What Digby says:
As the conservative movement godfather Richard Viguerie likes to say:
Sometimes a loss for the Republican Party is a gain for conservatives. Often, a little taste of liberal Democrats in power is enough to remind the voters what they don’t like about liberal Democrats and to focus the minds of Republicans on the principles that really matter. That’s why the conservative movement has grown fastest during those periods when things seemed darkest, such as during the Carter administration and the first two years of the Clinton White House.
Conservatives are, by nature, insurgents, and it’s hard to maintain an insurgency when your friends, or people you thought were your friends, are in power.As Rick Perlstein explained in his piece called “The Long Con,” maintaining an insurgency is how Conservative Movement Inc. stays in business. The above Viguerie quote is from 2006. The morning after the 2012 election, Viguerie wrote “[O]ut of that disaster comes some good news: conservatives are saying ‘Never again’ are we going to nominate a big government establishment Republican for President.” He put this on his website along with a fundraising pitch:
They’ve been making a nice profit at this sort of thing for a very long time.
What’s new in this cycle is the rise of the agitated “moderates” who are taking to the pages of their traditional media to lash out in anger at Tea Party excesses — or at least at a certain “non-mainstream” Republican who can sit in as the far right’s all-purpose sin-eater. (You don’t want to directly confront that rabid Tea Party base. It bites.) That man is Sen. Rand Paul.
Take, for example, this raging screed from none other than GOP strategist John Feehery, who has to count as one of the most reasonable of Republican fellows, a man who is commonly seen on MSNBC’s daytime shows sparring genially with Democrats and otherwise giving the impression of having a very even temperament.
He’s taking issue with Obama’s foreign policy, but uses Paul’s dovishness to stake out the “True Republican” position on national security and civil liberties — just in case some Tea Partyers might get it in their heads that when they rail against Big Government, they’d better not be talking about the Military or Intelligence agencies. That’s sacred GOP territory:
Paul is practicing the politics of paranoia, aimed directly at the American government. It’s a form of populist libertarianism that posits that the biggest threat to our liberty comes not from foreign powers but from our own government.
That kind of paranoia is not grounded in reality, but it unquestionably has a following in this country. Edward Snowden, for example, enjoyed a warm welcome at the South by Southwest festival in Austin, Texas, despite being the houseguest of Putin.
That Snowden could somehow continue to attract admirers despite his obvious betrayal of American national security says a lot about the deep vein of distrust that Paul is exploiting for his own political purposes.
If there’s one thing that really gets these nice moderate “grown-ups” upset, apparently, it’s the suggestion that Dick Cheney might not be one of those nice moderate “grown-ups.”But we live in an ever more dangerous world, and neither Paul’s paranoia nor Obama’s weakness is going to make America any safer.But the best example in recent days is this scathing “modest proposal” by Pulitzer Prize-winning conservative Wall Street Journal columnist Brett Stephens, in which he sarcastically advises the GOP to nominate Rand Paul so as to hasten its final descent into madness after which it can rise from the ashes with a new and better party. Ironically (and I’m sure he didn’t mean it that way) he seems to think Jeb Bush is just the guy to lead the moderate New Jerusalem.
His indictment of Paulism is centered on Paul’s (admittedly lame) attempt at Hispanic and African-American outreach, considering his own racist associations. But what seems to bother him the most is the fact that back in 2009 Paul implied that Dick Cheney might have been influenced to go into Iraq because of his long-standing ties to the military contractor Halliburton. Them’s fighting words:
Cui bono — to whose benefit? It’s the signature question of every conspiracy theorist with an unhinged mind. Cheney. Halliburton. Big Oil. The military-industrial complex. Neocons. 9/11. Soldiers electrocuted in the shower. It all makes perfect sense, doesn’t it?
If Mr. Paul wants to accuse the former vice president of engineering a war in Iraq so he could shovel some profits over to his past employer, he should come out and say so explicitly. Ideally at the next Heritage Action powwow. Let’s not mince words. This man wants to be the Republican nominee for president.
