Business Pants – 2022-09-26

I'm gonna be gentle today, heyo. It's Monday. Oh, happy New Year. Mom live from your mother's Oscar Wilde collection. It's a manifest Monday edition of business pants. Join is always by our BS correspondent Matt. Yeah that's just a made-up word man. Different wow I don't even mean that. Absolutely meaningless our PS correspondent, Matt McCarty, I'm half brewed coconut zest and today's stagnant pit. Called September 26th 2022. Sexy story updates and sleazy academic papers, although yeah. That's really sleazy. We keep calling them sleazy actually. This is a for the, for once this is a very unfortunate, use of Sexy and I and I Blame You Goldman Sachs but I, it's not my fault. Yeah, I don't know what's happening. All right, let's let's go right into, Well, let's go live around the world members. Yeah, let's do it. Here are some of the highlights from the business World. Matt Black media Mogul Byron Allen suing McDonald's for a whopping 10 billion dollars, arguing it's wow. Yeah, argument cuts out, African-American owned business. He wrong. Well. I don't know. I I'm gonna guess that lawsuit is not going to go very far, but it will bring some attention to probably a needed conversation. I had two things to say, one completely insipid. The first one, I is exactly what you just said. Bring attention to something that the ESG world, the work data World us, we business news, we don't cover enough, which is this? This is interesting thought and I'm God that it's coming. Even if again even if you fails I like this conversation. Secondly, The people over at Fortune Magazine. Should you have used the word whopping? In your head, like right? Because isn't that a Burger King thing Whopper whopping? I just feel like they fail a troll. You're saying it's a headline control the little bit there. All right, next story. These two first stories in our drugs category, the second one, Amazon officially confirms, it will hold a second prime Day sales event in October. Oh my God. We don't have to spend any time on this map, but I mean, I assume you've shopped on Amazon Prime before. Yes, what is the difference between a prime day and every day and I mean, isn't it all Amazon Prime, who cares? That's all fakely, discounted items that everything's marked down 180 to 92? What is it all mean on Prime day? All the things from China are 20% off simultaneously and they count things down really on Prime day. All it is, is you get countdown meters like every like it's just a list of things that are currently counting down and it? Yeah, I actually I think it's alright actually because well you do is you like scroll through things. You're like oh I got seven more minutes and I can get this, like it works repair kit that for something it's not broken, like it's and then you get all and up and you buy it, it works. Um, I don't know about the culture seems to be out on Zuck. They seem to be, even though they still use Facebook, they seem to be out on Zach. They seem to be out on Uber even though they still use Uber, you know, like lots of people seem to hate Uber, delete Uber. When are they going to be out on Amazon even though they'll still use it? Or are they already out on Amazon? What's the, what's the prevailing opinion about Amazon 2022? I mean I think it's a resignation deep resignation. I gotta hand it to Andy jassy. He's a, I'm gonna get to say that he's an honorary Indian, an honorary West East Asian, Well, sorry. West Asian because Ever since he took over people don't talk about that's good. I like being busy or Emma's back. They don't talk about Amazon anymore. He is had the the lowing effect of of a CEO that people don't know how to talk about because I don't know, they just seem to avoid headlines Amazon. We have proof that you otherwise sometimes he's in the news. Just just Like, about buying the Phoenix Suns. Yeah, I know and his Rockets are exploding, but still we're not talking about Amazon. And how nausea was fun, is a good rocket explosion. What else is there? Third story volunteer, we talked about palantir in the past, but I kind of had to cover this headline, just because it's actually a headline and the headline is verbatim holy shit. Palantir. CEO says risk of nuclear war is 20 to 30%. Now, do you think that that's true, Matt or he think he's trying to sell something at palantir because palantir is involved in Defence industry. Is it not? Yeah, um so if we're going to say I'm scared, I don't like this. If we're gonna play the creepy nuclear guests, how dead we are game. Tier 20 30%. I'm gonna go with a, I'm gonna take the under, I'm gonna take it at 16%. Can I have a follow-up question to? And I'm, I'm gonna ask this direction to the palantir CEO and you can answer for him as his proxy. What the hell? What the hell is the difference between the risk of nuclear war being 20%, or 30%? What the hell does that mean? Well math 10%. I mean, they're mad at ESG for trying to rate companies and, and this is okay. What the hell does it mean, Matt? That's his rating. He used all the available information and came up with 20 30, okay. One more before we get to the big story, Pfizer, CEO, Albert, borla test positive for covid again. Maybe he's a vaccine. I'm a little disappointed in this because Matt you get some excellent reporting at the beginning of the covid. Pandemic that predicting, which Executives might succumb to the to the, to the, to covid and it never, it didn't really maybe maybe companies haven't actually told us who got sick, but it really has an amounted. Much we have had very few headlines about Executives getting covid. Well, what I did not account for in our analysis because and what we did was look at mortality