CEO PAY IS RIDICULOUS! 

We are foolish to pay CEO's so much of our money, almost as foolish as we are to hand over our tax dollars to incompetent bureaucrats. You probably never thought you would read a JAM Views post that claims someone makes too much money, but let me explain how this CEO pay is totalitarianism, not capitalism. 
Recently, Larry Culp was installed as the new CEO for General Electric (GE). JAM Views has previously covered the GE disaster of replacing Jack Welch's meritocracy with redistribution personnel policies, as well as the embarrassing removal of GE stock from the Dow Jones Industrial Average (DJIA)("America is a Meritocracy" 7/29/2018). Larry's base pay is set at $2.5 million with bonuses of $3.75 million which he will also definitely receive. He also receives $15 million per year in stock, which we call "performance share units" so that we can manipulate the tax treatment of this income. Now, follow me on how the math works. GE stock has been crushed to $12 per share due to the above-noted failures plus 1,000 more. GE stock will rebound to $18, or even $30, if Larry just stabilizes the company, stops making more mistakes, and turns on the GE Public Relations Department to claim the worst is over. When the stock recovers to $18, just $6 higher, at any time over the next four years, Larry will receive $45 million extra. When the stock recovers to $30 at any time over the next four years, Larry gets $227 million. If by chance Larry fails at this task, we still have to pay him $12 million to leave, for failing! 
I keep saying "we" because GE is a public company. Larry is not the entrepreneur founder of GE. Larry doesn't even own 1% of the company's stock. Larry has no risk, no skin in the game. Larry didn't mortgage his house, pledge his kid's college fund as bank collateral, or sell the golden retriever to pay for the first company brochure printing. Larry did not design and patent the titanium turbine blades which revolutionized the industry. If he did any of these, he deserves to make "more money than God." But, Larry is a technocrat working as an employee, and he is paid with Other People's Money (OPM). 
So, how does this happen? Let me explain. Larry was represented by an executive headhunter who gets paid one-third of Larry's first year pay. I have been pitched by recruiters to accept executive jobs (not for $227 million unfortunately!), and I have also paid these recruiters for executives I have hired in our company. Headhunting is a small, specialized community similar to sports agents who obtain ridiculous $300 million Major League Baseball contracts. Just as the team owner has been brainwashed to believe he needs that player to win and he needs to appease his fan base, the corporate directors believe this is just the necessary price to get the "good" CEO. They believe that if they do not pay this extortion then an activist hedge fund will have them all replaced, and their own gravy train will end. 
But, it is actually more insidious than just the blind leading the blind with other people's money. Larry most assuredly comes from the schools of Price Waterhouse Coopers (PWC), KPMG and other consulting groups who advise and run companies once the founders with the brains and the guts have long since left because they couldn't deal with the inevitable bureaucracy. Larry was already on the Board of Directors for GE. He was already in the club. The Directors and the Executive Inner-Circle all have a tremendous number of stock options, or performance share units, and their self-interests drive them to make decisions for short-term share price movements. 
The Board of Directors and the Executives all grant each other stock options and then implement the financial engineering, mainly stock buyback programs, which move the shares past the option strike prices. The repurchases shrink the number of shares outstanding and therefore simply increase the earnings per share, which then triggers bonuses which were based on this metric. Between 2007 and 2016, the S&P 500 companies spent over $7 trillion, 96% of their total corporate income, on these programs instead of spending it on research & development, infrastructure, and cash acquisitions which create a healthier and more valuable company long-term (after these guys retire with their parachutes). 
Just as with government secret economic decisions, the problem here is that no one ever clearly explains to us how this terrible economic behavior occurs inside public corporations. Their misdirection causes us to focus on how much beer someone drank at a high school party 30-years ago, while they are writing each other $227 million checks. But, all of us can calculate how Larry's pay is, literally, 500-times the pay of the factory line worker who makes the GE titanium turbine blade which must meet incredible torque and fatigue standards or someone dies. Most importantly, the worker himself can calculate it, and this is why he votes for unions, higher taxes on people like Larry, and more government control which inevitably causes him to lose his own job. It's Larry's fault. It's GE's Board of Directors' fault for not leading by example, for not living by the ideals of free market capitalism, themselves. Larry and his gang are robbing the future of GE and making it impossible for others to teach and persuade the masses on the benefits of capitalism.  
Republicans recently saved the country with lower taxes and less regulation but then blew it by raising spending and increasing debt just like all the politicians who came before them. Therefore, educated people know that everything the establishment says, regardless of the party, is simply designed to promote their own self-interests and likely has no relevance to the truth. The GE Board stated, "Larry is a proven executive with a long track record of superior execution, and the Board's package to attract Larry is overwhelmingly tied to performance." 
Have you ever heard of the "dead cat bounce?" In investing, we refer to the inevitable stock rises after a company's share price has taken a dramatic beating as, "If we threw a dead cat off the top of a building, even the cat would bounce a little." Without question, Larry's GE stock price will at least have a dead cat bounce, and he will collect hundreds of millions of dollars from a public company in which he carries no risk. How can we teach people proper economics when this type of behavior is going on out there? The people will rightly reply, "I can't hear what you're saying, because I'm too busy watching what you're doing." 

