One of the assets of a company is its endowment or its retirement fund. In principle, it’s money that has been set aside for employees’ pensions when they retire.
The company supposedly sets aside money for employees in a pension fund that will be managed and grown, and the employees pensions will be paid out if it when they retire. If you’re familiar with the US’ Social Security system, it’s the same idea: a gigantic government-backed pension-fund that pays out, as people pay in – sort of a legal-because-it’s-the-government Ponzi scheme.
For a lot of companies in the 20s through the 80s and 90s, a company’s HR/accounting department might manage the plan. It’s not hard: for each employee you put a certain amount of money aside in the retirement fund, so that there would be enough to pay out when it was needed. It’s all pretty straightforward, isn’t it?
It would be straightforward except that there are always greedy sleazeballs who immediately begin to eye any large pile of money, trying to figure out how they can run off with a bunch of it, without having to do the hard work of actually earning any of it. I described elsewhere how asset-strippers like Mitt Romney’s Bain Capital [stderr][stderr] work: they buy a company that is “undervalued” – which means that its total assets are worth more than its sticker price, then tear it apart and sell the pieces so they can pocket the difference. A company’s retirement plan is an “asset” because, well, it’s money that the company controls. Uh-oh.
When Congress realized that the Social Security trust fund was money that they controlled, they immediately started borrowing against it. That’s because Congress realized something that capitalists also know: it doesn’t matter if it’s your money, you can steal it without stealing as long as you control it. Control of a valuable asset is, for all intents and purposes, what having that asset means. If you’re Congress you say, “well, since we control how much money comes in, we can guarantee how much money will be there at any given time, so you may as well let us borrow against it until such a time as we need the money.” Which is never, because Congress can make sure “never” ever comes. See how that works?
So, let’s say you are an asset-stripper and you just bought Acme Framis, Inc. and Acme has a well paid-up retirement fund. You probably can’t outright write a check for it and go buy a new yacht – but you can look at the part in the company’s bylaws where it says that the retirement money is to be invested in order that it grow. A ha! So, you invest the retirement money in a start-up that you’re going to also profit from – like maybe the new hotel that Trump guy is building in Moscow. If it succeeds, wildly, now the company’s retirement plan is over-funded and you can just use those assets for another purpose. A big bonus for the executive team seems like a good place to start. If there’s too much money for such an obvious trick to work, what you do is spin off another company and make your golfing buddies executives in that, and you still control it and now you can sell it any time you want to. Here’s what that looks like: [bain]
BOSTON and NEW YORK, October 23, 2018 – Bain Capital, LP and Pfizer Inc. (NYSE: PFE) today announced the creation of Cerevel Therapeutics, LLC (“Cerevel”), a new biopharmaceutical company focused on developing drug candidates to treat disorders of the central nervous system (CNS). Pfizer is contributing a portfolio of pre-commercial neuroscience assets to Cerevel, which include three clinical-stage compounds and several pre-clinical compounds designed to target a broad range of CNS disorders including Parkinson’s, Alzheimer’s, epilepsy, schizophrenia and addiction. Funds affiliated with Bain Capital Private Equity and Bain Capital Life Sciences have committed $350 million with the ability to provide additional capital should it be needed in the future.
If it works, lots of paper wealth will be created, so nobody will care where the investment capital came from. And, if it’s gone, hey, it’s gone so nobody’ll care, either!
At various times, lawmakers have tried to make it more difficult to steal a company’s retirement pot, and – ironically – companies that keep their retirement fund fully topped-up and under someone else’s management – are less attractive to asset-strippers because of it. But the older, more established businesses might not have gotten with the times.
So, you hear about companies like Toys-R-Us going bankrupt; where did the retirement fund go? It got eaten up to pay the company’s debts – debts incurred to the asset strippers; debts like the huge bonuses paid to the management team at the asset strippers. [stderr] That’s how you get stories like this: a large, successful business that had a paid-up retirement fund goes bankrupt and all the retirees are left with a great big double fist-full of “fuck you.” [wapo]
As a grocery chain is dismantled, investors recover their money. Worker pensions are short millions.
MUNCIE, Ind. – Once the Marsh Supermarkets chain began to falter a few years ago, its owner, a private-equity firm, began selling off the vast retail empire, piece by piece. The company sold more than 100 convenience stores. It sold the pharmacies. It closed some of the 115 grocery stores, having previously auctioned off their real estate. Then, in May 2017, the company announced the closure of the remaining 44 stores.
Marsh Supermarkets, founded in 1931, had at last filed for bankruptcy.