rates of males and females and the rates of infection for by age and gender and all the things, and we met them up to boards. And we basically used it as a case study for why you need more women on boards simply to survive future. Pandemics, we always come up with reasons. Yes, it is always a good reason, but what I did not take into account, was the socio-economic Divide between Trooper wealthy board, CEO types, and the rest of us, because those people just like walled themselves off and Yachts until the worst had passed. And it was Right? And they were fine. So maybe that was what I got wrong. Maybe the champion that cosmat, maybe, Pfizer, CEO, Albert, borla should just, he's just and again, I know no disrespect to the family or people that maybe he should die, just a champion. Oh, I don't think that what kind of, what kind of what is wrong with you? That they say things like that? Yes. I don't know, it's bad. Yeah. Better off. Saying is a 20 to 30% chance of dying and then it well, that's good to the big story that I wanted to cover. There's a lot of story. Yes, a lot of headlines on Goldman Sachs unfortunately here the headlines and first let's play a let's play a real, let's play a tasteless game first. Oh, okay. I have headlines from three. Different news sources that we cover Fortune BBC in Business Insider and I also included the pictures from all these stories, the photos and I want you to guess, which is which from Fortune. The headline is women employees at Goldman Sachs, alleged 75 incidents of misconduct including rape and sexual assault and newly unsealed lawsuit BBC's headline is sexual assault claims revealed and pay buy a suit and Business Insider has an article called the lawsuit is accusing. Goldman Sachs of a Culture of Fear saying mishandled claims of rape sexual assault and harassment of female workers in the 2000s. Um, I cannot believe what am I guessing? Maybe we should skip the now that I think about it, this is not time for a game but you know what, I they're all horrible. Except maybe they're all. Yeah. You have to put rape in the headline. I'm sorry. And you know what? I was, yeah, a culture that allows for rape. Yeah, at an investment Bank. This isn't like the, you know, like This is supposed to be the human capital Apex. Yes, Global Apex right? These are highly intelligent. Highly paid people. And there are actual incidences of rape that have been covered up. What differentiates this Activision? What is why here's why I'm I'm focusing on Goldman Sachs today because yeah, this happened over a period of a decade that the class actually shooting number represents roughly 1400 women That's significant and and this is the company that trots out. It's Dopey CEO. David Solomon, really lean into his stupid DJ career. And when you really think about it, that this was going on and that this that this they've been denying for your like they're they're not playing nice with this lawsuit. They do everything they can. I'm sorry, I should decide. Yeah cannot be busy playing Bonnaroo, right? And not dealing with this. I mean, even in their tent, their annual report. And when did this location as an ongoing risk? The years. Okay, let's get to that, the years were 2000 to 2011. So, I'm, you know, I'm going to I'm going to skip over some of the horrible stuff that came out of the lawsuit because it's just too terrible. If you know I'm sure if you if you want to read about this case, go ahead. But it's really it's just really horrible behavior. All the way to rape as Matt pointed out. But let's get to the here's what I wanted to cover. Not only not only sexual harassment and assault but also that female. The female Associates were getting paid less than men. That's that's that's big part of the class. I mean, that's a little no door. Okay? But still but here's what I want to do. Yeah, I'm saying obvious, I wanted to cover this from an ESG perspective and I'm asking him out, what is the ESG, answer? And I have some, I have some ideas and you can help me out with this. So, let's let's do it. Let's play the game. Okay, I know you haven't looked into proxies, but me an idea. Okay. So is the answer with the board, the board of directors. So let me let me present some things to you, Matt. The lawsuit covers 2000 to 2011. Okay, from that period, only one director remains from that period locksmith tall, who also happened to be the only director who got over 10% votes again. So, but since then, since then Goldman, has a pointed six female directors representing 46% of the board, which is very high number, but I asked you, Matt does this matter? Does this does this in itself matter? What it would suggest if we had a large enough sample size, what it's also worth saying that these female directors that not only do, they represent 46% of the board but they represent nearly 46% of the influence on the board, right? Like it's almost one to one. Yeah. And can I just say that what matches point out there that this is proprietary data that we created? Yeah, you want to know about influence off of that if you want to know about influence, know if you're seriously, like, reach out to us like like no joke. This is our our proprietary data. He's he didn't find that anywhere but right here at Fort saberman metrics baby. Yeah, but the the fact is actually if you do a bigger case study, if we can get enough of these cases. You could argue that if this lawsuit covers between 2002 and 2011 and the behavior began to be Effectively, mitigated starting around 2011, like, there's not a continuation of the behavior or as well pattern, at least has dissolved. You might reasonably look up and say, well, they added gender diversity to the board and there was