"I will dress him in your royal robes, and I will give him your title and your authority...He will bring honor to his family name, for I will drive him firmly in place like a nail in the wall...the time will come when I pull out the nail that seemed so firm. It will come out and fall to the ground. Everything it supports will fall with it." - Isaiah 22:21-25 

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* For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com. 
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BE WORTHY OF A WSJ OBIT #2 

Continuing our education as JAM Views members, I want to, once again, highlight the lives and characteristics of some interesting people who turned off the TV and put down the potato chips. As children, and as adults, we learn most from observing and experiencing others. If we study those who have lived great adventures, we can expand our own fishbowls, our own realm of possibilities, and the Wall Street Journal obituaries section is a worthy archive for studying what may be possible. Remember, JAM Views members want to lead lives of significance, whatever that term may mean for each of us individually. 
Dr. James Gips and a couple colleagues developed the technology to control a computer cursor by moving the eyes, but he didn't realize the potential impact until one mother begged him every day to test this technique on Michael, her paralyzed son. Michael quickly utilized the technology to communicate, create art and play games, even graduating from public high school in 2002. Dr. Gips spent the remaining years of his life refining this breakthrough which has enabled so many more people to escape locked-in lives. He began his next discovery last June at age 72. 
Robert Danzig from the age of two was shuttled from one foster home to the next. At age 17, he was hired as an office clerk by the Albany Times Union newspaper and soon proved a star advertising salesman, even working his way up the ladder to be appointed Publisher at age 37. Eight years later, he was promoted to head the entire newspaper division at Hearst Corp. in New York. He later became an author of books on leadership and self-confidence and a motivational speaker. He credits much of his success to a social worker who, when Robert was 10, looked him in the eyes and said, "You are worthwhile." He claimed those words were a revelation and wrote, "I held onto them like a lifeline." He received his last promotion in August at age 85. 
H.A. "Hap" Wagner was quarterback of his high school football team, captain of the Stanford University basketball team, and an Air Force officer before earning his Harvard MBA while married with three children. He joined Air Products & Chemicals in Allentown, Pa., and worked his way through research, sales and management, eventually being elevated to CEO. He expanded the company in Spain, China, and India before retiring in 1999, and was well-known for reciting, "If you are not the lead dog, the view never changes!" Mr. Wagner took on his next challenge last July at age 82. 
Stan Brock quit school in England at 16 and found work in British Guiana on the northern coast of South America. He worked on cattle ranches and created his own backyard menagerie which included jaguars, ocelots, and tapirs. His writings of this adventure were published in books and magazines, and earned him an offer to co-host "Mutual of Omaha's Wild Kingdom" alongside Marlin Perkins. Yet, his awareness of the lack of medical care for people in remote places compelled him to found Remote Area Medical (RAM) which has cared for 740,000 people in a dozen countries over the last 33 years. He did hundreds of sit-ups and chin-ups daily, always wore his khaki bush outfits, and retained his British accent and dashing looks in old age. Having given up most belongings, he slept on a grass mat next to his desk at RAM's office, and began his next adventure in August at age 82. 
Gerry Lenfest worked as a farm hand in Iowa, an oil-field roughneck in North Dakota, and as a mate on an oil tanker while earning his economics and law degrees. He joined Triangle Publications and eventually took charge of Seventeen Magazine. When the company decided to sell a tiny cable business in Lebanon, Pa., he and his wife leveraged everything and bought the company for $2.3 million in 1974, running the business from their home. They grew it to 1.3 million customers before it was acquired by Comcast in 2000 for $5.6 billion. After becoming billionaires, they continued living in their three-bedroom home which they purchased in 1966 for $35,000. But, their mission has been to give away their vast fortune in their lifetimes rather than create a foundation whose trustees later may stray from their vision. Gerry continued to ride city buses and fly coach, because people there were more open to conversation. Wendy Kopp was riding the train to New York and was slightly perturbed by the chatty old man seated next to her, but she eventually opened up about the charity she founded to send teachers to work in low-income areas. Chatty Gerry moved onto nicer transportation in August at the age of 88, but not before donating $14 million to Wendy Kopp's Teach for America. 
These amazing stories show us that we all are capable of great adventures, if we only follow our dreams, lean into our fears, and choose "Yes." These people were not smarter or stronger than us, and they were not handed an exciting life on a silver platter. They took risks, they made choices, and they followed their passions. What are you going to do about yours today? 