“It was a long, slow decline,” said Amy Gerken, formerly an assistant office manager at one of the stores. Sun Capital Partners, the private-equity firm that owned Marsh, “didn’t really know how grocery stores work. We’d joke about them being on a yacht without even knowing what a UPC code is. But they didn’t treat employees right, and since the bankruptcy, everyone is out for their blood.”
The anger arises because although the sell-off allowed Sun Capital and its investors to recover their money and then some, the company entered bankruptcy leaving unpaid more than $80 million in debts to workers’ severance and pensions.
Ms Gerken is exactly right: the Sun Capital Partners people didn’t know a UPC from a UPS truck. But they never cared about running the business successfully, anyhow. They were there to part the company out and loot everything they could carry.
The unpaid pension debts mean that some retirees will get smaller checks. Much of the tab will be picked up by the government’s pension insurer, a federal agency facing its own budget shortfalls.
“They did everyone dirty,” said Kilby Baker, 70, a retired warehouse worker whose pension check was cut by about 25 percent after Marsh Supermarkets withdrew from the pension. “We all gave up wage increases so we could have a better pension. Then they just took it away from us.”
Why is the government’s pension insurance having trouble with debt? It’s pretty easy to tell: because they offered an “impossible to fail” scenario at the taxpayers’ expense. That probably makes it easier for the asset-strippers to sleep at night.
As you might expect, this sort of thing has occasionally had regulation brought up to control it. Some companies structure their retirement by putting money into accounts for the employee, with matching funds. At my last job, a well-run software start-up, the company did a matching payout against any money the employee held in their 401K fund. In other words, it was my money and nobody could touch it until I retire. In other words, not all companies are evil to their employees – some of them are demonstrating their good faith by putting their employees’ money (and their contribution) where they can’t come along and take it back. Remember what I said earlier: having control of the money means you have the money.
When Trump (or whoever) talks about how businesses need a more friendly environment, with less annoying regulation, just remember that that annoying red tape is almost always an attempt to rein in capitalists’ rapaciousness. These are people who will bankrupt a 70-year-old retiree while complaining about the paperwork it takes to do it. I hope the retirees still know how to shoot straight.
Need I mention that the founders of Sun Capital Partners have big houses and parties in The Hamptons, are friends of Mitt Romney, and probably donated bigly to the Trump campaign? Because, with the kind of money we’re talking about, a few percentage points make a big enough difference to buy another yacht or lamborghini or something.
Those little statements you get (and do not read) about your company’s retirement plan – that’s where they hide those little turds like “now that we have taken over the company we may re-invest the retirement fund in a manner of our choosing”
Intrusive big government (Department of Labor) tries to keep all of this mess regulated. Does anyone want to bet against me that the Department of Labor is one of the departments that Trump has completely trolled to pieces? He’s probably put an asset-stripper in charge.
I suddenly realize why the local hospital appears to be run by a moron with no clue about how a hospital is actually run. And why, despite all expectations, they keep having less and less rooms/beds and employees.
This happened to a lot of non profit health insurance companies.
He’s probably put a
n asset-stripper in charge.FTFY
kestrel@#1:
I suddenly realize why the local hospital appears to be run by a moron with no clue about how a hospital is actually run. And why, despite all expectations, they keep having less and less rooms/beds and employees.
Yup. I think (to a different degree) a similar thing is happening to universities. You bring in some investment banker’s golf buddy as president, pay them a ton, and they spend a lot of the university’s endowment on things that are convenient for their banker buddies. That way the endowment is used to transfer wealth without outright looting it.
Oh, and let me guess: they’re doing a lot of renovation and buying new buildings, and one of the owners’ golf buddies owns a construction company and another just happened to own the lot where the new building is being built. The world of crony capitalism is full of amazing coincidences like that!
appears to be run by a moron with no clue about how a hospital is actually run
Google around for his resume. I bet you’ll find he’s a golf-playing member of the investment set.
colinday@#3:
FTFY
Strippers work for their money. Capitalists work for your money.
I should mention that the start-up I founded (Network Flight Recorder) had a retirement program managed by Fidelity Investments, where the company matched each employee’s contribution dollar for dollar, and everyone had options or outright equity grants. I don’t know if that made us an “employee-owned company – I think that term is kind of BS – but I did what I could. Unfortunately, by the time that the company was bought, it had been run for 4 years by a management team selected by our investment bankers, which means they had paid themselves as much in bonuses as they realistically could, and converted all their shares into shares with preferred liquidation rights.
