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Saturday, January 28, 2012

Crony Capitalism?

I'd always naively thought that it was the shareholders who ultimately ran a company by voting to appoint directors etc.! So, I was surprised to hear that this wasn't the case.
Seemingly these “top” people just appoint each other without any reference to the shareholders, usually giving each other ludicrous contracts – ridiculously high salaries, pensions and bonuses! “You scratch my back, I'll scratch yours” fits here!
When a company isn't profitable, how can anyone justify paying any employee a bonus?

Coincidentally though, these practises seem to be much more common in the financial “industry” banks, insurance companies etc.
As far as I can see, the only people really deserving these sorts of remunerations would be:-
  • People setting up companies from scratch
  • Executives taking a failing company back to profitability
  • Inventors
  • Artists – stage, music etc whose earnings are related to performance
  • Sports people who win
Perhaps there are some company executives who think that they deserve to be paid in the ludicrous fashion in which some “professional” footballers are paid!

Another point to consider is who comes up with these ridiculous contracts for example that of ex-Sir Fred "The Shred"  Goodwin? Is it just incompetence or even corruption? Maybe these contract writers and signatories could be sued by the company shareholder?

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