Contributors

Wednesday, January 16, 2013

HP Blunders On

After years of scandals HP announced that its sophomore CEO will receive a $15 million salary after the company lost $13 billion for fiscal 2012 and shares have lost half their value, falling from $26.61 to $13.85. Who is that CEO? Meg Whitman of eBay fame, the same woman who spent $160 million in a failed bid for governor of California against Jerry Brown.

The details of her compensation:
For the second year in a row, she will receive just $1 in salary. She will also receive a $1.7 million bonus and about $220,000 worth of perks, almost all of that related to use of company airplanes.
The bulk of her pay, though, is tied to the company's performance. She is to receive $7 million in stock awards and $6.4 million in option awards. Options are the right to buy shares in the future at the price they're trading at when the options are granted, so they're worth something only if the shares go up.
She sounds so noble, taking only $1 in salary, doesn't she? That $1.7 million will just barely cover her incidental expenses like panty hose and chewing gum, and the stock and options are just one big gamble, right?

But it's all a scam to avoid paying taxes. Only the $1 dollar and the bonus will be taxed at the new 39.6% rate. The vast majority of her income will be taxed at the new 20% capital gains tax rate (up from the 15% rate) when she sells the stock, as well as allowing her to completely avoid any Social Security and Medicare taxes on that income.

It's crazy that CEOs like Whitman can do such a terrible job and yet make so much money while paying almost nothing in taxes. And this is after the tax deal that Republicans fought so bitterly: it really puts the lie to the idea that the president is waging class warfare.

My predictions: to make the stock price go up Whitman will fire tens of thousands employees to convince Wall Street analysts that she's a tough leader. Then she'll announce negotiations with an Asian firm (probably Chinese) to sell HP's PC business to make the stock will go up again. Then Whitman will cash in big time with another fabulous golden parachute, and pay next to nothing in taxes on the windfall.

Why do I think this? It's happened before, when IBM sold its PC division to Lenovo in 2004. According to the former CEO, IBM chose Lenovo over other suitors such as Dell to curry favor with the Chinese government.

Even though HP is ostensibly an American company, the components in their computers are all manufactured in China or Asia. It boggles the mind that American capitalists have handed over the manufacture of all our computer and Internet infrastructure to Communist China, the very people who are most likely to engage in cyberwarfare against us.

It's not how Marx thought it would go down, but capitalism is ultimately dooming itself through its own greed.

No comments: