Same sex marriage and the Supreme Court -- should there be a try for compromise?

Ordinarily, I like to think of myself as being one of the first to seek compromise.  Whether the situation is one of business or one of politics, both sides should be able to look at the outcome with some amount of victorious feelings.  However, the two recent cases regarding same-sex marriage that have been argued in front of the Supreme Court of the United States--casually referred to as SCOTUS--cause me to wonder if compromise is possible or even desirable for this issue.

Frankly, I can't think of any way to compromise on this.  Maybe somebody else can, but I have nothing to offer.

In the absence of any creative and agreeable compromise -- SCOTUS, do the right thing by saying that everybody is equal under the law, and then let's move on.

To save you the trouble of wondering and asking:  yes, I have friends who have a personal stake in this.  In speaking with some of them, I have gained an appreciation for what this means to them as individuals.  It's real, it's significant, and it's important.

Here's the result of such a SCOTUS decision:  first, a minority grouping of persons who are currently denied elements of happiness and equality of legal protection would be provided with the same opportunities for happiness, and the same equality under the law, as now is enjoyed by the majority; second, nobody is harmed (nothing is denied to anybody else); and, finally, we then clear the decks and use our considerable energies in resolving at least some of the many other issues in front of us.

If you want some icing on the cake, then here's a business-like reason for doing this:  such a decision will simplify things for businesses which would otherwise have to cope with conflicting state laws regarding same-sex marriage when their business is conducted across state lines.  Additionally, we will avoid potential pitfalls that might arise when attempting to do business with some organization based in another country that has already legalized same-sex marriage.  Business naturally drifts along the path of least resistance.  For most of us, these business aspects are not compelling, and certainly they do not occupy the same moral and ethical high ground as do the concepts of individual pursuit of happiness and equality of legal treatment, but they could be of value for some.

Anything that goes before SCOTUS is both political and legal.  If for no other reason, each case is political because each Supreme Court justice is a political appointee, and so each justice will view cases through the lens of his or her experiences, backgrounds and beliefs that caused the appointment.  Each case is legal, too, because judgment is expected to be rendered within the context of the U.S. Constitution, often called the "supreme law of the land," and therefore a judgment will have lasting legal impact.

Last week, SCOTUS heard arguments in two separate cases about same-sex marriage:  the Federal Defense of Marriage Act (DOMA), and California's Proposition 8.   DOMA, as it stands now, denies the legality of same-sex marriages within the context of Federal law, even when those marriages might already be legal under state law.  Proposition 8 amended the California state constitution to legally define marriage as only being possible between a man and a woman within the State of California.

More than one justice made comments indicating that they felt like tip-toeing around the political, social and legal complexities and implications of these cases.  Perhaps, so the musing went, this is "too soon" to consider and judge this issue.

If they really believe so, then shame on them.  Shame for not knowing history, shame for not paying attention to what is going on around them, and shame for wasting everybody's time.

Politically, SCOTUS has plenty of cover, as public opinion polls are consistently showing a majority of Americans are now in favor of legalizing same-sex marriage.  The U.S. Constitution, as well as prior SCOTUS decisions that have collectively driven a stake through acts of discrimination against minorities in this country, provides ample legal support for the decisive decision that I am advocating here.

If you doubt my grasp of the Constitution, and perhaps also my assertion regarding SCOTUS precedents, then simply consider a couple of things. 

First, the Fourteenth Amendment to the Constitution says, in part, "No state shall. . .deny to any person within its jurisdiction the equal protection of the laws."  That's a pretty clear, clean and pertinent statement.  If there's a good argument that would conclude such a statement to be supportive of discrimination in application of the law, I've not heard it.

Second, right up until a SCOTUS decision in 1967, states were making laws saying that interracial marriage was illegal.  That decision made clear the legal fact that state laws regarding marriage must bend to the will and the nature of the national Constitution.

Had it not been for that 1967 decision, my first marriage would have been illegal in several states.  Thankfully, the Supreme Court at that time had a firm grasp on Constitutional realities, and on the ultimate societal deterioration that is the consequence of discrimination against minorities.  I married inter-racially--with the comfort of knowing that there would be no legal shadow on the marriage's validity anywhere in the country--and millions of others have likewise done so.  I believe that each such marriage has made its own unique contributions to our society, and we are a better nation for it.

Today's Supreme Court should deliberate and decide with the same wisdom as did its predecessor of half a century ago.  America will not revert to discrimination against minorities by selectively applying the protections of its laws to some groups of people and not to others.  Affirming that principle was the right thing to do in the past, and it's the right thing to do now.

