From Golden Parachutes to Golden Coffins.

We've all heard of "golden parachutes," that guarantee top corporate executives benefits that may include severance pay, cash bonuses, stock options, etc, totaling millions of dollars. But, have you heard of "golden coffins," that guarantee big fortunes to the heirs of top executives?

That's right. As the rest of us struggle to pay for their "sins" - who stole not only our futures, but the future of our offspring - they are arranging for "giant posthumous severance payouts, supercharged pensions or even a continuation of executives' salaries or bonuses for years after they're dead."

Take CEO, Verizon's Ivan Seidenberg, for example. His heirs will get up to $35 million in bonus after the golden lid of his coffin shuts for the last time.

"The ultimate in pay that isn't based on performance," the Wall Street Journal notes.

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Sponsor An Executive and Bail out a CEO

I want some TARP:

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Can Investor America Get Its Moral Compass Back?

Recycled post from February of 2008 inspired after reading John Bogle:

How many minimum wage employees have been sacked because the till was short a couple of cents? How many tellers fired for adding a couple of cents to balance out? A teller caught adding or subtracting money to her drawer, no matter how small the amount, not only gets fired immediately but also runs the risk of dealing with the law. Yes, one cent is enough to get an $8/hour teller fired for violating the integrity of her position.

Yet, CEOs, earning 600 times what the average teller makes, a crime in and of itself, can get away with manipulating billions of - no, not cents - dollars. Do they get fired? Well, if they do, and that's a big IF, they are rewarded with millions of dollars, bonuses, and cushy deals where they will never have to work again.

Oh, that's right...they are allowed to get away with hijacking our economy because of the "risk" they take. Risk? That no matter how badly they do their job, they are guaranteed a lifetime, dining on goji berries, white truffles, gold leaf, and caviar.

The bottom line is, the chances of top executives or big time fund managers serving time or facing any consequences for violating the ethics of their profession is slim to none; that is, unless the greed and corruption ooze out from every pore as was the case with the Bernie Ebbers, Kenneth Lay, Jeffrey Skilling, Dennis Kozlowski etc.

If it's not the CEOs raking in the bucks at our expense, it's the fund managers who are notorious for skimming money from the working man, especially hedge fund managers. Everyone knows that the hedge fund industry, a hotbed of "legalized" corruption, is, at best, a playground of of the hyper-wealthy.

Mutual funds however, according to John C. Bogle, founder and prior CEO of The Vanguard Group, started out as an industry that looked more to stewardship. The main objective of the mutual fund, was to secure the shareholder’s assets. As financial America has transformed itself from an "ownership society to an agency society", mutual funds have become an "industry of salesmanship. It’s become a marketing business instead of a business of management", as Bogle puts it.

Agents or institutions are holding most of the stock in the nation and they are not representing the principles of the industry. The Investment Company Act of 1940 states mutual funds must be operated, organized and managed in the interests of the shareholders rather than in the interest of the investment managers and distributors. Today, corporate trustees and mutual fund managers are acting in their own interests and not in the interest of the underlying pension beneficiaries and the fund share-holders

There is a disconnect between those who own the fund and those who manage or who run the funds. They are working at cross-purposes. Managers make their money by charging the highest fees the market will bear. 1.6% does not sound like much but it makes a dramatic difference when compounded over time. Remember what Albert Einstein said about the strongest force in the universe, "compound interest".

Managers have an interest in getting mutual funds as large as they can to take home the largest management fees they can. The larger the fund, the harder it is to manage and the shareholder pays the price. As Warren Buffet says, “The fat wallet is the enemy of superior returns”.

The average cost of a mutual fund is 3% (1.6% - manager fees + 8/10 % for transaction costs + ½ % sales charge = 3%)

Let's say you get a 10% stock market in the future, subtracting the cost, the average fund will give you 7%. Doesn't sound like a big deal until you look at a compound interest table and look at what happens between 7% and 10% over 30 years. You will find at 10%, a dollar will grow to $18 in the stock market but if it earns only 7%, it will only grow to $9.

In addition, instead of long term value, managers engage in short-term speculation.
The average mutual fund turns over it’s portfolio, at the rate of 110% per year. That means the average fund holds its average portfolio stock for an average of 11 months. The brokers and managers make all the money when turnover is this high, not the investor.

