Sally called when she got the word,
She said: "I suppose you've heard - About Alice".
Well I rushed to the window, And I looked outside, But I could hardly believe my eyes
- As a big limousine rolled up Into Alice's drive...
Oh, I don't know why she's leaving, Or where she's gonna go, I guess she's got her reasons, But I just don't want to know, 'Cos for twenty-four years I've been living next door to Alice. Alice, who the fuck is Alice Twenty-four years just waiting for a chance, To tell her how I'm feeling, maybe get a second glance, Now I've got to get used to not living next door to Alice... Alice, who the fuck is Alice
Grew up together, Two kids in the park, Carved our initials, Deep in the bark, Me and Alice. Now she walks through the door, With her head held high, Just for a moment, I caught her eye, As a big limousine pulled slowly Out of Alice's drive.
Oh, I don't know why she's leaving, Or where she's gonna go, I guess she's got her reasons, But I just don't want to know, 'Cos for twenty-four years I've been living next door to Alice. Alice, who the fuck is Alice Twenty-four years just waiting for a chance, To tell her how I'm feeling, maybe get a second glance, Now I gotta get used to not living next door to Alice... Alice, who the fuck is Alice
Sally called back, asked how I felt, She said: "I know how to help - Get over Alice".
She said: "Now Alice is gone,
But I'm still here, You know I've been waiting For twenty-four years..." And the big limousine disappeared...
I don't know why she's leaving, Or where she's gonna go, I guess she's got her reasons, But I just don't want to know, 'Cos for twenty-four years I've been living next door to Alice. Alice, who the fuck is Alice Twenty-four years just waiting for a chance, To tell her how I feel, and maybe get a second glance, But I'll never get used to not living next door to Alice... Alice, who the fuck is Alice Now I'll never get used to not living next door to Alice...
Wednesday, October 24, 2007
Tuesday, July 24, 2007
The Value of People -Insights of Human Capital
ne of the hottest topics in recent years is executive remuneration governance, and we predict that it will stay top of mind for companies and their shareholders well into the future. Public debate over executive pay levels, termination payments and the appropriate relationship between pay and performance continues to be fueled by the media and shareholder activists. Meanwhile, regulatory changes in the areas of disclosure, accounting and taxation are resulting in a decision-making process that is ever more complex. Remuneration committees themselves are also facing greater scrutiny and are being held to higher standards regarding their independence, demonstrable technical skills and alignment with shareholder interests.
In order to help companies successfully navigate these challenges, Mercer has highlighted recent developments in executive remuneration around the world and identified several best practices to strengthen executive remuneration governance whether your company is in Sydney, Stockholm or San Francisco.
Recent developments in executive remuneration
There have been a number of developments that have increased the complexity of the executive remuneration environment:
Australia
The biggest change in Australia has been the introduction of a shareholder vote on the directors’ report on executive remuneration. The shareholder vote generated some criticism of remuneration practices for a small number of companies and led to improvements in transparency for others, but overall it did not result in significant changes to executive remuneration program design or levels. The expensing of share-based payments also recently took effect, although the impact on long-term incentive (LTI) practices has been minimal given that equity-based compensation in Australia is already relatively conservative compared to other mature markets.
Canada
The Canadian Securities Administrators finalized new governance guidelines and disclosure rules that formalize corporate governance best practices. In a related development, the Canadian Coalition for Good Governance released its working paper, Good Governance Guidelines for Executive Compensation, pressing for greater independence in executive compensation decision making, enhanced linkages between pay and performance; adoption of share ownership guidelines; and even more dramatic changes in the form, context and timing of executive compensation disclosure. With the banks taking the lead, some Canadian companies have begun disclosing pension expenses and liabilities and including the expected value of stock options and other equity awards in their calculation of total compensation.
Continental Europe
Across the continent, companies are under mounting pressure to enhance pay disclosure. In the Netherlands, the Dutch Monitoring Committee Corporate Governance Code in its December report advocated more uniform disclosure of executive compensation practices in annual reports, with information presented in a simple and straightforward manner with more transparency between pay and performance. In Germany, for 2006 annual reports, listed companies are required for the first time to disclose individual executive compensation practices. We expect that companies currently behind the curve will voluntarily act to improve disclosures; otherwise, additional regulatory activity is likely to follow.
United Kingdom
Pensions have dominated the agenda of many UK remuneration committees as a result of the proposed changes to pension legislation from April 6, 2006 (A-Day). The introduction of accounting for share-based payments has acted as a catalyst for many companies to review their LTI arrangements as well. The Association of British Insurers issued their updated Principals and Guidelines on Remuneration. The updated guidelines called on remuneration committees to step up their scrutiny of pay programs and, in particular, to be more thoughtful in identifying the drivers of shareholder value when linking pay to performance.
United States
In the US, dozens of shareholder proposals related to executive remuneration have been submitted in recent years, with results showing growing support for limits on executive severance, the implementation of clawbacks of incentives where financial reports are restated, and mandatory use of performance-contingent equity. Several regulatory developments have come to fruition, including new tax rules that limit the flexibility of popular executive deferred compensation rules and FAS 123(R) accounting for stock-based compensation. The Securities and Exchange Commission (SEC) also took a series of actions to strengthen disclosure of executive compensation, culminating in the final rules issued in August 2006.
Among the five regions highlighted above, several common threads emerge: enhanced disclosure, linking pay to performance, and the expensing of share-based payments. Some countries may be further along than others, but all remuneration committees will continue to wrestle with these issues and their consequences well beyond 2006.
The outlook for executive remuneration governance
We expect to see continued focus on improving transparency around executive remuneration programs and deci-sion-making processes. Enhanced disclosure may serve as a panacea for disgruntled shareholders who have been clamoring for information, but we may also find newly disclosed plan details being used to fuel further criticisms about executive pay practices or perhaps even resulting in unintended consequences, such as increasing executives’ expectations of baseline compensation and benefit levels. Better disclosure will likely compel committees to more closely examine executive compensation programs from a shareholder perspective, especially those elements that have generally been less visible, such as
severance and change-in-control benefits, executive perquisites, and supplemental executive retirement programs. While these elements are sometimes overlooked, they often represent a substantial component of total executive remuneration and deserve the same careful consideration given to base salaries and incentive compensation programs.