Stephens concludes with this:
[M]aybe what the GOP needs is another humbling landslide defeat. When moderation on a subject like immigration is ideologically disqualifying, but bark-at-the-moon lunacy about Halliburton is not, then the party has worse problems than merely its choice of nominee.I don’t know if he’s being serious, but I wouldn’t be surprised to see plenty of Republicans quietly whispering to each other that a landslide defeat would be just what the doctor ordered. The Holy Grail of an enduring Republican majority rests on the myth of the epic Goldwater loss propelling a grass-roots conservative movement that in 16 years, and in the wake of a monumental Republican disgrace, came to dominate American politics for a generation. One could easily see many of them dreamily traveling back in time to 1965 and thinking they could repeat those glory days.
But the purpose of all that was to build a grass-roots movement. And they succeeded wildly. Today it forms the core of the Republican base, it elects conservatives to office and it wields considerable power over the political establishment. If what these Republican writers want is for the moderate wing of the GOP to rise like Pheonixes from the ashes of a major landslide they are going to have to activate a group of people who are unlikely insurgents: temperamentally low-key, judicious, restrained Republicans. I don’t know how many of them even exist anymore but they would seem to be an unlikely group to organize as an insurgent political movement.
It’s true that they will have millionaires on their side. That is, after all, the real “moderate” constituency that opposes both the anti-immigrant right wing and the potential isolationists among the Paulites. There’s a whole lot of money at stake. But even in this upside-down democracy of ours, they still only have one vote. It’s very hard to see how they can find enough moderate Republicans out there to mobilize a partisan insurgency against the conservative movement they helped build over the course of 40 years.
After all, as Richard Viguerie makes very clear, no amount of losing will change their course:
Conservatism can never fail, it can only be failed. It’s going to take more than a mere embarrassing landslide to tame that beast. They thrive on such losses.
It seems that the Republican establishment is finally seeing that enabling their radicals might have been a mistake. Unfortunately for all of us, it’s probably too late. Their monster is feeling his oats and it’s going to be very hard to stop him.
(Heather Digby Parton is a writer also well-known as "Digby." Her political and cultural observations can be found at www.digbysblog.blogspot.com.)
More Heather Digby Parton.
I remember thinking long ago as an engineering grunt, hearing that my company was going out of business but that the executives were getting million-dollar bonuses for selling it, that the pay metrics for the executives must be based on star-based (Dick Cheney-based?) measurements.
But as long as they're paid for performance it's okay, right?
April 12, 2014
Year after year, as executive pay continues its inexorable climb, it’s amusing to watch corporate directors try to justify the piles of shareholder money they throw at the hired help. Check out any proxy filing for these arguments, which usually center on how closely and carefully the executives’ incentive compensation is tied to the performance of company operations.
But pay for performance is only as good as the metrics used to determine it. And as a recent study shows, some metrics — including the most popular — are downright ineffective at motivating executives to create shareholder value.
The study was done by James F. Reda, a veteran compensation consultant, and his associate David M. Schmidt, both of whom are in the human resources and compensation consulting practice at Arthur J. Gallagher & Company. They analyzed pay metrics used by 195 large companies over the five years that ended in December 2012. By comparing those measurements with moves in these companies’ stock prices, the study identified the common pay metrics that corresponded with above- or below-average performance.
Their analysis will come in handy for investors examining the executive-pay tallies for 2013. As usual, the numbers are staggering:
The median compensation for C.E.O.s at the 100 largest companies that have filed so far was $13.9 million, according to the Equilar 100 C.E.O. Pay Study, conducted by Equilar, an executive compensation data firm. That’s up 9 percent from 2012.But investigating the basis of these amounts takes some digging. Consider Oracle, whose chief executive, Lawrence J. Ellison, received $78.4 million, placing him atop our 2013 pay list. Only by reading the company’s proxy do you learn that Oracle determined its incentive compensation — meaning most everything but salary — based on growth in what it calls “non-GAAP pretax profit.”