Is that fair? When the investor puts up 100% of the money, takes 100% of the risk but only receives 25% the return?

It's up to the individual investor to capture as much of the market return as he possibly can and no one is going to do that for him. He can begin by finding out how much the fees are and moving his money to mutual funds that are tax and transaction cost efficient and find out which ones understand the wisdom of long term investment.

Financial Industry Regulatory Authority (FINRA) is the largest non-governmental regulator for all securities firms doing business in the US. It's very difficult to determine whether funds are fee excessive. FINRA.org provides a mutual fund analyzer that will calculate the fees associated with the shareholder's fund.

Our whole investment system, once focused on corporate value has gotten focused on corporate price. We’re a nation of investment traders, speculators rather than a nation of long-term investors. The only way to be successful is to capitalize on the wisdom of long-term investing and instead we’re all engaged in the measurable folly of short-term speculation. It’s the focus on the precise price of a stock, an illusion rather than the eternal reality which is the intrinsic value of the corporation…how much cash it will generate over the foreseeable future or lifetime. -- John C. Bogle

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Where are the Investor Activists?

Wall Street executives will receive 10% of the $700 billion US government bail-out package in pay and bonus deals...that's $70 billion we, the taxpayers will fork over to those who have already profited beyond what most of us can imagine, as a reward for hijacking our financial system.

“We support the bill, but we are opposed to provisions on executive pay,” said Scott Talbott, senior vice president for government affairs at the Financial Services Roundtable, a trade group. “It is not appropriate for government to be setting the salaries of executives.”

Where is the remorse? Well, apparently, remorse is not written into their "contract", in fact, it's not part of the Wall Street vernacular at all. The words, accountability, merit, responsibility, ethics, morality, etc. are also excluded. Compensation consultant committees under the supervision of the board of directors determine what CEOs and top executives earn. Earning almost 600 times what the average worker takes home, these lucky men constantly receive pay increases and bonuses whether or not they do their job or not, because their raises depend not on how they perform, but on what their peers earn.

When compensation is paid out in the form of stock options, the temptation is to raise the stock price. Companies often apply special financial engineering to inflate profits and deflate losses on their Profits & Loss statement (P&L). The pressure is on to grow, merge or do anything to blur the numbers ...just bring in those returns!

Performance measurements are half the problem. Stock price is not a reliable gauge of a company's value simply because it's too easy to manipulate.

This week, Dupont, the chemical giant, slashed employee pension benefits by two-thirds. Furthermore, new Dupont workers won't get a guaranteed pension at all -- and no health care after retirement. It's part of Dupont's new "Die Young" program, I hear. Dupont is not in financial straits. Rather, the slash attack on its workers' pensions was aimed at adding a crucial three cents a share to company earnings, from $3.11 per share to $3.14. -- Greg Palast, September, 3 2006

So, what are better performance measurements? According to John Bogle, cash flow, dividend growth, operating earnings (earnings from the business rather than reported earnings which are earnings after the writeoffs) earnings per share, book value, etc are much more accurate.

Consider this. 65% of all company mergers do not work out, causing their book value to take a dive, however, there are no requirements to include that information in their P&L. So, if 65% of mergers fail, why do we have so many mergers? Because not only are most of us ignorant of this information, mergers are a great way to fudge the numbers, making it much harder to assess which companies are good for investing over the long run...the reason most of us invest to begin with.

Where are the investor activists and why aren't they protesting?

At one time, not too long ago, almost all the stock in America was owned by individuals and only 8% of stock owned by financial institutions. Now, 75% of stock is owned by institutions, yet institutions act much more like speculators rather than investors. So, why should they care... they "invest" short term and more than likely will not hold the same stock the following year.

We no longer have an ownership society. We have an agency society where agents or financial intermediaries are holding most of the stock, certainly the lion share of stock in the nation. The agents are not adequately representing their principles. We have corporate trustees and mutual fund managers who are acting too much in their own interests and not in the interest of the underlying pension beneficiaries and the fund shareholders. - John Bogle

In the end, Wall Street takes 75% of the return, over the lifetime of an investment, and put up ZERO percent of the capital and take ZERO percent of the risk, meanwhile, investors who put up 100% of the capital and take ALL the risk take home 25% of the return!

