Friday, October 12, 2007

Income Accounting

Sanders and Hambrick have written a Paper on risk preference among Corporate Executives, finding a greater likelihood of risk-taking under Conditions of heavy Stock Options usage, but that the risk-taking is far more precarious; and accounting fraud far more likely to result upon business failure. I have always been a relative opponent of Stock Options, thinking such practice allows for another level of Power shifts at the Corporate Board level, further deteriorating Stockholder representation in the Decision process. Like all things I consider, I study on the problem, and have developed my own system of Executive compensation I feel would operate better; basically leading to a unity of Executive and Stockholder interests.

My basic idea starts with elimination of the Windfall mentality which currently infects the Corporate structure. The first Step is to establish a permanent Bonus system for Executives, based upon set levels of Net Profits; when the later decreases, so does the amount of Bonus, and vice versa. The next Step is to forbid immediate execution of the awards; stipulating that all Bonuses will only activate upon Retirement from the organization. Bonuses cannot exceed Twenty in number, paid only from future revenues, but based upon the Profits record from the Executive’s years of employment where Accounting fraud is verified not to have been used. Corporate Executives immediately desire high performance, under their own reign, and under the management of their Successors. The only Problem with this system of compensation remains the necessary backbone expressed by Stockholders, in order to push through this compensation system.

The Bush Tax Cuts gets a fair Profile from this article, which indicates the basic inequity of the Tax Cuts in the first place. Some 95% of all Taxpayers reported reduced Income in Inflation-adjusted terms in 2005 from their Income in 2000. Take-home Pay was stated to have increased, but in terms so small as to be ludicrous; you had to make in excess of $62k to make more than $52 more per month, even the One Percenters only saved $5400 per month on Incomes averaging $1.2 million per year. I seriously wonder why Bush’s own Supporters don’t turn against him. The Tax Cuts were financed by a vast increase in National Debt, and if this Debt were Accounted like a Mortgage, the loss of Income would seem monumental. lgl

1 comment:

tingu said...

Its a little bit complex to understand.
How reduce the tax?