feel good about this…

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Don’t these people ever learn?

There’s a heartbreaking piece in today’s New York Times that chronicles how at least half of these United States, grappling with underfunded budgets, are cutting back on home-care services for the elderly and disabled. First — and second, and third — of all, that’s unconscionably cruel. But fourth of all, it’s fiscally irresponsible.

As the article lays out, it costs one heck of a lot less to care for someone in their home than to maintain them in a nursing or assisted living facility. And it certainly costs less than to care for them in a hospital, after they fell, or became malnourished, or didn’t take their meds. In Oregon — once an exemplar of how to effectively care for people at home, now one of the state’s cutting back — nursing homes cost an average of $5,900 a month. Home and community based services cost $1,500 — about 25%!

The problem, as usual, is boneheaded law. States are required to provide nursing home care to receive federal Medicaid money. They aren’t required to provide home care. So, home care is the only place they can conceivably cut back with impunity.

The piece’s kicker grafs say it better than I ever could:

For states, having to cut the Medicaid programs is a double loss, because they come with matching dollars from the federal government. This creates state jobs and much-needed revenue.

Without these, said James A. Davis, a gerontologist at Marylhurst University and executive director of United Seniors of Oregon, “it really is a death spiral.”

“So often the programs to go are the early interventions that save money and keep people healthy,” Professor Davis said. “That comes back to bite you.”

The timing on this, of course, is pathetically ironic. I mean, part of Obamacare — which I still heartily endorse — calls for removing copayments for preventive medicine, things like well-baby checkups and such. Everyone knows the cost of that will be way less than the cost of caring for people who ignored their health. The economic principles behind providing home care are the same. What’s wrong with these people???!!!

On a different (you’ll see the connection) but more heartening note, the Times has an editorial applauding the growing number of states who are recognizing the stupidity of barring ex-cons from municipal jobs. Some progressive cities — the Times cites Boston, Chicago and San Francisco — long ago abandoned that rule. And now, Connecticut, New Mexico and Minnesota have passed laws protecting the employment rights of former offenders.

The Times suggests other states follow. I heartily concur. If you don’t do it on humane grounds, then do it on economic ones — if these folks can’t get jobs, the chances they’ll go back to crime are huge. And the crimes themselves will be a cost to society — as, of course, will be the cost of incarcerating them yet again.

Noone is suggesting that we put convicted pedophiles in day care centers, or burglars as home care attendants. But there are plenty of “safe” jobs to offer these folks. I’ll give the Times the final word:

Confining people with criminal convictions to the very margins of society is unfair and self-defeating. These sensible new laws recognize that.

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I just got a press release from the American Accounting Association that shocked the bejeezus out of me: Contrary to what every cynical bone in my body dictates, shareholders at some companies really have tackled the issue of excessive pay, and directors have actually heeded their complaints.

I don’t have the actual study — that’s being released at the association’s annual meeting early next month — but I have the summary findings. And wow, are they heartening.

Few companies have granted shareholders proxy access to float their own slate of directors, or even given them a non-binding say-on-pay. But apparently, a growing number of shareholders have used tried-and-true political tools to approach the issue differently: They’ve mounted “vote no” campaigns, persuading other shareholders to vote the heads of overly generous compensation committees off the board. According to the association’s study, such campaigns resulted, on average, in a drop of 38% in CEO pay for that year.

Nor was this confined to any one industry. The list of companies the association offers as examples include Toll Brothers,Yahoo, UnitedHealth, United Natural Foods, Sanmina-Sci, Saks Inc, Sprint, Qwest Communications, Legg Mason, Lennar, KB Home, Constellation Energy, and Apple. If you can spot a pattern here, tell me.

And the study turned up another heartening factoid: Institutional investors, which presumably have a lot of savvy and ample ability to apply it, have begun to insist on an active role in designing pay packages. What the press release calls “pay-design proposals” by such investors resulted in average pay reductions of about $2.3 million in companies with “excessive CEO pay” — defined as “an amount greater than what would be expected on the basis of a number of standard economic determinants, including firm size, return on assets, stock performance, and industry.”

The institutional investors were smart enough not to dictate dollar amounts, simply to design packages that strengthened the link between pay and performance, between bonuses and profits, between stock grants and shareholder value.

I’ve always said that nothing will change until shareholders are allowed to vote directly on pay. The study concludes differently:

The findings would seem to bode well for the increase in shareholder say on pay likely to result from the major financial-reform bill that President Obama signs into law today.
<…>
“This study casts doubt on the two most frequent criticisms of increased shareholder say on pay — either that it will be largely ineffective or that it will lead to radical changes dictated by unions or other special-interest groups,” comments Fabrizio Ferri of New York University, who carried out the new research with Yonca Ertimur of Duke University and Volkan Muslu of the University of Texas at Dallas.

This is one of those cases where I want so badly to shout “I was wrong, I was wrong!” Fingers crossed, eyes crossed…

And on a related note…

According to today’s NYTimes, Goldman Sachs is — by its standards, at least — cutting back on excess pay.

For a second quarter in a row, the investment bank’s pay ratio was 43 percent of revenue; in the past, Goldman paid out around 50 percent to staff. For ordinary mortals, the numbers are still staggering: on an annualized basis, $545,000 is being set aside for each of the firm’s employees. But it does look like Goldman might finally be listening to its critics.

The piece goes on to suggest that shareholders move to lock in the lower pay ratios. 24 hours ago I’d have snorted and said, Fat chance!. But now that I see this study…well, repeating myself, fingers crossed, eyes crossed…

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If this weren’t such a deadly serious issue — and one fraught with such danger down the road — I’d be getting a huge giggle out of the way mandatory health care is twisting on the spit of hairsplitting definitions.

