Eric Dash of The New York Times this morning and Paul LaMonica of CNN.com yesterday afternoon both cover the implications of being an employee of a public company.
LaMonica's column on how so many private company are on Fortune's Best Places to Work list covers the reasons that shareholders are a problem when you are cashing paychecks.
"There is something to be said for a private company's ability to think longer term. We don't have to worry about quarterly earnings reports. Sometimes public companies serve too many masters," said Alan Skrainka, chief market strategist with Edward Jones.
When times are tough, investors often look for companies to cut expenses in order to preserve profits. Pink slips are typically a quick and dirty way to slash costs and boost the bottom line.
His column was about how the demands of being public are unjust to the hardworking souls who show up at their cubicles every morning having to worry about their paycheck being victim to analyst expectations.
Dash takes the greedy shareholder's side, arguing that banks that reserve 90% of their earnings for salaries and bonuses are robbing the pensioners and widows investing in bank stocks of rightful returns.
But to keep up with the Goldmans, laggards like Citigroup are handing out fat slices of their profits, leaving little left over for their shareholders. Citigroup is, in effect, paying its employees $1.45 for every dollar the company took in last year. On average, its workers stand to earn $94,000 each.
It's days like this that remind me why I don't like to focus on executive compensation as an issue. All of the consequences in both articles are the result of informed choices, either by investors or individuals in choosing where to work.
Institutional investors are alarmed by what they characterize as excessive rewards for bank employees. While banks are increasing salaries and bonuses for many employees, many have yet to restore dividends that were cut during the financial crisis.
“It’s not a fair shake,” said John A. Hill, chairman of the trustees at Putnam Funds, another big mutual fund company. “I think the shareholders who paid for building that franchise should be getting a bigger share of the franchise’s profits.”
Institutional Investors are alarmed at excessive rewards in the financial services sector? Um, banks didn't just suddenly start paying their employees that way and sophisticated institutional investors should be the ones explaining that risk to their clients, not expressing surprise that the sun rises in the East.
Similarly, LaMonica points to the reason that talented employees sometimes choose to work for public companies that have to put shareholder interests ahead of their own sometimes.
Private companies may offer more stability. But one potential knock on them could be that as long as they stay private, they may not give employees a path to big riches down the road through an initial public offering or from the exercising of cheap stock options.
He goes on to note that private company employees often end up doing better anyway and its a good point as long as one remembers that individual choice is the important part, not trying to mandate a system that forces the same choices on everyone.
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