It is likely that equity compensation and performance-based equity,in particular, will stay top of mind for committees as well. Mercer’s compensation studies suggest that more and more companies in the US and Canada are using performance-based equity as part of their LTI strategy. And in the UK and Australia, where the use of performance-based equity has long been common practice, companies are beginning to look beyond total shareholder return and earnings per share to incorporate metrics that are more closely aligned with their business strategy.
Thirteen steps to strengthen governance and drive results
By strengthening governance practices and procedures, companies will be better positioned to tackle the challenge of achieving responsible executive remuneration programs in an increasingly complex environment. Based on our work with clients around the globe, we believe the following 13 steps reflect the best practices of remuneration committees with a track record of making sound decisions regarding executive compensation.
1. 1. Plan the annual agenda. Actively managing the annual agenda is critical to enhancing governance because it determines the commit-tee’s work for the year. We recommend comparing the agenda to the committee charter to ensure that all of the committee’s responsibilities are discharged over the year. It is also important that the time allotted is sufficient to cover the agenda items; important decisions regarding compensation, equity strategy and shareholder approval warrant robust discussion. This may require two or even three meetings: one for information gathering, a second for in-depth discussion and preliminary consensus on direction, and a third to make final decisions and plan for implementation, including disclosure.
2. 2. Don’t make decisions in a vacuum.
The committee should be familiar with industry practices as well as general market practices. In particular, peer company practices should serve as a touchstone for committee actions. This raises two important issues: First, the quality of the peer group is critical to the credibility of the story the data tell; it is worth investing the time to ensure the comparator market is appropriate. Second, care must be taken in looking to the external market to identify new approaches. The external market should inform decisions, not make them. To be effective, compensation decisions need to also reflect the company’s corporate and HR strategy as well as recognize its life-cycle stage, corporate culture, compensation philosophy and degree of difficulty in attracting and retaining high-quality executives.
3. Don’t abandon benchmarking, but don’t forget performance.
Many critics blame the use of external benchmarking for elevating executive pay levels over time. Benchmarking in and of itself is not the problem; it can be a very useful framework for assessing the competitiveness of compensation levels. But benchmarks only make sense when they are considered within the context of performance. This is particularly true at the executive level, since executive compensation programs can deviate significantly from year to year or company to company based on performance results. Also, in some cases it may be appropriate to use different peer groups for pay and performance. Pay comparisons should reflect jobs of similar scope and responsibility, generally meaning businesses in a similar industry, of similar size and complexity. Performance comparisons, on the other hand, may reflect additional factors, such as capital intensity, cyclicality or business maturity.
4. Challenge the performance measurement process. Although linking pay to performance is the goal of most executive compensation programs, few have succeeded. The pressure on performance-goal selection, target setting and calibration to payouts is increasing; institutional investors are pushing to have performance-contingent equity awards. Shareholders expect companies to be able to explain how pay reflects company performance. And, the question is increasingly being posed in the context of relative performance against peers. Be prepared to hear from shareholders if your performance against your peer group is weak, especially if your executives’ compensation and benefits are relatively high. There are good analytic tools and methodologies that can be used to develop an independent evaluation of whether the company is focused on the right goals, whether there is sufficient stretch and whether payouts are appropriate for the performance achieved.
5. Be holistic. Review all the elements of the executive remuneration program at the same time. It is difficult to implement a compensation philosophy and to ensure that pay is linked to performance if decisions regarding salary, incentive opportunity, performance goals and equity awards are made at different points throughout the year or in different years. And don’t overlook executive benefits and perquisites. For example, the committee should review the competitiveness of pensions in the context of the broader total compensation package received by executives in comparator companies. This annual review should also include an update of the com-pany’s current and projected costs – earnings expense, cash cost and accrued liabilities – and executive benefits on an individual basis. Before implementing compensation program changes, committees should understand the implications (including costs) for any executive benefit or perquisite programs.
In addition, evaluate all programs – incentive plans, equity awards, retirement benefits and change-in-control and severance arrangements – under the best- and worst-case scenarios. Even if a low-proba-bility event occurs, you should be comfortable with the outcome or at least be prepared to weather the reaction. And know what will happen upon the termination of each executive officer – for what reasons and at what cost.
6. Question your assumptions.
The environment has changed dramatically; many of the old premises are no longer relevant. Companies should revisit the rationale behind all of their cash, equity, benefit and perquisite programs. Programs may not need to be abandoned, but they should be affirmatively continued because they are consistent with the company’s compensation philosophy and connected to business-related goals. For example, to ensure certain items are revisited, some companies are adopting a strategy to provide sunsets in new programs and agreements. So a new severance or change-in-control program might have a two-year life, at which time it will expire unless the committee affirmatively adopts a replacement program.
1. 7. Think about executive compensation as a fundamental part of strategic planning. Strategic planning charts the future course for the organization and reveals significant implications for the appropriate go-forward executive talent strategy. For example, shifting your target sales mix toward higher-margin products may mean that incentive plan metrics and goals need to be realigned. Implementing a new business model that focuses on customer service rather than cost to achieve competitive advantage may mean making additional investments to attract, retain and motivate top talent to execute the new vision, while reducing investments in less critical roles.
2. 8. Capitalize on your company’s HR expertise. Many organizations have strong HR staff who have expertise on a wide array of issues that the committee will confront over time, including establishing a process and criteria for assessing potential board and executive candidates, implementing succession planning and leadership development, developing an executive performance evaluation process, administering equity and incentive plans, and educating board members on industry trends and developments relevant to compensation and benefits.
1. 9. Develop a succession plan – and use it to actively manage your talent. Very few actions can have a more dramatic impact on stock price than the unexpected loss of a successful CEO. While the majority of companies say they have a succession plan, this usually consists of a list of “A” players and, possibly, an estimated timetable for readiness. Yet a succession plan should involve not only the “who” and “when,” but also the “why” and “how.” Rather than asking management to identify potential successors in their same mold, the board should articulate the skills and competencies needed to execute the company’s long-term vision, thereby providing an objective framework for identifying the right talent to meet the company’s evolving needs. For the succession plan to be a true management tool, it must also include a comprehensive strategy for developing and monitoring top talent once it has been identified. This includes identifying training, on-the-job experience and leadership development needs as well as developing an explicit plan to fulfill those needs.