@Marcus, #4: I just looked him up and while there was limited information, what I found totally confirms your cynical outlook. Yes: the hospital is improving “infrastructure rather than salaries” and yet somehow they keep having fewer beds for patients. So where is all the damn infrastructure? And that CEO from the hospital is tied in with a local energy coop which is doing exactly what you line out here: creating new start-ups, they “lose” money, and they are not keeping separate books on these despite being told to do so by the PRC and their members.
I need to be more cynical.
This must be the business-equivalent of the pilot putting on the parachute while announcing to the passengers that everything is fine.
I need to do a posting on how preferred shares work…
komarov@#8:
But basically preferred shares guarantee that shareholder’s at the front of the line when the time comes to jump out the door.
Businesses surviving for so long has been near impossible where I live. A bit of history:
-WWI: everything goes bankrupt.
-The great depression: most things go bankrupt.
-WWII: first the Russian army arrives, then the German army arrives, then the Russian army arrives again. Nothing survives. Never mind each invading regime telling people that their old currency is now worthless and their life savings are gone.
-The collapse of the USSR: most businesses don’t survive; people lose all their life savings once again, because the new political regime decides to announce that old soviet money is now worthless.
-2008: many businesses go bankrupt.
I’m 26 right now. I won’t be retiring for the next 40 or so years.* The idea of entrusting some business or some bank with my retirement money seems outright ludicrous for me—I simply don’t expect business or banks to avoid bankruptcy for more than only a few years. History has shown that here businesses simply cannot survive for 40+ years.
I know that this one is a cultural difference, but for me the idea of giving up a wage increase in exchange for a promise to have a better pension once I retire seems ridiculous. I’m way too cynical to trust anybody to give me back my money 40 years from now.
Personally, I prefer pensions to be handled by the state. I don’t think there are any other alternatives.
Option #1: each person saves money on their own. Investing money is always a gamble. Even if some citizen does everything correctly, saves money and is educated about investments and responsible about their retirement days, some nasty billionaire can still do some scam that results with this citizen losing all their savings. End result: we have a person who is too old and too ill to keep on working and who has no pension. In a civilised society we cannot have old people becoming homeless and penniless.
Option #2: private businesses handle pensions. Do I even have to elaborate why this is an awful idea?
Option #3: the state handles pensions. In my opinion, this is the only semi decent alternative.
I’m very unhappy about how Latvia handles pensions. In 1990ties some politicians (who also happened to be corrupt oligarchs) wrote the current pension laws and they intentionally wrote them to be awful. There’s hardly any correlation between how much tax money you pay to the state and how large your pension is. And this is fully intentional, because the existing twisted system was hand-tailored to make sure that people who were rich oligarchs in 1990ties could retire with huge pensions. For the average person out there, how large their pension is depends almost entirely on blind luck. For example, my mother got very unlucky, and her pension was severely reduced only because she had a child in the wrong year. If I had been born either three years earlier or three years later, my mother’s pension would be twice as large as it is right now.
Then in 2000ties the system was made even worse thanks to the bank lobby. People are now obliged by law to give their retirement money to one of the local banks (and, of course, those banks can do with this money whatever the fuck they want, and that obviously also means taking it for themselves or conveniently losing it).
Then in 2008 the system was made even worse once the financial crisis hit. People who retired in 2006 have a lot larger pensions than people who retired in 2010. Politicians, who were in charge during the 2008 crisis, realised that they cannot reduce existing pensions, but they can decrease the pensions for everybody who was retiring from 2008 onwards. I hate this damn country.
Anyway, just because countries like USA or Latvia intentionally create an awful pension system doesn’t mean that it has to be this way. Most other European countries prove that it can be done much better. Personally, I’d prefer universal basic income. Combine that with free healthcare in state owned hospitals. This ought to be sufficient to ensure that no elderly people live in misery.
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* I probably won’t be retiring at all. The climate change is likely to result in there being no inhabitable planet several decades from now. On top of that, probably I also have bad genes, most of my family members died before reaching the age of retirement, and I might get the same health problems.
So – first off, a pension is not a Ponzi scheme. Nor is Social Security. A pension is a prepaid life annuity – as Ieva Skrebele says above (@10_, ” Investing money is always a gamble.”, what pensions, like insurance plans, do is to aggregate risk. The overall actuarial risk is reduced proportional to the square-root of the number of subscribers (in other words, a 1000 member group is only 10x the risk of a 10 member group) subject to some constraints.