Apparently, our Constitution, as interpreted by opponents to health care reform, prohibits our government from requiring that everyone, sick or healthy, young or old, have health insurance — or pay a penalty if they don’t. That interferes with commerce, the naysayers insist, and thus is a no-no for the federal government to do.

Ah, but what if we say that everyone must buy health insurance or pay an extra tax instead? That’s perfectly okay, federal government certainly has the right to tax.

What’s so irritating about this is that of course it’s not a tax. Who ever heard of selective taxation on people who refuse to buy a product? Allowing the government to so thoroughly broaden the definition of a tax — and thus, broaden its ability to levy more of them — opens a ghastly can of worms.

But allowing young, healthy people to go without insurance opens an even larger can of even uglier wrigglers. This is one of the few issues on which I side with the insurance industry: If we are going to force them to insure everyone, despite preexisting conditions, they have got to be able to bring their costs down by insuring a pool of folks whose health care needs won’t exceed their premiums. That’s simple economics.

So yeah, if we have to call it a tax to get it passed, then do it. But I don’t have to like it.

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I’ve had a couple — really, only a couple — of people push back at me when I’ve said that CDOs and other exotic financial instruments exist only to enrich their creators, and are societally useless at best, destructive at worst.
Okay, you defenders of useless paper, let’s hear you make a case for box office futures.

Then again, don’t bother. A little-noted part of the financial reform bill that just passed nipped that particular disaster in the bud.

You will recall, of course, that a bunch of entrepreneurial financiers (financial entrepreneurs? what expression am I looking for?) wanted to create yet another futures market, that of movie box office receipts. You can bet that a new movie will open big, or you can bet that it will tank.

It’s gambling, pure and simple, with no redeeming boost to any segment of the economy. I mean, if you are investing in pork belly futures, you at least have the option of taking delivery on the product. What exactly do you do with your box office future?

Movie studios and theater owners lobbied fiercely against it. So much for the lame argument that it gives film producers an opportunity to hedge their bets.

And, in fact, it’s probably easier to cheat at this than it is to count cards in casinos. The opportunities to bribe critics to praise or pan a movie — or the ability of critics to trade in insider information — is boundless. The ways to find out in advance how many theaters plan to screen a new movie — or maybe even to influence that number — are legion.

It is unlikely that this particular betting vehicle had the potential to bring down the larger economy. And truth? I’m not sure I know what gives the government the constitutional authority to ban it.

But I’m glad it did, anyway. No amount of Wall Street gambling is totally risk free to society. And there is the opportunity cost — money not bet on futures could be going out in loans to legitimate businesses, to home-seekers, to students. I’m fed up with feeling (rightly or wrongly) as though my tax dollars — and my stock portfolio — are being held hostage to “innovations” that are of benefit only to the already-rich.

The idea of movie box office futures should have been scotched a nanosecond after it was suggested. But better late than never.

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So I said all along Blankfein would keep his job as Goldman Sachs’ chief, no matter what happens — the firm has made yacht-loads of money under his leadership, and when all is said and done, that’s all the Goldman partners and their shareholders care about. Moreover, if they fired the chief, they’d be admitting that they did something wrong — and considering that they settled the SEC suit so they could get on with business as usual, that’s something they are simply not going to do.

So, has Goldman learned anything from this whole horror?

I doubt it. Lots of reporters have been referring to this as a “humbling settlement” for Goldman. No matter where I look, I don’t see any “humbling” going on. Way I see it, the firm has yet more proof that there is absolutely no down side to getting rich on the broken backs of others.

First of all, the $550 million fine. Yeah, that’s huge by normal-people standards, and it’s huge by SEC standards, too. But it’s not a lot of money when seen in the context of the record profits Goldman’s been raking in (almost $13.4 billion last year). We’re talking maybe half a month’s earnings here, no more than that. Goldman can absorb that expense as easily as normal folk can absorb the cost of an occasional over-priced dinner.

And even if it couldn’t — Goldman shares went up more than 5% when the settlement was announced, adding a lot more than $550 million to Goldman’s market cap. (Yeah, the stock price could plunge again, while the fine is a concrete outlay, but still….)

But maybe the most disheartening aspect of Goldman closing this chapter is that it doesn’t have to tinker with the plot-line of its book.

Remember, Goldman was charged with defrauding its own clients by persuading them to buy a mortgage security that Goldman itself knew would tank.

Goldman denied it had done anything wrong — but it did NOT deny that it had withheld the fact that it had created the toxic security for the sole purpose of letting John Paulson, a mega-respected investor, bet against it. That’s kinda like telling me to invest my 401K in a new class of stock without mentioning that it was created just so that Warren Buffett could short it. Goldman’s grudging admission: it was a “mistake” to withhold the information, a mistake it regrets.

So have clients fled the firm in disgust? No sign that’s happened. Apparently, what looks like fraud and malfeasance to people like me looks like the kind of sophisticated savvy that existing and prospective Goldman clients want on their side.

Are shareholders fleeing? Nah, as I noted above, they’re bidding up Goldman stock. And they don’t even seem overly upset that Goldman didn’t immediately tell them that it was being investigated by the SEC (definitely material information). Sure, a few have sued — but many more are applauding.

Nor am I seeing any signs that Goldman will be forced to give up its bank holding company status. Remember, it switched to that so it could have access to real cheap money,even as it got rich from bailout funds and AIG payouts. Wanna bet it continues with that, too — unless new financial rules make that onerous. If that happens, Goldman will find yet another way to turn back the clock, publicly offering “regrets,” privately patting itself for another job well done.

It’s all pretty depressing, dontcha think?