2. 10. Understand how your executives value their remuneration. Many companies are taking a hard look at their LTI strategy and are struggling to understand the pros and cons of the many alternatives. A variety of factors should be considered, including the associated accounting expense, tax
consequences, potential share dilution, alignment with the business strategy and administrative complexity. But the value perceived by executives should not be overlooked. For example, depending on a potential recruit’s risk preferences, a sign-on package consisting primarily of perform-ance-based restricted stock with a $50,000 accounting charge may actually be more attractive than a stock option package valued at $150,000. This example also highlights the importance of regularly communicating the potential value of the total remuneration package to executives in order to maximize return on the compensation investment. For any compensation program to drive results, participants must have a clear understanding of the expected performance and associated rewards.
11. Talk with your major shareholders. Shareholder advisory groups, which generally apply rigid models to make recommendations on a limited number of governance topics, do not speak for all shareholders. Institutional investors may apply their own criteria for deciding how to vote at the annual shareholders meeting and certainly use their own discretion in determining whether to divest their interests in favor of more attractive alternatives. Many investors appreciate an open dialogue about matters such as potential board nominees or equity grant reserves, and their input can generally give you a sense of broader shareholder views. The conversation doesn’t have to be limited to those matters over which they have voting rights – asking investors what financial metrics they follow closely may provide valuable insights into how third parties measure value creation in your industry.
12. Read the board HR committee report in the proxy statement as if you were a shareholder.
Shareholders use the report to understand how the committee makes decisions, the rationale behind programs and how pay and corporate performance are linked. If the discussion is sparse, then shareholders must rely on financial statements and disclosure tables in the proxy statement to formulate their own judgments. We see companies increasingly using their proxy statement as an opportunity to demonstrate transparency and to minimize surprises later. We encourage companies to proactively disclose information about the pay-for-performance link, perquisites and benefits. And finally, if you want to test the quality of your report, read those of your peer group and other companies’ reports that are being praised by the governance community.
13. Make the best use of external advisers. Because executive remuneration is an area of increasing complexity, specialist advice is critical. The committee should conduct executive sessions (without management present) as part of their regular meetings and use a portion of these sessions for a candid conversation with their outside advisers about marketplace developments and program changes. Candor works both ways; we have also witnessed committee members being more forthright about their views on programmatic changes and developments. Making such discussions routine reduces the “sting” they’ve previously had for management.
In order to help companies successfully navigate these challenges, Mercer has highlighted recent developments in executive remuneration around the world and identified several best practices to strengthen executive remuneration governance whether your company is in Sydney, Stockholm or San Francisco.
Recent developments in executive remuneration
There have been a number of developments that have increased the complexity of the executive remuneration environment:
Australia
The biggest change in Australia has been the introduction of a shareholder vote on the directors’ report on executive remuneration. The shareholder vote generated some criticism of remuneration practices for a small number of companies and led to improvements in transparency for others, but overall it did not result in significant changes to executive remuneration program design or levels. The expensing of share-based payments also recently took effect, although the impact on long-term incentive (LTI) practices has been minimal given that equity-based compensation in Australia is already relatively conservative compared to other mature markets.
Canada
The Canadian Securities Administrators finalized new governance guidelines and disclosure rules that formalize corporate governance best practices. In a related development, the Canadian Coalition for Good Governance released its working paper, Good Governance Guidelines for Executive Compensation, pressing for greater independence in executive compensation decision making, enhanced linkages between pay and performance; adoption of share ownership guidelines; and even more dramatic changes in the form, context and timing of executive compensation disclosure. With the banks taking the lead, some Canadian companies have begun disclosing pension expenses and liabilities and including the expected value of stock options and other equity awards in their calculation of total compensation.
Continental Europe
Across the continent, companies are under mounting pressure to enhance pay disclosure. In the Netherlands, the Dutch Monitoring Committee Corporate Governance Code in its December report advocated more uniform disclosure of executive compensation practices in annual reports, with information presented in a simple and straightforward manner with more transparency between pay and performance. In Germany, for 2006 annual reports, listed companies are required for the first time to disclose individual executive compensation practices. We expect that companies currently behind the curve will voluntarily act to improve disclosures; otherwise, additional regulatory activity is likely to follow.
United Kingdom
Pensions have dominated the agenda of many UK remuneration committees as a result of the proposed changes to pension legislation from April 6, 2006 (A-Day). The introduction of accounting for share-based payments has acted as a catalyst for many companies to review their LTI arrangements as well. The Association of British Insurers issued their updated Principals and Guidelines on Remuneration. The updated guidelines called on remuneration committees to step up their scrutiny of pay programs and, in particular, to be more thoughtful in identifying the drivers of shareholder value when linking pay to performance.
United States
In the US, dozens of shareholder proposals related to executive remuneration have been submitted in recent years, with results showing growing support for limits on executive severance, the implementation of clawbacks of incentives where financial reports are restated, and mandatory use of performance-contingent equity. Several regulatory developments have come to fruition, including new tax rules that limit the flexibility of popular executive deferred compensation rules and FAS 123(R) accounting for stock-based compensation. The Securities and Exchange Commission (SEC) also took a series of actions to strengthen disclosure of executive compensation, culminating in the final rules issued in August 2006.
Among the five regions highlighted above, several common threads emerge: enhanced disclosure, linking pay to performance, and the expensing of share-based payments. Some countries may be further along than others, but all remuneration committees will continue to wrestle with these issues and their consequences well beyond 2006.
The outlook for executive remuneration governance
We expect to see continued focus on improving transparency around executive remuneration programs and deci-sion-making processes. Enhanced disclosure may serve as a panacea for disgruntled shareholders who have been clamoring for information, but we may also find newly disclosed plan details being used to fuel further criticisms about executive pay practices or perhaps even resulting in unintended consequences, such as increasing executives’ expectations of baseline compensation and benefit levels. Better disclosure will likely compel committees to more closely examine executive compensation programs from a shareholder perspective, especially those elements that have generally been less visible, such as
severance and change-in-control benefits, executive perquisites, and supplemental executive retirement programs. While these elements are sometimes overlooked, they often represent a substantial component of total executive remuneration and deserve the same careful consideration given to base salaries and incentive compensation programs.