I would like to point out that there has been a drive to eliminate pensions in favor of 401k plans, which are now being pushed aside by SEP IRA plans – why would businesses avoid pensions so much if they were as bad for workers as you seem to think? Why is the push to privatize social-security into individual accounts (increasing the risk by a factor of something on the order of 10,000 times)? Let us take a look at the change from a defined-benefit to a defined-contribution to a tax-deferred savings account. Notice a similar change in medical insurance – from full coverage, to copays, to HSA-accounts. These are ways of pushing the risk back to the individual, and greatly increasing the overall risk (as we have seen) for society.
Next – “Congress you say, “well, since we control how much money comes in, we can guarantee how much money will be there at any given time, so you may as well let us borrow against it until such a time as we need the money.” Which is never, because Congress can make sure “never” ever comes. See how that works?”
But that is not how it works. Social Security excess (income over payouts) is invested in treasury bonds – yes, that is a loan to the US government (Congress, if you insist), but it is repaid with interest, and that money does go back to social security beneficiaries. Note that the requirement for treasury bonds is because those are literally the safest investment you can make in dollars. If the government ends up defaulting on paying bonds, our entire economy has collapsed and no other investment will be providing any money (dollars) either.
There are two fixes I would recommend – (1) eliminate the cap on SS-taxable income, while retaining the cap on payouts;* (2) allow businesses to increase SS contributions, which then go to their employees (here some details would definitely need to be worked out), that is have the state maintain private pensions and have that be the first payout for any bankruptcy proceedings. The state may also require bonuses and stock to be returned from owners to cover the pension (for so long as the owners have been in charge). Again – details to be worked out, but that’s the gist of it.
I would also like to see the entire defined contribution method of both retirement and medical coverage be eliminated.
*Yes – this is unfair to the wealthy. Cry me a river. When they start having to eat cat food to get by we can revisit it.
As an aside – I am a socialist because aggregation minimizes risk, and the largest aggregation is the entire population.
I would largely do away with private insurance in favor of the government handling such things. Especially when private insurance expects to be bailed out over their bad bets. Not that private insurance would be illegal, but it wouldn’t really be needed by individuals aside from some exceptional circumstances.
@ felicis
#12
Aggregation reduces risk unless it introduces new hazards.
I may be naive, but it would seem to me the simplest way round this is to place a legal separation between the company and its pension fund, i.e. the pension fund is NOT an asset of the company. Too simple?
It honestly surprises me that in a country where the right to keep and bear arms is an inalienable right, that this phrase has, so far, not been enacted literally.
I’m serious. If (Bod forbid) I lived in the USA, and I’d worked for 40+ years for a company that was asset-stripped to the point my pension wouldn’t buy me food, I’d consider the following:
1. I have a lot of time on my hands.
2. I have the right to keep and bear arms.
3. It is in principle possible to identify at least one of the people responsible for the asset stripping that led to my pension’s failure.
4. It is in principle possible to arrange to be in the same place at the same time as that person and their family at least once.
5. Room, board and healthcare in prison is free.
In all seriousness, if a few vigilante pensioners started offing these scum (and their families) pour encourager les autres, I for one would hail them as heroes. And I imagine a LOT of other pensioners (and prisoners, and prison officers) would too. Asset stripping should be seen as a positively dangerous practice, and in my experience such people are nothing if not massive physical cowards. If nothing else, they’d have to seriously increase the money they spent on personal security, and more carefully limit their travel plans.
sonofrojblake@#14
“And their families?” Seriously? Did I miss some sick joke or do I seriously have to ask you how old a child must be for you to consider it acceptable to murder some child as a punishment for their parents’ crimes?
Actually, yes, it is a joke, literally. It’s the old “I told you nobody would care about the [actual targets]” joke. Typical form is:
Perpetrator states they’re going to kill x actual targets plus one red herring. Straight man says “why the red herring?”. Perpetrator triumphantly says “see, I told you nobody would care about the actual targets”.
E.g. Perpetrator = Hitler, actual targets = 6 million Jews, red herring = one bicycle repairman.
The point being, you didn’t question even slightly the wisdom or sense of a pensioner hunting down an executing a 1%er responsible for plundering their retirement fund. Good for you.
Re: sonofrojblake (#14):
Cynicism must soak my very bones because I can’t help think that people would something like this not to argue for gun control but for smaller pensions. They may not put food on your plate but they put a gun in your pocket and we clearly can’t have that.
That said I doubt there’d be any heroism involved, especially with the “families” bits tacked on. To my knowledge capital punishment has a lousy track record. Throwing in vigilantism isn’t going to improve things but only move closer towards terrorism.
Aren’t “disgruntled worker” shootings already a thing? Did any of those accomplish anything meaningful besides leaving scores of people – mainly bystanders – dead or traumatised and making management set up a metal detector in the lobby?