"Success listens only to applause. To all else it is deaf." - Elias Canetti 

** For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com. 
** To access JAM Views directly or to subscribe, please visit jeffreyamartinovich@blogspot.com. 
** Thank you to the WSJ.

4th QUARTER UPDATE
(FORBES, GRISHAM, OVERFLOWING TAX COFFERS!)

     Here at JAM Views we like to check in on our previous theories and predictions once per quarter to give a voice to others and to provide for objective updates.  We have new data for 7 recent posts, so we will be succinct in order for you to still get that 18-holes in today before the beautiful fall weather leaves us.  Remember, "Winter is coming" (Upcoming Post).
     Recently we discussed the sad state of education in the United States, to include our colleges and universities (CORPORATE UNIVERSITIES, 9/30/18), and now we find that immigrants to the U.S. know more about our country than we do.  The Woodrow Wilson National Fellowship Foundation put questions from the U.S. Citizenship Test to current American citizens, and two-thirds failed the multiple choice!  60% didn't know which countries the U.S. fought in World War II, and 37% thought Ben Franklin invented the light bulb.  81% of under-45 Americans failed the test, reflecting the declining state of public schools.  I'm having flashbacks of Jay Leno asking people on Hollywood Boulevard to name the current President of the United States.
     Reference California's new law mandating each company have a required number of women on their board of directors (MONEY GOES WHERE IT'S TREATED BEST, 9/23/18), Thomas Nast from Seattle states this is a violation of "the First Amendment of the U.S. Constitution, which guarantees freedom of association...This is a clear equal-protection violation."  Dave Berndtson from Vienna, Virginia points out that "California has had 39 governors since 1849.  Not one of those 39 has been a woman.  Maybe Gov. Brown could also decree that change."  Certainly many lawsuits and, sadly, huge attorneys fees to follow.
     A quick look at the growth of the economy (GROWTH TRUMPS TAXES EVERY TIME, 6/3/18) notes that even the non-believers are starting to admit that the recent tax cuts have almost already paid for themselves.  Everything forward is icing on the cake, playing with house money, you get the idea.  The Congressional Budge Office's August 2018 Economic Forecast increased the GDP growth rate for the next decade from the report released in June 2017 before the cuts.  Even if the growth later goes back to the dismal 1.9% path, the compounding effect of the growth already achieved adds $6 trillion in additional GDP.  Stay with me.  The Government captures approximately 18% of extra output in tax revenue.  That's $1.1 trillion more taxes paid instead of the $400 billion expected loss when the uneducated campaigned against the cuts on your favorite talk shows.  This year alone, states and cities will receive a $20 billion windfall in revenue.  Maybe these new converts were reading JAM Views!
     In a follow up to the story of the U.S. Attorneys Office's conduct destroying the New York money management firm (DAVID GANEK AND LEVEL GLOBAL, 8/12/18), famous novelist John Grisham, also a defense lawyer, surprisingly released an opinion piece to inform the country that "some prosecutors cheat and even break the law.  It has been proved, repeatedly, that prosecutors across the U.S. have (1) concealed evidence that would benefit the accused; (2) fabricated evidence that would convict the accused; (3) made false statements to judges, juries and defense attorneys; (4) offered perjured testimony; (5) cut sleazy deals with jailhouse informants who will testify to anything in return for leniency; (6) employed junk-science 'experts' who mislead jurors; and (7) intimidated witnesses."  Hopefully, eventually, Mr. Ganek receives redress and relief.