It is likely that equity compensation and performance-based equity,in particular, will stay top of mind for committees as well. Mercer’s compensation studies suggest that more and more companies in the US and Canada are using performance-based equity as part of their LTI strategy. And in the UK and Australia, where the use of performance-based equity has long been common practice, companies are beginning to look beyond total shareholder return and earnings per share to incorporate metrics that are more closely aligned with their business strategy.
Thirteen steps to strengthen governance and drive results
By strengthening governance practices and procedures, companies will be better positioned to tackle the challenge of achieving responsible executive remuneration programs in an increasingly complex environment. Based on our work with clients around the globe, we believe the following 13 steps reflect the best practices of remuneration committees with a track record of making sound decisions regarding executive compensation.
1. 1. Plan the annual agenda. Actively managing the annual agenda is critical to enhancing governance because it determines the commit-tee’s work for the year. We recommend comparing the agenda to the committee charter to ensure that all of the committee’s responsibilities are discharged over the year. It is also important that the time allotted is sufficient to cover the agenda items; important decisions regarding compensation, equity strategy and shareholder approval warrant robust discussion. This may require two or even three meetings: one for information gathering, a second for in-depth discussion and preliminary consensus on direction, and a third to make final decisions and plan for implementation, including disclosure.
2. 2. Don’t make decisions in a vacuum.
The committee should be familiar with industry practices as well as general market practices. In particular, peer company practices should serve as a touchstone for committee actions. This raises two important issues: First, the quality of the peer group is critical to the credibility of the story the data tell; it is worth investing the time to ensure the comparator market is appropriate. Second, care must be taken in looking to the external market to identify new approaches. The external market should inform decisions, not make them. To be effective, compensation decisions need to also reflect the company’s corporate and HR strategy as well as recognize its life-cycle stage, corporate culture, compensation philosophy and degree of difficulty in attracting and retaining high-quality executives.
3. Don’t abandon benchmarking, but don’t forget performance.
Many critics blame the use of external benchmarking for elevating executive pay levels over time. Benchmarking in and of itself is not the problem; it can be a very useful framework for assessing the competitiveness of compensation levels. But benchmarks only make sense when they are considered within the context of performance. This is particularly true at the executive level, since executive compensation programs can deviate significantly from year to year or company to company based on performance results. Also, in some cases it may be appropriate to use different peer groups for pay and performance. Pay comparisons should reflect jobs of similar scope and responsibility, generally meaning businesses in a similar industry, of similar size and complexity. Performance comparisons, on the other hand, may reflect additional factors, such as capital intensity, cyclicality or business maturity.
4. Challenge the performance measurement process. Although linking pay to performance is the goal of most executive compensation programs, few have succeeded. The pressure on performance-goal selection, target setting and calibration to payouts is increasing; institutional investors are pushing to have performance-contingent equity awards. Shareholders expect companies to be able to explain how pay reflects company performance. And, the question is increasingly being posed in the context of relative performance against peers. Be prepared to hear from shareholders if your performance against your peer group is weak, especially if your executives’ compensation and benefits are relatively high. There are good analytic tools and methodologies that can be used to develop an independent evaluation of whether the company is focused on the right goals, whether there is sufficient stretch and whether payouts are appropriate for the performance achieved.
5. Be holistic. Review all the elements of the executive remuneration program at the same time. It is difficult to implement a compensation philosophy and to ensure that pay is linked to performance if decisions regarding salary, incentive opportunity, performance goals and equity awards are made at different points throughout the year or in different years. And don’t overlook executive benefits and perquisites. For example, the committee should review the competitiveness of pensions in the context of the broader total compensation package received by executives in comparator companies. This annual review should also include an update of the com-pany’s current and projected costs – earnings expense, cash cost and accrued liabilities – and executive benefits on an individual basis. Before implementing compensation program changes, committees should understand the implications (including costs) for any executive benefit or perquisite programs.
In addition, evaluate all programs – incentive plans, equity awards, retirement benefits and change-in-control and severance arrangements – under the best- and worst-case scenarios. Even if a low-proba-bility event occurs, you should be comfortable with the outcome or at least be prepared to weather the reaction. And know what will happen upon the termination of each executive officer – for what reasons and at what cost.
6. Question your assumptions.
The environment has changed dramatically; many of the old premises are no longer relevant. Companies should revisit the rationale behind all of their cash, equity, benefit and perquisite programs. Programs may not need to be abandoned, but they should be affirmatively continued because they are consistent with the company’s compensation philosophy and connected to business-related goals. For example, to ensure certain items are revisited, some companies are adopting a strategy to provide sunsets in new programs and agreements. So a new severance or change-in-control program might have a two-year life, at which time it will expire unless the committee affirmatively adopts a replacement program.
1. 7. Think about executive compensation as a fundamental part of strategic planning. Strategic planning charts the future course for the organization and reveals significant implications for the appropriate go-forward executive talent strategy. For example, shifting your target sales mix toward higher-margin products may mean that incentive plan metrics and goals need to be realigned. Implementing a new business model that focuses on customer service rather than cost to achieve competitive advantage may mean making additional investments to attract, retain and motivate top talent to execute the new vision, while reducing investments in less critical roles.
2. 8. Capitalize on your company’s HR expertise. Many organizations have strong HR staff who have expertise on a wide array of issues that the committee will confront over time, including establishing a process and criteria for assessing potential board and executive candidates, implementing succession planning and leadership development, developing an executive performance evaluation process, administering equity and incentive plans, and educating board members on industry trends and developments relevant to compensation and benefits.
1. 9. Develop a succession plan – and use it to actively manage your talent. Very few actions can have a more dramatic impact on stock price than the unexpected loss of a successful CEO. While the majority of companies say they have a succession plan, this usually consists of a list of “A” players and, possibly, an estimated timetable for readiness. Yet a succession plan should involve not only the “who” and “when,” but also the “why” and “how.” Rather than asking management to identify potential successors in their same mold, the board should articulate the skills and competencies needed to execute the company’s long-term vision, thereby providing an objective framework for identifying the right talent to meet the company’s evolving needs. For the succession plan to be a true management tool, it must also include a comprehensive strategy for developing and monitoring top talent once it has been identified. This includes identifying training, on-the-job experience and leadership development needs as well as developing an explicit plan to fulfill those needs.
