Back Among the Deck Chairs

(Yes, the title is a reference to ANOTHER Titanic/TSR joke among the employees. We had a lot of them, for some reason).

I hadn't planned on coming back to this particular subject so soon, but the Fates planned differently. My last post went a little viral between friends picking it up on the Facebook/Google regions and posting on industry discussion boards. Still, I felt I had advanced the idea of looking for root causes as opposed to merely bemoaning our lots in life.

And then THIS shows up on the 'net. For those not linking, it is an announcement that the CEO of Hasbro is getting paid $23 Million this year. And yeah, it is like pouring oil on troubled water, then tossing in a match.

Now, doing the digging in the article, the CEO gets a raise in salary from $1 Mill to $1.2 Mill (hardly chump change), and the rest being common stock. And to the best of my knowledge (the Internet will correct, of course), this means that it comes out of the company till - they are reassigning stock held by the company to the individual. And this assignment may have other strings attached - the stock cannot be sold except back to the company, it may only be sold at a particular price, it must be sold on leaving the company. So it is a fuzzy number, but a very large fuzzy number.

The article also makes clear that this is a retention payment, negotiated last year, to keep the CEO around. It also notes that Hasbro had a weak 2010 in sales (stock prices went up, though). 2011 is nothing to write home about (stock prices have since deflated) and 2012 is not shaping up to be any better (Upcoming big movie: Battleship). So this is not about performance, but rather about stability. This is payment for showing up.

What is important gets back to the idea of shareholders as being the ultimate measure of company success. By rewarding the management of the company with shares, they reinforce that mindset - increasing the net worth of the company (judged by stock price) also increases their personal wealth. Therefore decisions are made with more than a weather eye to how they will affect those stock prices in the near term as opposed to planning for a longer term.

This is a chosen and deliberate corporate mindset. The last time I was in Pawtucket at the Hasbro headquarters, several years ago, they had in the lobby a stock ticker showing the Hasbro share value running continually. This is a feature, not a bug, and informs on the rest of the decision-making involved.

More later, but hopefully not on this.