      I think Steve Forbes, Editor-In-Chief of "Forbes" magazine has also been reading JAM Views.  In "THE GOVERNMENT HAS NO MONEY", 4/1/18, I stated, "There is no money sitting in a Social Security bank account holding all of the contributions you gave them out of your paycheck for all those years.  The extra 'savings' was raided by politicians years ago.  There is no money."  I took a lot of grief from some of our readers, even being called a "conspiracy theorist!"  But, recently Steve Forbes advised the country, "Anyway, Social Security's reserves, ostensibly almost $3 trillion, are illusory.  There's not a penny in there, just a bunch of nonmarketable IOUs from the Treasury Department.  In other words, all of those trillions were spent as soon as they were collected."  Maybe everyone will believe Steve.
     With our post utilizing the Boeing-Airbus competition to describe all the varied derivatives of tariffs and government subsidies (HEAVY METAL, 3/24/18), we attempted to explain how Airbus is simply a "government corporation."  Just as China, France and Germany use these unfair government corporations to attempt to compete with the United States, while Macron and Merkel speak of free trade out the other side of their mouths.  Recently, Airbus replaced their CEO.  The Wall Street Journal reported, "The French and German governments remain the largest shareholders at the company.  The nationality of the chief executive has rotated between French and German after the company abandoned a co-CEO structure representing both nationalities."  Sounds like communism to me.
     In "AMERICA IS A MERITOCRACY", 7/29/18, we explained Harvard's anti-American policy which discriminates against Asian-American overachievers.  Recently, the Justice Department and Education Department opened a similar investigation at Yale University, on top of the Harvard investigation, with it all started by the Asian-American Coalition for Education.  Libertarians and Jack Welch meritocrats are really enjoying this one.
     Staying with Jack Welch meritocracies, Nike announced they are overhauling their compensation structure.  Instead of individual bonuses based on performance, the company said the changes will "support a culture in which employees feel included and empowered" and "will measure success based primarily on companywide performance."  This will bring "pay equity and reshape the company's culture."  Well, it's been an amazing ride for the Shoe Dog.  The Portland Greens finally got to the one remaining capitalist in town.  Time to short Nike stock?
     It appears that we had some successful conversions last quarter, but there obviously is so much yet to be accomplished.  I greatly appreciate everyone's comments, participation, and support.  Now get out there, and keep it in the short grass!

"People will forget what you said, forget what you did, but will always remember how you made them feel."
         - Maya Angelou

** For more information on Jeff's Blog, Books, and Legal Challenge, please visit www.jeffmartinovich.com.
** To access JAM Views directly or to subscribe, please visit jeffreyamartinovich@blogspot.com.
** Always thank you to the WSJ, Forbes, & Fortune for statistics and specific quotes.