Stop paying corporate executives with stock -- we'll get better business, and an improved US economy

Over the last two decades or so, it has become common for American corporations--the publicly-traded ones, at least--to pay a big part of senior executives' compensation in company stock.  The logic behind doing this has been the theory of "enlightened self-interest:"  If the so-called "C-suite" members are paid in company stock then they will have a greater incentive to perform well in their jobs because doing so will increase their personal wealth resulting from stock ownership, and oh-by-the-way all other company stock holders would benefit in like manner, too.

That's the theory, anyway.  You've probably heard it before.  Now the time has come to take a critical look at it.

Why now? you might ask.

Because there are some good reasons to think that this practice is bad business for the companies doing it, and also because it has been harmful to America's overall economy in the recent past, and--if the practice is allowed to continue--it will once again harm the country at some unknown time in the future.

Executive stock payments are bad business

First, the obvious:  paying senior executives in stock is bad business for the company doing so.  One of the foundations of good business management is "pay for performance."  In other words, an employee's earnings are tied directly to that employee's success in carrying out the duties and attaining the objectives associated with that person's job.  Employees typically are paid based on an evaluation of how well they achieved their business or work objectives during the most recent work evaluation period.  If you are an employee, just try justifying to your manager that you deserve a pay raise mostly because of how much better you will do in your job in the upcoming year when compared to your lesser performance in the year past.  I think that most people realize this is not a compelling case, with the exceptions of people who are CEOs and other C-suite residents. 

Paying an employee--any employee--in stock is not paying for performance.  Why?  Because the nature of financial markets is to value a corporation's stock more on future expectations than on past events.  Therefore, paying an executive with stock is basing that employee's compensation on future expectations and not on measurable, tangible and actual attainments.  Doing so is bad business management, not only for the reason described earlier, but also because it does nothing to foster the concept of teamwork.  Teamwork depends upon mutual respect among the team members, but how can mutual respect be accomplished when the financial rewards that are offered are performance-based for some members, but are expectations-based for other members?  Perhaps it can be done, but I suspect that would be the exception rather than the rule.

Proponents of the executive stock compensation scheme will argue that such payment will motivate the individual to perform at the highest level, because that will tend to maximize the future value of the company's stock.  In some cases this might happen, but it doesn't change the basic fact that this is still payment for expectations, and not payment for performance.

Is the truth out there?

Which takes us to the second, and not so obvious, objection to this practice:  paying senior executives in stock is an open invitation to misrepresentation of the company's expected future performance.  The stock market values securities largely on expectations of future performance; how are those expectations developed?  Good for you!  You've already figured this one out -- expectations about a company's future performance are built in large part on statements made by that company's senior executives, as well as information provided by key employees who work under the directions of those same executives.  This is clearly a conflict of interest.

The opposing argument here is going to say that the system is self-policing, whether by an errant executive being fired or by that person eventually suffering a loss in wealth due to the eventual depressing effect on the stock price once a misrepresentation is found out.  To which I would rebut:  So what?!?  The executive in question didn't pay anything for the stock in the first place, so that person lost nothing, but just didn't profit as largely as originally expected (perhaps).

A more thoughtful rebuttal--and a more compelling one--would be:  Well, what about all the other people who might simply be outside investors and who become "collateral damage" to the offending executive's implosion?  And, what if such downstream damage becomes so widespread that it threatens wealth destruction on a major scale?

Watch the dominoes fall down

And so now we come to the third and most important reason to cease this practice of compensation-by-stock:  When misrepresentations--or even unintentional misstatements--snowball into a perfect storm of systemic value destruction, then America's economy will once again face an existential threat, just as we did a few years ago in 2008 and 2009.

After all, what was at the center of the failures of Bear Stearns, Lehman Brothers, AIG, Countrywide Financial, Washington Mutual and hundred of other companies if not misrepresentation about future performance, and senior executives whose compensation plans included generous grants of corporate stock?

It all comes down to this:  use the basics and succeed

There's merit in employee ownership of an employer's stock.  Management and senior executives are employees, too, and are entitled to participate in the ownership of publicly-traded stock in their employer.  However, there is no merit in creating an environment where a select few employees become highly-favored participants in that ownership, thereby making them different from all other employees in substance--methods of performance evaluation and of ownership acquisition--as well as different in degree--amount of compensation.  Such an environment is counter to fundamentals of good business management, and it creates opportunities for manipulative behavior.

The American economy does best when its publicly-held businesses are guided by the best business management possible, and when opportunities for financial manipulation are quashed as soon as they are found out.  Executive compensation that includes generous stock grants goes against both of those themes, and that's why it's a practice that must be stopped.