a trickle down effect. There's a trickle down diversity affect that may have been a part of that Hey, one thing we know from our one thing I we know from our ESG experience is that even though companies will never admit that things have done wrong, when you have an outlier of women in any position, in this case, half the board is women? You're that? That's your confession. Yes, no, yeah, you're laughing but I'm serious in the corporate world. This is tantamount to a confession. Is it not? It basically is, it is okay, if you So Matt is saying that the board does matter that that oh 100%, okay. I also want to ask you about this. It's something we don't talk about enough, and I think I'm hoping in our next iteration of our own rating. That we start to include things like this, but I have another question for you, Matt. According to the proxy, only two, there's only two directors. With human capital experience under key experience and qualifications that's that's two women. Michelle Burns who I guess got her human capital experience because she was the CEO of a consulting company called Mercer. And then Drew Faust, she was the former president of Harvard. But I asked you about this, does this matter does, do you think that having this type of experience matters? Should we be? Should we be start to look more closely at these things? What do you think you're making a face? Help me out here. Oh, being the CEO of Mercer and the president of Harvard. Right? Don't feel like learning Capital to experience to me. I mean, are you? Well, you could say anybody who's a CEO has human capital experience. Can I add firing and hiring actually, can I add to that conversation? Because I like that, you pointed out, because there's another part in the proxy, where Goldman Sachs says that that there's a table called those diversity of skills and experiences Table. And there, they say that seven directors have human Capital Management. Yeah. And they do not take the effort to prove how they came to that number. Maybe, this is where Dilbert gets angry at ESG, right? Because where first of all, you only told us two people had human capital experience and then you listed out some kind of wonky is reasons and then you're telling us in another table to actually seven directors, have it but we don't know why. I'm sorry, like running a thing does not mean, you're actually good at human. That's true. So you can separate those things also like being the president of, college or university and that one, being a consultant focused on human capital as because you're the CEO of a consultant or I always see you. I almost get Mercer, but but she was a, she was a history professor. And then the president of Harvard. Yeah, I don't really get the human capital part of that because you went to college, Matt? Right. Even you went to college, right? I did. Yeah. I mean, I think how much time did you spend in the president's office? Not any. And where's the human? I don't get the human capital. I don't really get that just because you're a boss. I don't understand that one. I mean, you know what, they would make a better argument if they looked at CEO pay ratios and said our human capital experience is limiting. CEO pay ratios like this to below average, right? Like that's how we even one empirical data point to say like this, I have human Capital management experience. Other than the ephemeral. I was a CEO because in that Case I have deep human capital experience. You can work early. Yeah, and you have any of kids. Yeah, I mean everybody who's a parent can say that basically the childless with cats are the only ones who can can't say they have human capital experience if they're not, then they're not CEOs, right? I will say this sad woman sucks. Goldman Sachs that. First of all that you call it human capital, maybe as part of the problem. Second of all, I notice that you mentioned the word collaboration, in your proxy statement, 19 times. But labor 0 times in certainly, insert said face here, third of all. It's the perfect time for me to to bring up one of my favorite points that Matt hates is that and I know Goldman Sachs big part of Business Roundtable, big part of that Revolution. This is a perfect moment for stakeholder. Capitalism. Now is the time to get employee representation onto your board. Because maybe I asked you this Matt? Yeah. Could that, could that help with a situation? Like, that's, could that affect the culture at places, like Goldman Sachs just simply having representation from your Workforce on your board. Why not? Well, first of all Dilbert thinks you're a socialist but second of all I know that's the Weird. Albert would agree. Yeah Gilbert. He hates it. He loves it. Who is he? Uh, yeah. I agree. Yes. Okay. The answer is yes. All right. Do you have other moments to say because the answers? Just yes, I mean I was gonna I was gonna add like there was this also a shareholder vote on whether they should have an independent chair at Goldman, Sachs it failed miserably, but I was gonna ask you, do you think that would help? But I don't know if I care about your answer. Well, look, one of the things that we notice looking at the board and we haven't talked about yet is about half of the board is interconnected with one another. Um, Meaning, despite the fact that the board is 46% women and they all check the boxes for Independence. Almost half of them, actually have sat on other boards, you know, with either directly with each other, or with somebody who sat on another board with them. As in, they have like this very small network of to get back to one another, they can like call a friend who knows. What would have known another board member in which case even bringing