Executive Compensation Has Become Both

Executive compensation has become both a contentious issues throughout America. The financial crisis only exacerbated this issue by delving deep into the proponent of executive compensation. Does not actual business performance account for anything in regards to executive compensation? It is my position that executives should and can demand higher salaries simply because of the duties inherent in their position. However, the downside risk for top management, especially those of "too big to fail" institutions should also be corresponding high.

I believe with the downside risk to managers elevated, our society can eliminate much of the unnecessary risk taking that has plagued it in the past. It is my position, that it is both illogical and irrational to have management with a position of massive influence over society and not have subsequent requirements on those individuals. The implications to society for greed and risk taking are simply too high, as evident by this last financial crisis, for individuals to act only in their own vested self-interest.

As a result of this excessive managerial compensation with no tangible business results, many CEO's have been replaced. These new CEO generally has unique thoughts and mindsets that make them attractive for particular corporations. Cisco systems are no different in this regard. As primarily a technology company, it relies heavily on innovation, ingenuity and business foresight. John T. Chambers provides all of this at a very high level as evident by his impression business record. John T. Chambers John T.

Chambers as CEO of Cisco has grown the company from $1.2 billion in 1991 to is over $40 Billion in 2006 (1). Throughout the course of his 16-year tenure, Chamber has garnered much recognition for his accomplishments. Some of his awards include, "CEO of the year," "Award for corporate leadership," and many others (2). Chambers has also done much philanthropic work to benefit society as a whole. Some of his initiatives include leading a delegation of U.S. business leaders, in partnership with the U.S. State Department, to form the Partnership for Lebanon.

This program provided construction resources to help reestablish infrastructure within Lebanon and its surrounding territories. From his previous track record, it is difficult to predict with any certainty, future business transactions. For one, the industry in which Cisco engages in is rapidly changing. It is difficult to fathom what the future holds in regards to technical initiatives. As outsiders we can only speculate as to possible courses of action. This action in itself however, is usually only partly correct and should subsequently be taken with caution.

If I were to speculate however, I would venture to say that Cisco's next move would be further innovation in the realm of cloud computing. Cloud computing is yet another innovation that is bound to reshape the manner in which consumers act on a daily basis. Since his inception as CEO, Chambers has consistently provided products and services in demand at a price point that is presumable fair to consumers. This is apparent by turning a $1 billion company into a $40 billion company.

Undoubtedly the shareholders are pleased especially when this was done in the face of technical behemoths Microsoft and IBM. Cloud computing is no different in this regard. In the fiscal year ended July 31, 2010 Cisco Systems has spent approximately $5 billion on research and development expenditures (3). We can contrast this with Cisco's direct competitor Alcatel-Lucent who has research and development expenditures of roughly $3 billion (4). It is the nature of the business and economic cycle that some research and development expenditure will not produce worthwhile results.

However, it is during this time of economic depression that presents a great opportunity for Cisco Systems. With interest rates at historic lows, Cisco has the means to borrow money at very low costs which can further aid in its research and development efforts. This extra $2 billion of research and development may seem excessive, but with Chambers track record, I believe these efforts will bear fruit in the near future.

In what realm will these future profits be realized, only the management team and prominent shareholders will know exactly? Further, if an outsider can predict the actions of a corporation with certainty that may present a red flag to management. The technology industry is predicated on innovation. If an outsider could know with certainty what Cisco is doing, one of two actions could subsequently occur. If the competitor has large enough capital, he can create and market the product first in an effort to gain first mover advantage.

The company could also make a better product utilizing its superior competitive advantage in whatever realm it finds best suited to accomplish this. Second, a competitor can make the technology that was leaked and patent it to prevent Cisco from creating a similar product at all. Both of these actions will reduce profits, margins and market share. As a result in would be logical to keep many fine details concealed until the advantage is sealed. Apple is notorious for this.

It will commercialize products that many individuals speculated on but didn't know with any certainty what the product would be. As a result of Apple's innovation, and secrecy it is now in the forefront of the technological world. With the benefit of hindsight, we can however, view some of the changes enacted by Cisco Systems in the past. By venturing into the annual reports, we can see what methods and research and development initiative were successful and which were not.

One important initiative that Cisco engaged in was one of cost controls. The early 2000's were marred by dotcom bust on the 1990's. Casco learned from this mistake and controlled excessive costs including inventory which can subsequently become outdated. One key fact, that since 2000, Cisco has continued to invest heavily in research and development. All of which will contribute to future earnings growth. Kevin R. Johnson Kevin Johnson joined Juniper Networks in late 2008. His former experience includes 16 years at both Microsoft and IBM.

At Microsoft, he was the president of the platform and services division. This division was responsible for the windows and online services division (5). While at IBM, he was head of the company's system integration and consulting business. Both of these experiences have help propel Juniper solutions in regards to market share and revenue growth. His focus has been on the integration of software much like he did at both Microsoft and IBM. From his previous track record, I would venture to say he will move more towards integration.

Integration of software has many inherit benefits if it is widely accepted by consumers. First, once consumers become accustomed to particular software, it is often difficult for them to switch to other software as they must learn an entirely different method of using it. Further, humans are naturally resistant to change, further creating a stronghold for those companies who can garner a large software following. This is very prevalent with Microsoft and its windows operating system.

Apple, its direct competitor, continues to dominant in the hardware portion of the industry; however a vast majority of PC users prefer the Microsoft operating system. This is primarily due to how deeply entrenched the company is in regards to Windows. Many consumers are very familiar with it, and more importantly, satisfied with the utility it provides. To switch to subsequently lesser know system provides unneeded difficulties associated with learning that particular system. This same concept can be applied to Juniper Networks in the future under Johnson's leadership.

Because Microsoft is so entrenched with is operating software, I would further venture to predict that Juniper will not attempt to capture this market. Instead, I believe it will delve into opportunities that have been largely neglected such as some aspects of business software. These could include security, cloud computing, and network management services. This can further be accomplished through joint ventures with foreign entities that might not have the extensive capital of Juniper but know the market demographics better.

One aspect that we have seen Juniper make significant market share in is that of mobile network management. Many cell phone customers are adopting smart phones as their primarily medium for information and communication. With the advent of digital apps, photos, videos and more, security has become a major concern. Juniper has made significant strides since 2000 to help create a vastly safer environment in which to conduct business over the phone.

With the high adoption rates almost sure to continue, Juniper will be at the forefront, delivering high quality security products Leo Apotheker Leo Apotheker has over 20 years of experience with SAP, where he most recently served as CEO. In addition, Leo has also spent 8 years on the executive board of SAP, where he served in various capacities. In addition to his over 20 years at SAP, Leo was also the co-founder of ISOFT BV which was one of the largest venture capital startups ever in Europe.

Finally, Leo can speak 5 languages (English, Dutch, Hebrew, German, and French). Out of the previous two CEO's, Apotheker has by far the most experience. What more intriguing is that he has experience with both the entrepreneurial and corporate aspects of business? This provides a competitive advantage for HP as it has further know how in regards to new venture planning. It can also recognize viable new enterprises better as a result of the knowledge gained from Apotheker.

Finally, Apotheker has extensive international experience which is of extreme importance in our global economic environment. This again can be utilized for HP's benefit in the future, as Apotheker undoubtedly has extensive international contacts to help his business. With Apotheker extensive experience, I would venture to say that HP will move.