2. 10. Understand how your executives value their remuneration. Many companies are taking a hard look at their LTI strategy and are struggling to understand the pros and cons of the many alternatives. A variety of factors should be considered, including the associated accounting expense, tax
consequences, potential share dilution, alignment with the business strategy and administrative complexity. But the value perceived by executives should not be overlooked. For example, depending on a potential recruit’s risk preferences, a sign-on package consisting primarily of perform-ance-based restricted stock with a $50,000 accounting charge may actually be more attractive than a stock option package valued at $150,000. This example also highlights the importance of regularly communicating the potential value of the total remuneration package to executives in order to maximize return on the compensation investment. For any compensation program to drive results, participants must have a clear understanding of the expected performance and associated rewards.
11. Talk with your major shareholders. Shareholder advisory groups, which generally apply rigid models to make recommendations on a limited number of governance topics, do not speak for all shareholders. Institutional investors may apply their own criteria for deciding how to vote at the annual shareholders meeting and certainly use their own discretion in determining whether to divest their interests in favor of more attractive alternatives. Many investors appreciate an open dialogue about matters such as potential board nominees or equity grant reserves, and their input can generally give you a sense of broader shareholder views. The conversation doesn’t have to be limited to those matters over which they have voting rights – asking investors what financial metrics they follow closely may provide valuable insights into how third parties measure value creation in your industry.
12. Read the board HR committee report in the proxy statement as if you were a shareholder.
Shareholders use the report to understand how the committee makes decisions, the rationale behind programs and how pay and corporate performance are linked. If the discussion is sparse, then shareholders must rely on financial statements and disclosure tables in the proxy statement to formulate their own judgments. We see companies increasingly using their proxy statement as an opportunity to demonstrate transparency and to minimize surprises later. We encourage companies to proactively disclose information about the pay-for-performance link, perquisites and benefits. And finally, if you want to test the quality of your report, read those of your peer group and other companies’ reports that are being praised by the governance community.
13. Make the best use of external advisers. Because executive remuneration is an area of increasing complexity, specialist advice is critical. The committee should conduct executive sessions (without management present) as part of their regular meetings and use a portion of these sessions for a candid conversation with their outside advisers about marketplace developments and program changes. Candor works both ways; we have also witnessed committee members being more forthright about their views on programmatic changes and developments. Making such discussions routine reduces the “sting” they’ve previously had for management.
Magic or the Unknown Forces of Existence !!
Interdiscipline Synthesis Cosmology, ISC, is a title that denotes the description of reality which results from mixing as many avenues of thought as are needed to come up with the most accurate possible model of reality. Thus, ISC could ultimately establish a Theory of Existence capable of describing all of nature in both physical and metaphysical terms.
The first inescapable result of attempting to construct a suitable ISC is that the hypothetical particle called the "tachyon" (a particle which always travels faster than light) answers some of the most puzzling questions about existence. For instance, we find that gravity quanta are best represented as special types of tachyons, and that the substance of spirit creatures can be contemplated by viewing any purportedly non-physical beings as aliens made-up of tachyons.
Tachyonics will be responsible for giving us the most accurate view of our reality; providing the means of explaining what has previously been held as the unexplainable, such as the true nature of supernatural forces.
Physicists have established that the ten-dimensional (10-d) manifold of quantum theory is adequate for describing reality with respect to what can be detected directly and/or implied experimentally as far as the physical world is concerned, and that it also allows for the construction of a Grand Unified Field theory that successfully combines the four fundamental forces of nature; gravitation, electromagnetism, the weak-nuclear force, and the strong-nuclear force. Note, though, that this 10-d manifold we perceive as "real" is embedded in an infinity of possible alternate-multidimensional manifolds [which is actually a requirement of the mathematical formalism on which quantum mechanics is based], and therefore represents only a small part of a much more complex reality that includes many possible undetectable dimensions. The nearest set of alternate-dimensional manifolds coexisting with our 10-d manifold must include all of those which exist on the other side of lightspeed, the tachyonic realm, which is likely inhabited by entities such as deities, angels, demons, and numerous other non-physically-based creatures (or alien beings which resemble such entities, and to which ancient people attached these and other names). Clearly, then, at-least some previously unexplained phenomenon can now be understood using Tachyonics. Miracles, magic, mysticism, and psychic abilities are, for example, lifted up and out of their mysterious past and placed on an empirical mathematical footing by applying Tachyonics to explain them. In particular, we now recognize that magical forces are merely tachyonic forces for which we earlier had no formal scientific designation, and, as such, must be taken as seriously as any other natural phenomenon we might investigate. Let us therefore examine magic in its own right.
The following is excerpted from The Wizard's Book of Magic; a manual of magic practice defined according to the teachings of the order of the Wizards of Esaereh, the "Sages of Earth," and should not, therefore, be construed as applying to other orders.
Magic practice is said to be a secret wisdom. As a science, it is the gaining of knowledge. As an art, it is the understanding of the secrets of nature. As a unique pursuit among human endeavors, its primary focus is the manipulation of physical processes by wielding unseen forces that provide superhuman or supernatural powers. That is, a "magic-user" is any person who has obtained such advanced learning or such a profound understanding of nature (or who has such unique inborn gifts) that actions beyond the norm of most human capabilities are placed within their reach. Yet, wisdom is the primary tenet. A high intelligence, or detailed memory, or an aptitude for a given subject will aid in the process of gaining knowledge, but without the proper insight into the knowledge gained an individual may not have the necessary wisdom to go far in a practice of magic. The gaining of knowledge, and also an understanding of nature (such as that given by studying physics), therefore, are not part of the tenets of magic usage, but are more like prerequisite to entering into a study of actual magic.