in an independent director, if brought from the same pool of jackasses, who thought this was okay, the, you know, doesn't actually change culture, you need to like, go outside, do something real, just do something. Real, okay. Yeah, well, do anything real again, these these new allegations Were Unearthed I guess the the lawsuit was made public over the weekend so we'll see. I don't I haven't there's no evidence yet of Goldman Sachs reacting to this other than just denial mode. I don't know how that serves them but we'll see. Well, no here comes to this. Yeah, go ahead. Here's your follow-up. If Activision is a comp right? You should a expect the shareholder lawsuit to come where they sue the board on behalf or they they sue on behalf of the company. First Security saying you withheld, a large material litigation over a 10 year period and we made investment decisions based on a less information that we should have had, right? Like, you have to disclose yes and you didn't. So, you owe something to the shareholders and number two, expect this. This is the beginning of proxy season. We're just about to hit proxy season. The analysis is going on. I mean, well, the vote start happening in, you know, February and March, right? Yeah, really you're under the you're thinking, it's the summer, don't you? Know what I think is if you were going to if you have proxy access and you're gonna nominate someone or vote for or against somebody on the board of Goldman Sachs, now is the time you start engaging with them, you start the letter writing campaign through what did you know, when you know it and you start thinking to yourself, who do we vote out because of this like is it DJ diesel we vote out or is it someone else on the board? This is this is all that starts to happen. I'll leave you with this two things. The top five named executive offers as a Goldman Sachs made in aggregate 125 million dollars in 2021. So maybe they just stick around a little longer for the Q&A session. He's just say, I think they're busy though. Yeah, second. I will say because I used it in my former life. I used to go to the 10K in these companies, look at their ongoing legal risks and litigation. And, and, you know, some of the companies that conglomerates like GE, they're very good itemizing exhaustively, every single lawsuit and legal risk. They were caught up on even like, you know, dumping soda cans and a river in Albany, like whatever like they did, a good job disclosing that I checked out Goldman Sachs annual report 10K. They they don't mention this, they know. So that's not the thing. Yeah, it's a concern. I mean, again, if you have time to DJ your son's best friend's cousins, second Bar Mitzvah then. I think you have time to disclose this time. We covered this last week. If you have time to walk around the floor of Goldman, Sachs find the mail guy who spent seven minutes learning Pro Tools to write, like basically help produce your next album. Yes. Then you have time to base to to somehow address a rape culture at Goldman Sachs? Absolutely. That's, that's no. There's no easy way to get out of this conversation so I'm just going to do this and we'll move over to nerd alert. All right. Let's do it. Oh, see, I like this one better. Okay. All right, here we go. Nerd alert and for this nerd alert. Can you so many miles do it? First off, I want to celebrate the coming of the season, because I won't be here next week for this. So I just learned this today. First off, we're gonna turn on my skull. I have a skull neon light above me, it's not actual neon, it's an LED light. And second, let's talk about rpe Relative performance evaluation nap time. Yeah. Okay. Get clothes. Ready. Here we go. Part of the CEO. Contract is actually granted. By the board that evaluates the way they evaluate the CEO per. The contract is against external peers, that's the relative performance evaluation. It's not just like, did your firm make more money this year. It's actually how did your peers perform and those are gonna we're gonna set performance benchmarks. That is separate from compensation. That's not how much should we pay you? You know, that thing where it shows you like, we set a target of like 12% return on Equity this year. That's this part. This part is the relative performance evaluation how you set those benchmarks, right? So don't get those two confused because once you set the Benchmark after you go over it, then they start asking questions. Like how much should you get paid for that, right? So, that's number one. The paper I read is from 2020. I actually read a couple papers but the one I'm talking about is from 2020 is called performance. Peer groups. In CEO, compensation contracts by tour. Eric bakkie, Hamid, muhammadi and Ashlee Newton. Okay, yeah, They looked at 750 firms in the US between 1998 and 2012 with the midpoint being when they changed the rule about disclosing pure group for um, and here's what they found, just brace yourself. I know this shock. You shockingly, quote Managerial power Theory suggests that Executives by controlling their own boards maximize their own compensation by choosing performance peers strategically at the cost of shareholders. What they found was firms to a great job at finding their peers in similar Industries. Similar sized highly correlated market returns similar geographies, all the stuff But the comp committees tend to choose firms, that historically underperform. So that CEOs can be marked as better performing. Are you shocked? I mean, I honestly like I can't believe I can still be shocked, but I kind of am shocked. It's it seems even. Too Brazen for them. Well you know what, you know we complain about for. We can clean up for