LICENSING IS A SCHEME TO STOP COMPETITION

     Licensing is another scheme in the United States largely utilized by government and Big Corporate special interests to retain power and destroy competition. JAM Views members believe that free-market competition is at the heart of capitalism and success for our nation. We believe that steel sharpens steel, top teams welcome top challengers, and great minds tested achieve higher wisdom. Contrarily, licensing is a tool used to protect those in power and protect those at the top of the pyramid, which unfortunately makes everyone softer, less innovative, less cost efficient, and less educated. 
     Yet, the elites always present licensing as a form of consumer protection, skill development, and as a system to ensure individuals are "qualified." A Founding Father, or a rugged individualist, would find it absurd that we must have a government agency or a city council member tell us which hair braider, local florist, eyebrow threader, or even financial advisor we may patronize. A step further, why do we allow these special interests to shut down their competition in payday lenders, for-profit colleges, and even generic drug distributors? 
     In our current society, city council members, government agency personnel, and union officials are some of our least-educated and least-experienced members, but we are brainwashed to believe that we need them to make our decisions, filter our choices, and protect us from ourselves. How ridiculous is that?
     To compound this artifice, we allow them to demand onerous fees for applications, permits, licensing, and continuing education, all which enter the coffers of the most-ineffective allocators of capital in our society. Why do we go along with this? Is it Freudian fear of authority indoctrinated in us as children, or is it Skinner behavioralism learned throughout our lives, which causes us to blindly let these people control our companies, our economies, our lives? Do we not have confidence in ourselves to select an appropriate eyebrow threader? 
     The Louisiana Agriculture Department requires large fees and 202 days of education and experience to obtain an occupational license in order to operate a florist. Governor Edwards, attempting to eliminate these barriers to competition, found that state records show no history of anyone ever being harmed by a poorly arranged bouquet, yet the state senate shot down his efforts claiming, "There's a certain amount of regulation to make sure the public gets what they pay for." 
     On a more-intelligent note, the Institute for Justice, a libertarian nonprofit, brought a lawsuit against Louisiana's Board of Cosmetology to eliminate the requirement for eyebrow threaders to take 750 hours of courses and three exams, as well as pay up to $13,000 in fees. Having no defense and not wanting to spend the money to defend the suit, the Board reduced the requirements to one test and a $50 permit. 
The New Jersey Board of Cosmetology and Hairstyling requires hair braiders to complete 1,200 hours of training at a cost up to $17,000, and enforces hefty fines on those who attempt to braid their neighbors hair without the state's authorization (1984?). Governor Murphy recently defended these requirements by admitting that "burdensome licensing requirements" disproportionately hurt "African-American women, immigrants from African and Caribbean countries, and others," but he concluded that reducing these rules would jeopardize consumer safety. Remember, those who claim to be working in the interests of the poor and the minorities are usually the ones manipulating and hurting this very demographic = JAM Views Truism. 
     Detroit recently lost the opportunity to host this year's NCAA Basketball Final Four, as well as recent NFL Drafts and the NBA All-Star Game, all due to a lack of large hotels. Last month the City Council voted 6-2 to deny a hotel permit to Crowne Plaza for a new 28-story tower expansion, a $164 million investment with zero cost to the city. But, for years these hotel owners have resisted the UniteHere! Labor Union from organizing their employees. Even though the last employee vote was 80-15 against organizing, labor rep Janee Ayers said she could not support building a second hotel tower "until we get things done right in the first tower, 100% correct." Councilwoman Raquel Castaneda-Lopez claimed that she was disappointed that the hotel hadn't done more to compromise with the union, and she must vote against the expansion. Who are the top campaign contributors to city council campaigns? Labor and education unions. Detroit just missed out on 1,785 temporary construction jobs and 250 permanent jobs, not to mention tremendous revenue from the NFL, NBA, and NCAA. 
     Every week JAM Views attempts to help us at least think twice before accepting the news, the economic reports, and the politicians' explanations at face value. If we can train ourselves to understand that humans always operate in their own self interests (thank you Adam Smith), and that we only find the truth when we follow the money, we will continue to improve our business decision making capabilities and live a more-congruent life in the truth. Moving forward, let's take back responsibility for our own decisions and discretion, and let's allow entrepreneurs access to free markets in order to better their station in life, which in turn will raise up so many others. 

"I must uneasy make, lest too light winning make the prize light." - Shakespeare, The Tempest 

** For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com. 
** To access JAM Views directly, please visit jeffreyamartinovich@blogspot.com. 
** As always, thank you to WSJ, Forbes, Fortune for statistics and quotations.

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