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Computer Sciences Corporation Message Board

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    • A wake-up call for boards, and the rest of us or get the "phook-out".

      "....While it may be difficult to admit that our best intentions can cause harm, corporate boards need to recognize that increased business risk and capital markets' volatility are not solely due to globalization, technological change, or governmental actions. Pay practices instituted by boards of directors have had unintended consequences, but changing those practices can make a difference. There is clear evidence that countries with cultures that do not use huge pay packages to motivate executives have stronger economies, more financial certainty, and citizens who suffer from less stress...."

    • Perfect description of the management at CSC....

      "....Acting out of self-interest based on how they are paid, CEOs will fail to take actions in the best interests of their corporations, the paper's authors argue.

      Current symptoms of this sort of behavior include widespread cost cutting and a failure to invest in a company's long-term future. CEOs can easily find themselves in a mode of cost cutting to boost their company's stock price, which then becomes a self-fulfilling prophecy, Donaldson says. CEOs cut costs, the stock price rises, and so they keep cutting costs because it boosts the stock price over the short term.

      Over time, this behavior will drive any business into the ground. In their defense, CEOs are merely acting out of rational self-interest. It's the board's job to align pay practices to avoid these unintended consequences.

      Not all CEOs succumb to this shortsightedness, but with enough of them acting this way, the result is economic instability. CEOs will take actions that cause bubbles and slow recoveries. CEOs will tend not to invest idle cash when the economy needs them to (which is happening now) -- and to hold too little capital when they shouldn't ("levering up" as we saw in financial firms in the run up to the crisis). Multiplied across the economy, "executive pay practices … may have dramatic, adverse business cycle consequences," the paper explains.

      The resulting economic volatility can affect a number of economic indicators, Gershun says. "GDP, employment, investment in productive assets and consumption" may all suffer from the way executives are paid today..."

      • 1 Reply to sanderstheparrot
      • Management fails to see employees as a RESOURCE, as Peter Drucker correctly has asserted. Rather, they see these Carbon Units as EXPENSE LINE ITEMS that can be reduced, i.e. Workforce Reductions, RIF or (as in England) called "redundancies." (Isn't that insulting.) So a company fires off it's best assets and, over time, there is nobody with smarts doing anything of worth save answering a phone in Bangalore, reading from a script and asking for email surveys.

 
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