Mostly joking, I’d rather that they take the guns and use them against particularly corrupt government officials. It still mostly wouldn’t work out, but I’d rather target the root of the problem. Actually, the root of the problem is probably the pernicious belief in America that can be summed up as the American Dream – namely, the false belief that the system is fair, and if you work hard enough, you can become a millionaire or billionaire or president. Insert obligatory link to George Carlin video on the topic, who might just be cynical enough for Marcus.
@ colinday #13
“Aggregation reduces risk unless it introduces new hazards”.
True – and there are some other caveats as well (for example the individual risks must be largely independent of one another in a statistical sense).
However, I am interested in these ‘new hazards’ you are thinking of…
felicis@#11:
So – first off, a pension is not a Ponzi scheme. Nor is Social Security. A pension is a prepaid life annuity – as Ieva Skrebele says above (@10_, ” Investing money is always a gamble.”, what pensions, like insurance plans, do is to aggregate risk.
Ideally, yes. In principle the prepaid annuity is held safely, and the pool of money is grown through wise investment. In principle, Bernie Madoff was going to do that, too, except he started making some bad bets and lied about it. In the case of social security, the government defines all its bets as good and defines it as not a ponzi scheme, so it’s not a ponzi scheme.
I guess I think of a ponzi scheme as any financial instrument in which the payout for existing members is financed by signing up new members. To a certain degree, I suppose that’s “an economy.”
I would like to point out that there has been a drive to eliminate pensions in favor of 401k plans, which are now being pushed aside by SEP IRA plans – why would businesses avoid pensions so much if they were as bad for workers as you seem to think?
I don’t think businesses set out to screw their employees. I mean, some do, but I want to believe that most are trying to do the right thing. (whatever that is) as they understand it. That’s why, at NFR, we did contributions to employees’ own retirement accounts, and let them automatically add money from their paychecks at their choice. There was some lecturing about “Social Security won’t be enough for you” and all that as well. Since it was basically “free money” most of the employees contributed the maximum.
One thing that I don’t like about that scenario is: what if you have an employee who needs all the cash they can get, because they have something draining their excess cash? In that case, they’re supposed to save but they can’t. Do we just say “you’re going to have a rotten life when you get old?” I believe there should be some sort of guaranteed minimum pension from the government. (We had no employees at NFR that were just scraping by. As soon as the company went profitable, everyone got a raise and I started paying out annual bonuses)
Another problem with all this is that there’s no way (aside from giving people the money in a private account) to keep a company (or government) from instituting new rules, as Ieva says. There’s nothing I wouldn’t put past the bastards, really. (For example, the French government devalued their currency, which let them turn everyone’s pensions to 1/100th of their original value, which they wisely adjusted because the French government knows that French people know how to make guillotines)
There are two fixes I would recommend – (1) eliminate the cap on SS-taxable income, while retaining the cap on payouts;*
I agree. The rich are already rich; it’s not like something of that sort would put any of them in the poorhouse.
komarov@#17:
Aren’t “disgruntled worker” shootings already a thing? Did any of those accomplish anything meaningful besides leaving scores of people – mainly bystanders – dead or traumatised and making management set up a metal detector in the lobby?
Yes, unfortunately it seems that distraught people choose the wrong targets. They go in to the workplace and shoot the guy whose annoying humming was more than they could handle, not the executive who decided to pack them in a sardine tin to maximize floor space.
People are not very good at recognizing their enemies. Therefore, as a cynic, I offer the following algorithm: start at the top because “the buck stops here.”
sonofrojblake @#16
You are jumping to incorrect conclusions.
When somebody says “let’s murder men, women, and children,” it’s rational to ask for a clarification by saying, “Is this a joke or are you serious about killing children?” If I get an answer that the person is serious about murdering children, it’s safe to assume that they are also serious about murdering men and women. In this case I would have to conclude that I’m talking with a psycho. Alternatively, if this is a bad joke, then the person will explain exactly what they meant. Which is exactly how you answered to my question this time. (Personally, I believe that jokes about killing people are bad jokes. Obviously, this one is a matter of opinion.)
Jumping to conclusions once again. When given a list of crimes, some worse than others, most people are going to first inquire about the worst crime in the list. Just because a person believes that some crimes are worse than others doesn’t mean that they doesn’t care about the lesser crime.
For the record, I’m against capital punishment even when it’s done legally and by a state. Obviously I also object to people killing each other for revenge or hurting somebody’s family members in order to get revenge.
Hmm. I worked at a Village Pantry (I think that was the name) owned by Marsh. It was during the long, rather awful period after I learned my way around IT but before I knew anyone who could help me get my foot in the door.