The First Tenet of magic is that the practitioner must, above all, be wise. This is required because there is no other means by which knowledge and understanding can be used by humans (on their own) to gain magical capabilities. The Second Tenet of magic is the belief in magic; though not a blind faith, or indoctrination into occultism, or devil worship, and so forth, but the mere willingness to accept the possibility that magic is not wholly fanciful. To explain, one must first recognize that all magical forces are superdimensional. Thus, to "believe" in magic is to accept the possibility that humans can make use of energies that happen generally to be undetectable using scientific instruments. The Third Tenet of magic is that purely intuitive thought has more power to accomplish magic than does purely rational thought. In other words, it takes imagination and a keen sense of intuition to perform magical activities. Thus, in most magic practices, considerations of instinct, hunches, apprehension, gut feelings, and the like, will often be more important than considerations of known facts, raw data, or exacting formalisms. The Fourth Tenet is that the universe we see is a model of others with which we, as humans, may establish magical links. That is, we generally understand the alternate realms as being in analogy to things we can actually detect, or theoretically discern, about the basic physical nature of the universe around us. For instance, the fundamental forces each have analogs in the alternate dimensional manifolds that coexist with our own. Conversely, however, we do not have access to realms in which something is missing. The laws of physics hold, even if their analogs are actually different, and all of them must be present (in one form or another) in a given alternate realm if we humans are going to be able to access the energies of that realm. The Fifth Tenet is that everything is connected (somehow) to everything else, either directly or indirectly, whether in the seen or unseen realms. There is no such thing as an "isolated incident". An action always has a cause and an effect, and involves more than just the finite manifold of our detectable spacetime. The Sixth Tenet is that each variety of energy, force, particle, material, etc., has at least one opposing or otherwise corresponding energy, force, particle, etc., or both, or more than one or the other, or both, in the same universe, along with all analogs in each unseen alternate universe that has complete analogs of the laws of physics.
Now, beyond the six Tenets of usage there are other rules, called the "Principles" of magic practice. The "Primary Principles" are grouped into two categories, together called the "Edicts of Magic Practice", where each Edict is actually a set of universally applied mandates -- one set referred to as the "Rules of Sympathy" and the other set as the "Rules of Antipathy". Sympathy is an edict that two or more things resembling each other in any way are connected by magical energies, as far as similarities in their characteristics are concerned. In casting a spell, for instance, the caster can mention a color, a smell, or a natural substance that is associated with a disease, in order to aid in banishing that particular disease. Sympathetic magic itself is divided into two dominant principles, its "Rules" proper, which are; (1) the Principle of Homeopathy, which states, in-brief, that like affects like, meaning imitation can be employed in the working of magic, and (2) the Principle of Contagion, which states that things that have touched retain a special connection for some time period after the contact. Homeopathy can best be illustrated by the Voodoo doll, which is merely a doll made into the image of an individual and over which spells are cast with the intent of affecting the person in whose image the doll is fashioned. Contagion, however, can best be illustrated by the spell-casting aid of involving something with which the target of the spell has lately been in contact, such as nail clippings, a snip of hair, a photograph, and so on. Antipathy is the edict that various magic forces can activate others. This edict, formally called the "Rules of Antipathy", is embodied in two Primary Principles, called the "Principle of Taboo" and the "Principle of Return", which simply amounts to the aspects of nature which mandate that certain actions result in certain reactions, no matter what. The Principle of Taboo states that restrictions on all acts are inharent in nature. We cannot violate the fundamental laws of physics, for example, nor the analogs of those laws in any other realm. As a corrolary, the Principle of Return states that what we do comes back to us in one way or another, by natural rules referred to in some traditions as "karma". These rules are counted as an aspect of Antipathetic Magic because doing magic which causes a change in the world often results in effects that tend to rebound on the magic-user; sometimes in opposition to the intent of the user.
Besides the Tenets of Magic Usage and the Principles of Magic Practice, there are other rules that must be considered so obvious, and so important, that they are referred to as the "Laws of Magic", of which there are four sets, referred to seperately as the General, the Scientific, the Metaphysical, and the Spiritual Laws of Magic. The General Laws of Magic include the rule that there are generally two kinds of magic; active and passive. The Scientific Laws are embodied in rules that come straight from the laws of physics, but which have a companion set of rules, Metaphysical Laws, governing magical forces and energies directly. The Spiritual Laws are derived from various religious ideas involving true miracles, magic, mysticism, and so on. The General Laws are the first three Laws of Magic, defined; (1) the Laws of Magic are inviolate, (2) human magicks are tachyonic, and (3) a magick is active or passive. The Scientific Laws include the next three laws, defined; (1) physical laws apply to magic usage, (2) magic is explained by physics, and (3) physicists can benefit from gaining an understanding of magic. The Metaphysical Laws includes three more laws; (1) every attribute outwardly displayed reveals powers within, while (2) flames (combustion processes) constitute an interface between realms, and (3) experience results in perfection. The Spiritual Laws include the last three Laws of Magic, which state that (1) good and evil exists in all realms, (2) divine energy pervades all realms, and (3) there is a connectedness involving all realms.
The complete collection of Tenets, Principles, and Laws of magic form a compilation of ordinances referred to as the "Fundamental Rules of Magic"; being fundamental not in a sense of simplicity, but in the sense that knowing about them is required of all thoroughly successful magic-users. Be aware, however, that these are not all of the rules of magic that can be counted; they are only the rules requiring enumeration in the Esaerehn tradition of Wizardry, which has as its foremost article of faith that magic is tachyonic.
The first inescapable result of attempting to construct a suitable ISC is that the hypothetical particle called the "tachyon" (a particle which always travels faster than light) answers some of the most puzzling questions about existence. For instance, we find that gravity quanta are best represented as special types of tachyons, and that the substance of spirit creatures can be contemplated by viewing any purportedly non-physical beings as aliens made-up of tachyons.
Tachyonics will be responsible for giving us the most accurate view of our reality; providing the means of explaining what has previously been held as the unexplainable, such as the true nature of supernatural forces.