Now that half of all Americans are invested in the market, we can't afford to let this con game continue. As long as we stay within the Constitutional framework of our country, we the people can make up and enforce the rules that serve us. We can start by following the same procedures we use to rid our pets of ticks, and rid our financial system of the greedy parasites who have been given full permission to leech off we the taxpaying public.

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Hedge Fund Managers, Overpaid CEOs and Reaganomics: The True Axis of Evil.

As my grandmother always told me, every time I asked for more of something, after I had already gorged myself silly, "Your eyes are bigger than your stomach", we, the people's organs of vision, bulge out, the size of beach balls, either trying to fill an already overflowing pot or spinning our wheels, in hopes of "achieving" the means to do so.

The over abundance of wealth in the United States is sufficient to make sure everyone's basic necessities are more than met. Knowing this is true, then why do so many in this country go without essentials?

With the clear understanding that it is not the government's duty to provide a superior quality of life to its citizens, but only to go as far as to protect, secure and help to make strong the citizens, who for whatever reason, suffer from the lack of what an evolved society define as basic human rights, the answer is clear...

Wealth is never destroyed it is merely transferred. With the emergence of hedge fund managers and egregiously overpaid CEOs in the last thirty years, in an un-nuanced nutshell, our "wealth", the wealth we all work so hard to earn, has transferred in the pockets of those who need and deserve it least.

American decadence has blinded its citizens to the leeches among us, the leeches who are draining the essence and exhausting the resources of not only American society, but the world at large. Our government - commencing with the Reagan administration - laid out the red carpet for people willing and eager to "earn" their living gradually sucking the vitality and immunity from the veins of the middle class, the working class, the working poor and the misfortunate.

Legislation created and destroyed over the last thirty years explains why the distribution of wealth is skewed toward those, already so wealthy, they wipe their a$$e$ with "paper" spun from the finest silk, after scarfing down fungus they bought at the local market, for the price of a small car. Hedge fund mangers, in particular, known to make upwards of billions of dollars annually, these vampires are the product of a society, transformed by the late, great Ronald Reagan - "Betsy Ross" reincarnated - who diligently wove greed and lust for an overabundance of all things tangible, into the fabric of American society.

Hedge fund managers and egregiously overpaid CEOs symbolize this group of bottom feeders or vapid black holes of greed. They refuse to evolve past the smug self-satisfaction, at the expense of the most vulnerable, that characterizes a society still trying to figure out how to meet their physiological and security needs. They would rather gain a surplus of wealth at the expense of hard working Americans

Are all of America's wealthy people bottom feeding, vapid black holes? Of course not. Bill Gate's contribution transformed the world..his philanthropic efforts, an added bonus. Bill Gates is an example of the kind of wealth capitalism was designed to create, as his hard work and superior talents served to enhance, rather than crush and destroy...that is, unless you dare to compete with him.

No, Bill Gates is not perfect...far from it. However, compared to those who contribute absolutely nothing, skimming the cream off the top of "regular" folk's hard earned savings, making more money than a couple of small nations combined, Bill Gates comes out a hero.

According to Maslow's hierarchy of needs, once we have satisfied our basic needs it's time to evolve to the next level. It's time we, the people put an end to gauging success by the attainment of wealth, position, honors, or the like, and instead start to measure our worth by what we contribute to our community, country and/or the world. We need to work on using the power we have to say "no" to ourselves and rather than spend that $10,000 burning a whole in our pocket, on a plate of fungus at lunchtime, take that money and feed more than $10,000 starving people who exist on mud cookies.

The leaders we choose reflect our values, morals and sense of who we are. If we are not able to apply the brakes on our own ravenous appetites for money, things, power and control, how can we expect our leaders to hit the breaks and evolve our country to another level? It won't happen.

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Executive Customer Service

I would assume most people over a certain age have accumulated their fair share of "customer service" stories from hell. I know I dread calling any company's customer service department when I have a problem with their product. My expectation is that I will have to call back at least a few more times before I get the service I'm entitled.

I highly recommend what the blog, The Consumerist suggests, and that is go straight to the top and forget about the torturous process of low-level customer service.

• For public companies, put the stock ticker symbol in Google Finance and pull up the profile page. The corporate office should be listed under Company Facts.
• Call the corporate office.
• Ask for a transfer to the office of the CEO.
• You will likely get an exec. assistant but that's good. Voice mail is ok, too.
• Give succinct summary, including identifying details like order numbers and confirmation numbers.
• Remain nice.

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