It was a lousy, depressing place to work. The usual management BS of “we stop paying you when the store closes but you better perform certain shutdown tasks before you leave.” By a strange coincidence this almost always ended with the company getting hours of free labor from several minimum wage employees every week. The one I worked at was a gas station that didn’t sell gas (tanks failed inspection and they didn’t want to pay to renovate) buts happy to sling booze, tobacco and sugary pseudofoods to the poor people in the area. In fact they sold almost nothing else. And it stayed busy enough to keep 2 clerks fully occupied for just about an entirely shift. Technically the armed security guard was also occupied but I think his job was mostly to avoid shooting himself or letting anyone else grab his gun (I wanted his job even less than I wanted mine although he did make slightly more).
So I also feel they had no idea what they were doing with the business. Because as noted, they weren’t in the grocery business, the gas station business, or retail at all. They were in the business of making piles of money grow into larger piles of money with next to no compunctions about how that was accomplished.
Marcus @#20
I agree. I prefer universal basic income, because I think that nobody should live in misery regardless of their age. The big question is what to do with all those people who want to save some extra money so that they can retire and live comfortably with more money than just the guaranteed minimum pension. Leaving it up to each person is risky—there are plenty of opportunities for things to go wrong and entirely wipe out somebody’s savings. Thus it would make sense for the state to somehow organize the whole system of retirement savings.
I dislike this one. This is one of those situations where you encounter some cultural difference and disapprove of the foreign custom on an emotional level. In Latvia the state pays a modest (to put it mildly) pension to everybody. Many people feel like that’s too little to live comfortably, so they save additional money on their own. Where each person invests their money is entirely up to them (and their chosen bank). Employers have no say at all about this. In general, bosses don’t even know where each of their employees is investing their retirement savings (unless they chat about this during a lunch break and the employee chooses to tell that). The idea of employers having any say at all about what happens with their employees’ retirement money seems very wrong for me. What I’m about to say next might be a rationalization; my attempt to logically explain why something that I feel is bad ought to be seen as bad because of rational reasons. This is my warning that my opinion might be not objective.
Anyway, I think that businesses shouldn’t have any say at all when it comes to my pension. I don’t want to have a boss lecturing me about how the state pension won’t be enough for me once I retire. This infringes upon my freedom to do with my money whatever the hell I want. It’s my money, I choose how to spend (or how much to save and where to invest) it. I don’t want my boss to give me any incentives to spend my money in a certain way. This is a violation of my financial freedom.
Part of the problem is that some companies and people who lead them are plain nasty to their employees. But I would still have a problem even with the situation you described. It’s unfair. There’s some “free money” that an employee can obtain only by allowing their boss to manipulate their financial decisions. If the employee refuses to comply, then they don’t receive part of the money they have earned. I perceive a relationship between a boss and an employee as an exchange of money versus services. There’s no reason for the employer (even a kind and well-meaning one) to meddle in their employee’s life. If I did a job and earned some amount of money in exchange, I want to get all the money I have earned. How I spend it afterwards is up to me.
I have heard about workplace wellness programs where employers are using some form of financial incentive to increase physical activity among their workers. The whole idea makes me uncomfortable. I’m an artist. If I paint a picture for my boss, the value of that picture doesn’t diminish just because I might have some extra pounds of body weight. Why the hell should my paycheck be diminished? Same goes for retirement savings. Whether I make any doesn’t influence the value of my work, so why should it influence how much money I get.
Re: Marcus Ranum (#21):
It just occured to me why executive offices tend to be on the top floor and it has nothing to do with the view. They’re just that much harder to reach without being spotted…
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Re: Ianir (#23):
They’re probably following a standard corporate flow chart:
1) Are we making money?
Yes: Carry on but cut corners if you can and receive a bonus.
No: Fire half the staff to fix the numbers and receive a bonus.
2) Could we make a ton of cash right now by gutting everthing and screwing up long term prospects?
Yes: Fire everyone and sell everything, receive a bonus.
No: See yes and receive another bonus.
It doesn’t require any real knowledge about the business. That’s probably a plus because the more you know the more difficult it gets to avoid responsibility. (Isn’t it amazing how many corporate scandals shock the very CEOs nominally in charge? Somehow there are middle management cabals everywhere, bent on making the boss look bad while accidentally earning him a ton of cash.)
Marcus @#20
The Soviet legacy: employed people go to work, earn money, and pay the income tax, VAT, and a bunch of other taxes. The money they pay as taxes today goes right to the state budget and is given to retired people as pension the next month (pensions are paid from the state budget).