Physicists have established that the ten-dimensional (10-d) manifold of quantum theory is adequate for describing reality with respect to what can be detected directly and/or implied experimentally as far as the physical world is concerned, and that it also allows for the construction of a Grand Unified Field theory that successfully combines the four fundamental forces of nature; gravitation, electromagnetism, the weak-nuclear force, and the strong-nuclear force. Note, though, that this 10-d manifold we perceive as "real" is embedded in an infinity of possible alternate-multidimensional manifolds [which is actually a requirement of the mathematical formalism on which quantum mechanics is based], and therefore represents only a small part of a much more complex reality that includes many possible undetectable dimensions. The nearest set of alternate-dimensional manifolds coexisting with our 10-d manifold must include all of those which exist on the other side of lightspeed, the tachyonic realm, which is likely inhabited by entities such as deities, angels, demons, and numerous other non-physically-based creatures (or alien beings which resemble such entities, and to which ancient people attached these and other names). Clearly, then, at-least some previously unexplained phenomenon can now be understood using Tachyonics. Miracles, magic, mysticism, and psychic abilities are, for example, lifted up and out of their mysterious past and placed on an empirical mathematical footing by applying Tachyonics to explain them. In particular, we now recognize that magical forces are merely tachyonic forces for which we earlier had no formal scientific designation, and, as such, must be taken as seriously as any other natural phenomenon we might investigate. Let us therefore examine magic in its own right.
The following is excerpted from The Wizard's Book of Magic; a manual of magic practice defined according to the teachings of the order of the Wizards of Esaereh, the "Sages of Earth," and should not, therefore, be construed as applying to other orders.
Magic practice is said to be a secret wisdom. As a science, it is the gaining of knowledge. As an art, it is the understanding of the secrets of nature. As a unique pursuit among human endeavors, its primary focus is the manipulation of physical processes by wielding unseen forces that provide superhuman or supernatural powers. That is, a "magic-user" is any person who has obtained such advanced learning or such a profound understanding of nature (or who has such unique inborn gifts) that actions beyond the norm of most human capabilities are placed within their reach. Yet, wisdom is the primary tenet. A high intelligence, or detailed memory, or an aptitude for a given subject will aid in the process of gaining knowledge, but without the proper insight into the knowledge gained an individual may not have the necessary wisdom to go far in a practice of magic. The gaining of knowledge, and also an understanding of nature (such as that given by studying physics), therefore, are not part of the tenets of magic usage, but are more like prerequisite to entering into a study of actual magic.
The First Tenet of magic is that the practitioner must, above all, be wise. This is required because there is no other means by which knowledge and understanding can be used by humans (on their own) to gain magical capabilities. The Second Tenet of magic is the belief in magic; though not a blind faith, or indoctrination into occultism, or devil worship, and so forth, but the mere willingness to accept the possibility that magic is not wholly fanciful. To explain, one must first recognize that all magical forces are superdimensional. Thus, to "believe" in magic is to accept the possibility that humans can make use of energies that happen generally to be undetectable using scientific instruments. The Third Tenet of magic is that purely intuitive thought has more power to accomplish magic than does purely rational thought. In other words, it takes imagination and a keen sense of intuition to perform magical activities. Thus, in most magic practices, considerations of instinct, hunches, apprehension, gut feelings, and the like, will often be more important than considerations of known facts, raw data, or exacting formalisms. The Fourth Tenet is that the universe we see is a model of others with which we, as humans, may establish magical links. That is, we generally understand the alternate realms as being in analogy to things we can actually detect, or theoretically discern, about the basic physical nature of the universe around us. For instance, the fundamental forces each have analogs in the alternate dimensional manifolds that coexist with our own. Conversely, however, we do not have access to realms in which something is missing. The laws of physics hold, even if their analogs are actually different, and all of them must be present (in one form or another) in a given alternate realm if we humans are going to be able to access the energies of that realm. The Fifth Tenet is that everything is connected (somehow) to everything else, either directly or indirectly, whether in the seen or unseen realms. There is no such thing as an "isolated incident". An action always has a cause and an effect, and involves more than just the finite manifold of our detectable spacetime. The Sixth Tenet is that each variety of energy, force, particle, material, etc., has at least one opposing or otherwise corresponding energy, force, particle, etc., or both, or more than one or the other, or both, in the same universe, along with all analogs in each unseen alternate universe that has complete analogs of the laws of physics.
Now, beyond the six Tenets of usage there are other rules, called the "Principles" of magic practice. The "Primary Principles" are grouped into two categories, together called the "Edicts of Magic Practice", where each Edict is actually a set of universally applied mandates -- one set referred to as the "Rules of Sympathy" and the other set as the "Rules of Antipathy". Sympathy is an edict that two or more things resembling each other in any way are connected by magical energies, as far as similarities in their characteristics are concerned. In casting a spell, for instance, the caster can mention a color, a smell, or a natural substance that is associated with a disease, in order to aid in banishing that particular disease. Sympathetic magic itself is divided into two dominant principles, its "Rules" proper, which are; (1) the Principle of Homeopathy, which states, in-brief, that like affects like, meaning imitation can be employed in the working of magic, and (2) the Principle of Contagion, which states that things that have touched retain a special connection for some time period after the contact. Homeopathy can best be illustrated by the Voodoo doll, which is merely a doll made into the image of an individual and over which spells are cast with the intent of affecting the person in whose image the doll is fashioned. Contagion, however, can best be illustrated by the spell-casting aid of involving something with which the target of the spell has lately been in contact, such as nail clippings, a snip of hair, a photograph, and so on. Antipathy is the edict that various magic forces can activate others. This edict, formally called the "Rules of Antipathy", is embodied in two Primary Principles, called the "Principle of Taboo" and the "Principle of Return", which simply amounts to the aspects of nature which mandate that certain actions result in certain reactions, no matter what. The Principle of Taboo states that restrictions on all acts are inharent in nature. We cannot violate the fundamental laws of physics, for example, nor the analogs of those laws in any other realm. As a corrolary, the Principle of Return states that what we do comes back to us in one way or another, by natural rules referred to in some traditions as "karma". These rules are counted as an aspect of Antipathetic Magic because doing magic which causes a change in the world often results in effects that tend to rebound on the magic-user; sometimes in opposition to the intent of the user.