decades, the comp committees are just stuffed with CEOs and former CEOs, it they all. It's almost like there's some magic They put on the comp committee and all the like CEO cheese and all the former CEOs. Only they know how to say smell it, they all get. I don't know, it's always them. It's not like it's not the, it's not the president of Harvard or, you know, it's it's the CEO cheese. Yes, that's actually in the delicious contract. It's true. But here's the thing. Yeah. um, this actually seems to hold true even though CEOs one third of CEO pay is based in on average, on this This construct, this pure construct, which significant name a single investor. That is challenged to Pure set. Can you name one? There there are. Lots of happened in the past where they argue about peer sets. I've covered them in a past life. Yeah. But these are not, these are usually like John and his garage, whose annoyed at the pier set and did the research and figure it out. How has black rock ever challenged a pure group? No selected by a company to set CEO performance, thresholds upon which they will use to set pay later on. No, it was only us, whack jobs at places like the corporate library that would argue with these things. So, let's start because board, saber metrics. What we do here shows that there are 23,517 us board members in as of August of this year. 3,288 of those people are currently Executives at the company. So there's 3,288 Executives on boards and that's not like their CEO somewhere else. That's they literally work at the company where they're on the board, right? Okay. The average executive on the board influence is 25% when there's an executive on your board, They command on average a quarter of the board's decision-making power which, which makes perfect sense. Because in the US that, that executive on your board usually is your CEO. That's correct. And that on average is three times more than a non-executive director. So, if you put the CEO as the chair and sitting on the board, on average, you are basically going to say, the entire boards going to do, whatever that guy says like that. Think of it is worth a quarter of the Vets. You got 10 people. They're worth about four of them. Yeah, another case of the lunacy of making your CEO, the chair. It's worth two. But yeah, Lucas There are in fact this is where it gets crazy to me. 12, executive directors. Who chair their pay committees on us companies right now? So must be like a controlled companies because it usually controlled companies. But not always, this isn't like family members. Yeah, how's this possible? I thought it was and there are only controlled companies were exempt from that. Rule and there are 23 others who sit on pay committees. That sounds nice. The effectively there are 35 directors, who are choosing the peer groups used to assess their performance and then set the peer groups used to set their pay and then approve their own pay. I want this little system. I want us abilities so much because I already have my I'm already thinking about my list. Matt, it's gonna be, I'm thinking LeBron James. I'm thinking like, Leonardo DiCaprio, maybe, maybe Rihanna I'm already imagining my peers for my paycom. I'm very excited by the way. Very excited. No, I definitely. Rihanna is, definitely your peer. Here's the takeaway. Yeah. Because number one, most companies most firms BlackRock has to own these companies, which is, it's already egregious that you, you have to own a controlled company because they're on an index and that's your excuse for having to own them. They're fake public, they're not companies. And now now, not only do you own these controlled companies but most of them Are many of them I should say. Have Executives determining, the pay of their CEOs, determining the performance measurements of the CEOs. There is no point, not only, they fake public companies, but they're fake constructs, they don't have. And there's no accountability. The takeaway is, if you don't know how influential the executives are on a board, you have no idea how their hosing you and that's what I want to say. I want to basically say buy our stuff because this sounds like, because I need a job. There's something another delightful plug for us. That's exactly what it is. She will wait full disclosure the live, the audience that our shows live audience. This is not made up, we have a live audience. Go ahead, clapped prove that you're here. That's proof. They start, they do get our data for free. This is why they're clapping map because they've seen the influence data, and they approve of it. They like it. They did. They do like, what? I come to our tapings? Yeah, I will. And this with the side note, as we oh, I love side. Notice love side, notes, Tomas, Peter fee, who's the founder? And CEO of the self-paying. Chair of interactive brokers global. This is one of those people I mentioned use the founder. He's the CEO. He's also a massive, the largest billionaire in Florida and he's Ron DeSantis in the gop's largest funder there seriously. Actually we covered his son earlier this year because his son shifted from he was doing healing using crystals and poetry and he became his dad's ESG guy. He's like how is this this Is not a side. Note, can we can we bring this up discussion, back up again on Wednesday on our? Yes, I don't like that. You're like drowning out this amazing side, note and IBG. Currently clocks in at a middle, ESG rating. They're the middle of the pack. Okay, let's bring this up again, really good. That's Damien Raleigh media. If you like this, come back tomorrow. I'll be gone next week, but I will be here all this week so you can get your kicks all this week and we'll see you then good. Bye.