The capitalist option: “Social Security excess (income over payouts) is invested in treasury bonds – yes, that is a loan to the US government (Congress, if you insist), but it is repaid with interest, and that money does go back to social security beneficiaries.” (As per felicis @#11)
Sorry for all the capitalists out there, but I personally prefer the first option. My goal as a young employed person is to make sure that some years later after retiring I will have a source of income. I’m perfectly happy just paying taxes to my state as long as I have good reasons to believe that 40 years later the state will be giving me a pension.
I don’t wish to invest my money in treasury bonds so that my country could accumulate debt on paper, nor do I particularly care about receiving interest (I do wish my pension to be adjusted for inflation, though). Investing my money into something else rather than treasury bonds would be an even worse option. When I give my retirement savings to a bank, they will invest my money into things that directly harm the economy (for example, real estate bubbles). When I pay taxes, the state uses my money for good purposes (financing education, infrastructure, science, or just giving pensions to people who are currently old). When I put my money in a savings account, the bank will use my money to further enrich some billionaires and to pull of various semi-legal activities that are bound to cause the next economic crisis. I might dislike countries and their governments, but I hate banks even more. The last thing I want to do with my money is giving it to a bank.
So, yes, this time I prefer the simpler way that still remains here as a Soviet legacy. But of course rich capitalists would never allow that to happen. If state doesn’t just give all the old people their pensions, then each person is forced to save their retirement money on their own, and that provides nice opportunities for capitalists and banks to enrich themselves. After all, if the state handles pensions and all citizens are happy with the system, then banks get their hands on a lot less money.
I don’t even understand the headline to this one: “Brexiter hedge fund chief’s bets against UK economy fail to pay off”
How is it not “paying off”? He’s personally still making in a year far more than my expected lifetime earnings. This is apparently a disaster because it’s not the 4 times higher it was the previous year…
The funds themselves made 7% in a month, 50% in a year. I don’t think any of my savings accounts are doing better than 0.5% pa at the moment.
https://www.theguardian.com/business/2018/dec/28/crispin-odey-hedge-fund-bets-against-uk-economy-brexit-profit-falls
This is a guy who has literally just said, he knew brexit would fuck the UK economy, he intended it to fuck the UK economy, he supported and paid for it (via pro-brexit campaign contributions) *because* it would fuck the UK economy, because he was betting on the UK economy getting fucked, and know he’s making out like a bandit because it worked.
It there actually *any* reason whatsoever, any possible societal benefit that would be foregone, not to completely ban short selling?
komarov @25 – last i heard, beff jezos had his office on top of a humble 5 story building – but there was a creepy guy on that floor with a bulletproof booth full of submachineguns.
xohjoh2n@#27:
It there actually *any* reason whatsoever, any possible societal benefit that would be foregone, not to completely ban short selling?
A lot of these financial maneuvers are inherent possibilities in the system. It’s probably not possible to ban them and if someone tried, they’d be able to come up with another way to do it. It’s gambling, with contracts, and you can get really creative with contracts. There are small armies of specialists who exist to do nothing but figure out ways around tax codes and market regulators.
That doesn’t make it right, of course.
You’re more pessimistic than I am Marcus about the possibility of designing regulations to fix this. Just have some honest (lol, I’ll get to that) people who monitor the market for new kinds of abuse of this sort, and ban or regulate them as they are discovered.
Of course, the big problem with my idea that even I recognize is that this requires getting the financial regulators to be working for the common man and against Wall Street, and that’s really hard.
The German system works much like what Ieva Skrebele describes (so it’s not actually a “Soviet” legacy since it has been the practise in West Germany as well). Only that our governments decided to fuck it up as well. At the start of the 1990s, the coffers were overflowing. The pension system was taking in much more money than it was paying. Careful voices recommended putting money aside for the times when the boomers would retire. The Kohl government (you all remember that old sucker, don’t you?) decided to use that money to pay for German reunification. Back in the day the social democrats said “you know, reunification will be expensive, there will be higher taxes and shit” while Kohl promised “flowering landscapes”. Guess who won the election.
People sued, but our Constitutional Court said “it’s OK because the government has to guarantee the pensions”, but when the boomers started to retire we were told that everybody had lived “above their means” and that we needed to cut pensions for new pensioners (especially by increasing the age at which you can retire).
Back when all that started, many middle class people looked at the USA and said that our system was so unfair, they had paid so much, had they invested all that money they would now be rich. They were getting very quiet when the banks crashed and they watched news stories about people in the USA whose wonderful pension plans turned into thin air.
