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It is true that business executives work hard and are very well educated and highly trained ("Fray on Pay," June). However, front-line workers also work hard. Science shows that front-line workers are also under more stress. And front-line workers — such as engineers, scientists, and accountants — often have as much or more education than executives.
Nobody argues that executive compensation should not be greater than that of a front-line worker. The problem arises in the degree of disparity. Nobody quibbled in the 1970s that the CEO earned 70 times the lowest-paid workers in a company. But now that ratio has increased to 250 to 700 times.
The middle class, which was the strength of the United States, is shrinking, partly because the upper class is hoarding wealth. As Dolly Madison said, "Money is like manure — it must be spread around to make young things grow." And as the Bible says, "A worker deserves his pay."
Executives: Don't be so greedy. Let your subordinates, who are truly earning their reward and making your company profitable, share equitably and monetarily in that profit.
Professor of Physics and Math
I value hard work and making the most of what we can do to live a better life. However, I feel that the richness of the "American Dream" is too narrowly defined by the comments in "Fray on Pay," which overemphasize personal monetary profit.
Historian and writer James Truslow Adams coined the phrase "American Dream" in his 1931 book Epic of America: "The American Dream is that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement.... It is not a dream of motor cars and high wages merely, but a dream of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position."
If I were to define the American Dream, I would say it is about personal satisfaction, being able to stand on your own two feet, and living in a nonprejudiced community that shares and supports these values. It is a great dream, and it is now shared by more than just Americans.
Cambridge, Ontario, Canada
Just Say No
You always have the option of saying no when asked to cook the books (On the Record, June). The question is, Are you willing to pay the price? Do you really have the conviction of your beliefs? If you do, and those convictions do not control your actions, you need to reassess whether you really believe what you think you believe. I have been a CFO. I was asked to falsify financial statements and lie to a large (publicly traded company) customer, and I said no, and I was fired. It boils down to your priorities and what is most important to you in this life.
Regarding the article "Are Target Funds on Target?" (May), I have yet to find a plan participant who completely understands that any target-date, lifestyle, or other fund of this type is a choice in and of itself. It's not just another choice on the menu of other fund choices, but an alternative to all the other non-target-date fund choices.
And it's about much more than just the "glide path." A point worth considering is just how many proprietary funds go into making up a target-date fund. Just scanning through Morningstar's database of 2030 target-date funds, a sampling of 20 well-known providers included as few as 6 funds and as many as 54 in their 2030 target-date fund. The average of the 20 providers was 19 funds and the mean was 16 funds. In my opinion, any more than 8 to 10 is redundant.
And speaking of redundant, if you ran any stock-overlap program to see how many of the same underlying securities are owned by the various funds, you would be amazed how much overlap there is. Most funds own the same thing. That's because they're in the same family of funds, and fund managers tend to have a herd mentality.
This kind of information is virtually never explained to employees, nor to plan trustees. I guess I'm just wary of letting the fox guard the henhouse when it comes to mutual funds being the creators of the target-date funds in the first place, and then applying the pressure to include theirs whenever their platform is being utilized.
Charles C. Scott
Pelleton Capital Management Ltd.
As an executive liability insurance broker, I'd like to make a clarification on the difference between D&O policies and fiduciary policies ("A Tale of Two Markets," April). D&O policies cover the directors and officers of a company for claims against them for any breach of their duties. This includes coverage for breaches of the duties of care, loyalty, obedience, or otherwise. Claims against directors most often come from shareholders (particularly with public companies), but they can also come from creditors, employees, competitors, or governmental entities, among others.
Fiduciary-liability policies, in contrast, cover fiduciaries of employee-benefit plans for claims alleging breaches of ERISA (and usually HIPAA by endorsement). Claims in this vein most often come from employees who were denied benefits or who lost a large portion of their retirement savings. Directors and officers are often named fiduciaries of the plans, so there is sometimes overlap between the two coverages. Fiduciary-liability coverage is generally inexpensive and is important coverage to purchase, since liability for breaches of ERISA is not covered under a standard D&O policy.
My recommendation for directors and officers who want to ensure their personal assets are protected is to push their companies to purchase a "Side A" D&O policy. This covers them for claims where the company cannot or will not indemnify them and is not considered an asset of the company in a bankruptcy proceeding. There is almost never a deductible associated with a Side A policy, and premiums are significantly lower than standard D&O policies.
Marc A. Ragin