I'm not sure that conclusion is warranted. Here's what we know:
1. Loads of companies were doing it.
2. When this company wanted to do it, their counsel said it was illegal, so they didn't.
Given those facts, we can't say that the other 200 companies were simply flummoxed by a too-complex regulatory framework. They may just have well had their own meetings and said, "This looks fishy, but everyone else is doing it, and we get more money." Or maybe they did no due diligence at all, and just did it anyway. Once caught, obviously many people would claim an honest misunderstanding, whether or not there was one.
Frankly, I'm skeptical of the whole, "the jail sentences were handed out arbitrarily" angle. It seems the opposite of arbitrary -- the person who instituted an illegal policy in multiple companies was punished. The law may be complex, but when you're making C-level salaries, I'm sorry but you're expected to figure out if you're committing a crime or not.
I'm not saying it was arbitrary from regulator's side. I am saying it would be arbitrary for you because you won't know if you're in the wrong or not.
>>> but when you're making C-level salaries, I'm sorry but you're expected to figure out if you're committing a crime or not.
I'm not sure how it has anything to do with the salary. I'm sure whichever lawyers OKed this practice - and I would find it very hard to believe hundreds of companies would just decide to wing it without asking a lawyer - I'm sure they were paid enough. They just thought it'd be OK, but they were wrong. How the salary helps to deal with that? Unless you're claiming the salary is just compensation for the possibility of being jailed for something you have no idea you were doing wrong. In which case I'd prefer a system with more transparent laws and lower CEO salaries.
The "arbitrary" I was referring to was from the article -- a direct quote from Horowitz.
I'm saying that if knowing things like the legal requirements for running a company isn't expected to be part of your job, then you should pay someone a hell of a lot less to do the job than most executives are paid. If you just want someone to wing it, give me a call -- I'll work for probably 10% of the salary.
It's not that the salary is compensation for the possibility of going to jail. It's that compensation correlates with responsibility. If you hire a programmer for $250,000 a year, you damn well expect him or her to be better, more responsible, and more independent than one you're paying $50,000 a year. If not, then what are you paying 5x as much for? So if I hire a CFO at say, $3.5 million a year plus stock options and all the other perks (that's Google's CFO compensation at the moment), what am I paying for if I can't assume that they won't have bothered to figure out the accounting laws?
Also, you're assuming that companies would be innocent, unknowing participants here. That's an assumption that, very often, turns out to be false when we have occasion to check. I don't think all those valley companies thought they were allowed to enter into those wage-dampening agreements, but they still did it. I don't think that was an honest mistake or misunderstanding of the law. I don't think Enron, Tyco, Global Crossing, AIG, and a million other examples thought they were shining beacons of moral virtue victimized by a complicated legal system either. People, and by extension corporations, will quite often break or at least flirt with breaking the law in exchange for money. You're asking me to just take your word for it -- sort of a "well obviously we didn't mean to do anything wrong" defense. It isn't obvious.
That's what I am saying - responsibility is in finding what is right to do and doing the best you can in the situation. But what if the situation is such that there's literally no way of knowing what is right and what is not? If the law is so impenetrable that basically asking a lawyer is akin to going to an psychic - he gives you the answer, charges a lot of money, but you have no idea where it came from, is it true and if you can rely on it or not. How you can be a responsible CEO if you have to rely on psychics to do your jobs?
>>> what am I paying for if I can't assume that they won't have bothered to figure out the accounting laws?
Again, that's what I am talking about - I think it would be much better if the laws were such that you don't have to hire 3.5 mln/year CFO and still not be sure if that all won't end up in trouble.
>>> . I don't think all those valley companies thought they were allowed to enter into those wage-dampening agreements, but they still did it.
That is entirely different topic, but I see you presume you have the right to tell companies how they should pay the workers. I have no idea where that came from to you, and if you do, you're the part of the problem. That is exactly the reason why these laws are so bad and convoluted - because everybody wants to pull a bit of it to their side and carve a little loophole in the law to add a bit more power to himself. I want to be paid more (no matter I'm already paid well into six figures and am in one of the best paid professions in the world) - so I want a law that tells the companies to pay me more. Then the company comes and makes their private law that makes a loophole for them so they don't have to. And then you come and carve another little loophole for yourself. And pretty soon you need a 3.5mln/year professional to figure out what your employees should be paid, and you still get sued for millions because apparently some bureaucrat disagrees.
True, I presume to tell employers that they are responsible for following the law.
I think you're exaggerating the complexity of the legal system to attempt to support a point that doesn't warrant support. In the article, Horowitz took the proposal to his company's legal counsel, and quite quickly, counsel came back with, "this proposal is illegal". It's not impossible to determine that -- it was actually determined correctly in the real world.
"Later that year, Schmidt instructed his Sr VP for Business Operation Shona Brown to keep the pact a secret and only share information “verbally, since I don’t want to create a paper trail over which we can be sued later?"
This isn't a case of a company honestly trying to follow the law and being victimized. Schmidt knew that he was opening Google up to legal action, and he did it anyway because it saved him huge amounts of money.
If these companies think the laws are bad, it's not like large corporations have no political power. They're free to buy as many votes as they always do and get them changed. Until that happens, they can suck it up and abide by the anti-trust laws in force in the country they've chosen to incorporate in.
It was determined in this particular case. But in many other cases, it was not, and this scheme was approved, for example, by PWC.
>>> This isn't a case of a company honestly trying to follow the law
First of all, this is not the case that we were discussing - it has very little to do with financial law. Secondly, in current climate, where companies can be sued for basically anything, given they have enough money to be attractive targets, of course that makes executives to try and minimize the exposure. Even though company is supposed to be able to choose their worker's pay as they please, obviously it is not so - the populist politicians want to mess with it to get themselves elected. And thus a savvy executive would certainly not want to make it too easy for them. It turns into an adversarial game, and the results are not good for anyone.
>>> If these companies think the laws are bad, it's not like large corporations have no political power. They're free to buy as many votes as they always do and get them changed.
That's what they are doing. That's where the regulatory capture comes from. As a result, the law becomes more and more complex, as each company and each interest group carves a loophole in the law for themselves and pours millions into buying off politicians. As a result, we get completely corrupt politicians, the law that is trying to serve a thousand of special interests and no longer has any connection to what was the original purpose of the law - to protect people's rights, huge barriers of entry to the competition, billions spent on political squabbles instead of doing something productive (think about how many people one could feed and clothe for the cost of one election campaign) and ultimately the consumers and taxpayers paying for all this baloney. And you response essentially is - if you don't like how we do it in America, GTFO? Is this really the best you can do?
1. Loads of companies were doing it. 2. When this company wanted to do it, their counsel said it was illegal, so they didn't.
Given those facts, we can't say that the other 200 companies were simply flummoxed by a too-complex regulatory framework. They may just have well had their own meetings and said, "This looks fishy, but everyone else is doing it, and we get more money." Or maybe they did no due diligence at all, and just did it anyway. Once caught, obviously many people would claim an honest misunderstanding, whether or not there was one.
Frankly, I'm skeptical of the whole, "the jail sentences were handed out arbitrarily" angle. It seems the opposite of arbitrary -- the person who instituted an illegal policy in multiple companies was punished. The law may be complex, but when you're making C-level salaries, I'm sorry but you're expected to figure out if you're committing a crime or not.