But the government found different ways to help middle class people, mostly by promoting a “private pillar” that is heavily subsidised. I got one of those plans. The government pays an additional 50% on what I pay into the plan (up to a limit), but of course, people who live pay cheque to pay cheque cannot afford that initial money. Worse than that, people who depend on “Hartz 4” our wonderfully reformed welfare system that gave rise to food banks, aren’t even allowed to put away any money because that would count as “assets” they have to use now. Quite a lot of these people are folks who work minimum wage, in other words, the government pays a subsidy to the company disguised as “welfare” to the workers who are then subsequently shamed and forced to lay their whole lives open.
This basically means that a lot of people will never get a high enough pension anyway and will be stuck in poverty until they die.
“When I pay taxes, the state uses my money for good purposes” Pish! Where is your amazing and amusing cynicism? In the United States, our taxes go to support Yemeni bombing campaigns, planes that cannot fly in the rain, and escalating debt payments to wealthy bond holders.
Ieva Skrebele (@#26)
“Sorry for all the capitalists out there, but I personally prefer the first option. My goal as a young employed person is to make sure that some years later after retiring I will have a source of income. I’m perfectly happy just paying taxes to my state as long as I have good reasons to believe that 40 years later the state will be giving me a pension.”
Social Security is paid by a tax (as is Medicare). If you are paying your taxes _now_, and in 40 years you expect a pension, what do you think is being done with the money in the meantime?
Marcus Ranum (@#20)
It is not just a matter of definition. Taxes are not theft merely because the government defines them as not theft (nor are they slavery) – two arguments often brought up by libertarians about taxes. Similarly, pensions are not a ponzi scheme just because they are defined not to be.
A Ponzi scheme never has an intent on paying everyone back what they put it. It exists to benefit only the early investors (and the guy running it). Multi-level marketing is the same kind of thing with a gloss of some kind of product that gets sold to people (Herbalife and Amway come to mind). Pensions have a defined benefit that members will get – the major problems that have arisen with pension in the last 30 years have been from (often deliberate) mismanagement.
Which brings me to:
“I don’t think businesses set out to screw their employees. I mean, some do, but I want to believe that most are trying to do the right thing. (whatever that is) as they understand it.”
Really? Did you not read your OP? While _your_ business may not have deliberately set out to screw employees, it is actually very common that business decisions screw over employees. Even when it is not necessary to do so. How does shifting retirement risk from the business to the employees do anything good for the employees? That goes for health-insurance risk as well? Oh – and the latest new thing for salaried employees – no longer do we get PTO, now it’s only flex time. Take off as much time as you want (subject to management allowing you that time off). Then when you go somewhere else, there’s no PTO bank to pay off. How does that not screw over employees?
There has been an erosion of non-executive benefits over my entire lifetime – and while none of those companies may be deliberately setting out to screw over their employees, it turns out that it is the employees left holding the bag. And that bag is filled with flaming shit. So, from an employee’s point of view, it sure looks the same as being deliberately screwed over, especially when none of those executives are taking a hit.
Case in point: Moda Health is a local health insurance company – around 7th or 8th largest in Oregon. They bet on getting a bunch of business through the ACA Exchange – they did this by deliberately undercutting the premiums (by about 30%) under the assumption that the federal government would make up the difference with the risk-corridor program (they are suing the government for that money – they have lost at the Court of Appeals in June, but we’ll see where the appeal goes). Still – the company made a bet that they thought would be subsidized by the state and lost. It was a failure by corporate leadership and gross incompetence by the company’s chief actuary. Who lost their jobs over this fiasco? Hint – not anyone in corporate leadership who are still pulling their salaries, and are the ones who made the bad decision in the first place. So – due to cash flow problems they laid people off – the CEO makes $13M a year and continues to enjoy his position.
But companies don’t deliberately screw over workers.
Jimmy John’s requires sandwich cooks to sign a noncompete. But companies don’t deliberately screw over workers.
Most companies are fighting any attempt to increase the minimum wage. But companies don’t deliberately screw over workers.
Uber and Lyft – which are heavily subsidized by investors and not close to making money – have screwing over workers as their business model. (Oh – sorry, ‘independent contractors’, because that makes it ok, I guess).
Amazon? Walmart? How many examples of businesses screwing over workers do I need to provide?
felicis @#33
In the USA maybe, in the UK employees have more rights than they did when I started work forty plus years ago. Although there has been an extension of the use of ‘self-employed’ it has been, and is being, challenged in the courts, Uber are appealing the decision that their drivers are employees at the moment, the courts are getting less patient with this, seeing it rightly as an attempt to evade the legal responsibilities of being an employer.