In Oracle’s lexicon, that means the company’s earnings before income taxes and minus the costs of stock-based compensation, acquisitions, restructurings and other items. In other words, the Oracle number is not based on generally accepted accounting principles, or GAAP, and that makes its numbers look better.
Oracle’s approach is just one of many benchmarks companies can choose. Some boards award incentive pay based on a company’s total shareholder return or earnings-per-share growth; others use return on invested capital or return on equity. Most companies use more than one measure. And all argue that their methods justify the incentive pay they award.
But which measurements work and which don’t?
According to Mr. Reda and Mr. Schmidt, stocks of companies choosing the most popular gauge — total shareholder return — as a performance metric for at least one year out of the five in the study underperformed stocks of companies using other benchmarks. By contrast, stocks of companies that used earnings-per-share measures based on generally accepted accounting principles outperformed.
The analysis also determined that companies making frequent changes to their pay metrics vastly underperformed those that stuck with their benchmarks.
It is dismaying that companies using total shareholder return as a performance metric tended to underperform, given its rising popularity in pay practices. Among the 195 companies in the study, just over half — 53 percent — used total shareholder return as a metric. Those companies’ shares had an average loss of 0.18 percent, annualized, over the five-year period. That compares with an average gain of 1.15 percent among all 195 stocks, regardless of the benchmark they used.
Even more striking, stocks of companies that did not use total shareholder return as a measure gained an annualized average of 2.67 percent.
“What this says is companies should look for alternatives to the total shareholder return measure,” Mr. Reda said. “They should look for growth drivers that management can control and not do the knee-jerk thing.” That knee-jerk thing, he said, is total shareholder return, and he said that using it routinely was a mistake.
Interestingly, the study found that stocks of companies using a much less popular metric — earnings-per-share growth — were more likely to outperform. Only 37 percent of companies used that measure at least once from 2008 to 2012, the study found. Still, these shares generated a gain of 1.37 percent, annualized, during the five years, above the 1.15 percent average gain across all the companies.
Neither Mr. Reda nor Mr. Schmidt could say with certainty why the benchmark of total shareholder return seemed so closely linked to lackluster corporate performance.
But Mr. Reda was willing to speculate on why earnings-per-share measures were less popular in the boardroom. They are harder to manipulate than other measures that burnish results by removing costs from the equation, he said. (Of course, earnings can be enhanced by stock buybacks and other management machinations, but most of those tricks can be spotted fairly easily.)
“Earnings per share seems to be the best measure, and lots of investors and shareholders think it is important,” Mr. Reda said. “But companies hate it. They don’t want to be held accountable for the costs of discontinuing product lines or closing factories.”
Another conclusion from the study is this: Shares of companies that chose a metric and stuck with it generally did better than those of companies that changed their measures. For example, the 24 companies that changed their performance measures three times over the five years generated an average loss of 2.65 percent, annualized. The 56 companies that maintained the same metrics over the period — it didn’t matter which metric they used — showed gains of 5.09 percent.
“Stability of design has value,” Mr. Reda said.
Perhaps the study’s clearest message is that one size does not fit all when measuring pay for performance. For instance, not all companies’ stocks underperformed when their managers were judged on total shareholder returns.
Health care equipment and services companies are an example. The returns of those that used total shareholder return exceeded the average returns of their peers, the study found. Of the 11 companies studied in that industry, the stocks of the three using total shareholder return generated average annualized gains of 4.4 percent in the period. That compares with 1.9 percent for shares of companies that didn’t use the metric.
Similarly, the use of earnings per share didn’t always translate to stock outperformance, the study found. This was the case in the energy, insurance, media and retailing industries.
As a result, Mr. Reda said, boards must design their pay packages with goals that are specific to the company’s strengths and weaknesses, but that will also promote the kind of growth that shareholders want.
“Large companies can be unwieldy,” Mr. Reda said. “If management is not really focused on what they need to do, they are unlikely to succeed in getting their houses in order. If you can focus management on things they can control, investors might be better off.”
Also, management may not get the millions in bonuses?