Besides the Tenets of Magic Usage and the Principles of Magic Practice, there are other rules that must be considered so obvious, and so important, that they are referred to as the "Laws of Magic", of which there are four sets, referred to seperately as the General, the Scientific, the Metaphysical, and the Spiritual Laws of Magic. The General Laws of Magic include the rule that there are generally two kinds of magic; active and passive. The Scientific Laws are embodied in rules that come straight from the laws of physics, but which have a companion set of rules, Metaphysical Laws, governing magical forces and energies directly. The Spiritual Laws are derived from various religious ideas involving true miracles, magic, mysticism, and so on. The General Laws are the first three Laws of Magic, defined; (1) the Laws of Magic are inviolate, (2) human magicks are tachyonic, and (3) a magick is active or passive. The Scientific Laws include the next three laws, defined; (1) physical laws apply to magic usage, (2) magic is explained by physics, and (3) physicists can benefit from gaining an understanding of magic. The Metaphysical Laws includes three more laws; (1) every attribute outwardly displayed reveals powers within, while (2) flames (combustion processes) constitute an interface between realms, and (3) experience results in perfection. The Spiritual Laws include the last three Laws of Magic, which state that (1) good and evil exists in all realms, (2) divine energy pervades all realms, and (3) there is a connectedness involving all realms.
The complete collection of Tenets, Principles, and Laws of magic form a compilation of ordinances referred to as the "Fundamental Rules of Magic"; being fundamental not in a sense of simplicity, but in the sense that knowing about them is required of all thoroughly successful magic-users. Be aware, however, that these are not all of the rules of magic that can be counted; they are only the rules requiring enumeration in the Esaerehn tradition of Wizardry, which has as its foremost article of faith that magic is tachyonic.
The Electric Brain !!
What is the nature of consciousness? Is it limited to humans? Does free will exist? Read on for one scientist's view.
How does a three-pound mass of wet gray tissue (the brain) succeed in representing the external world so beautifully? In this interview with noted neuroscientist Rodolfo Llinás of the New York University School of Medicine, find out how the rhythm of electrical oscillations in the brain gives rise to consciousness, and how failures in this rhythm can lead to a variety of brain disorders.
ASK: Let's start by talking about why one needs a nervous system—or a brain—in the first place.LISTEN: That's a very intriguing issue. The nervous system is about 550 million years old, and it first came about when cells decided to make animals. Basically there are two types of animals: animals, and animals that have no brains; they are called plants. They don't need a nervous system because they don't move actively, they don't pull up their roots and run in a forest fire! Anything that moves actively requires a nervous system; otherwise it would come to a quick death. ASK: Why would it die if it didn't have a nervous system?LISTEN: Because if you move, the variety of environments that you find is very large. So if you happen to be a plant you have to worry only about the very small space you grow into. You don't have to do anything other than maybe move up and down. And you're following the sun anyhow, so there is no planned movement, and therefore there is no necessity to predict what is going to happen if, which is what the nervous system seems to be about. It seems to be about moving in a more or less intelligent way. The more elaborate the system, the more intelligent the movement. ASK: So you need a nervous system in order to be able to predict the future? LISTEN: Yes, and in order to predict you have to have, at the very least, a simple image inside that tells you something about the purpose of the outside world. That is common to all nervous systems of all forms that we know of. Each animal has a different universe—the universe it sees, the universe it feels, the universe it tastes. Earth probably looks very different not only for all of us as individual humans, but also for different animals. ASK: How does consciousness come into this view of the brain? Is consciousness a mysterious phenomenon, in your opinion?
"We assume we have free will, but we don't."
LISTEN: I don't think so. I think consciousness is the sum of perceptions, which you must put together as a single event. I seriously believe that consciousness does not belong only to humans; it belongs to probably all forms of life that have a nervous system. The issue is the level of consciousness. Maybe in the very primitive animals, in which cells did not have a single systemic property—in which each cell was a little island, if you wish—there may not have been consciousness, just primitive sensation, or irritability, and primitive movement. But as soon as cells talked to one another there would be a consensus. This is basically what consciousness is about—putting all this relevant stuff there is outside one's head inside, making an image with it, and deciding what to do. In order to make a decision you have to have a consensus.
This colored scanning electron micrograph shows the synapses, or connections, between two nerve fibers (in purple) and a nerve cell (yellow). The picture is magnified 10,000 times.
ASK: But it all just boils down to cells talking to one another?LISTEN: Some people believe we are something beyond neurons, but of course we are not. We are just the sum total of the activity of neurons. We assume that we have free will and that we make decisions, but we don't. Neurons do. We decide that this sum total driving us is a decision we have made for ourselves. But it is not. ASK: So this mass of wet gray tissue that is our brain is made up of neurons?LISTEN: The brain is made out of cells. It is a long and very distinguished group of cells—about 550 million years or so old. These cells have a small mass. Our brain is about one-and-a-half liters, or three pounds, but it has 1010 cells, which is a huge number of cells. Ten billion cells. And each cell has 1,000 to 10,000 or so synapses—the connections between the cells. So the brain has trillions of synapses. ASK: How does the brain keep all these different neurons communicating in synch?
"Neurons like one another very much. They basically chat all day."
LISTEN: Neurons like one another very much. They respond to one another's messages, so they basically chat all day, like people do in society. "Where can I park?" "How much is it going to cost?" "Am I going to get a ticket?" One set of neurons talks to another set of neurons, and they talk back, so we have a dialogue between different components in the brain. And the dialogue is not between one cell and another cell, but rather between many cells and many other cells. It's like having a huge number of people holding hands, dancing together, making ever-changing circles and organized together in such a way that every cell belongs, at some time, to some circle. It's like a huge square dance. Each dancer belongs to a particular movement at a particular time. ASK: And there's music that keeps them all dancing together?LISTEN: Right. It's generated by the neurons themselves. Neurons have an intrinsic rhythm, a bit like a hum. They generate this electrical dance at a given frequency because they have similar rhythms—they hum in unison. But as in the case of choirs and dancing, you can have two groups doing different things at the same time. Now imagine that each group doing something represents an aspect of an external event, like a color.
Scientists have recorded the "hum" of neurons communicating. This movie shows the response of cells in the cortex to a visual stimulus.
ASK: That's the brain's job—to represent an external event?LISTEN: Right. Imagine many cells making an activity circle, with electrical activity going around and around like a windmill. Imagine that out of this circle come a few cells into the center and perform a particular dance that the other cells see but are not necessarily part of. Now these cells that do this particular dance may be cells that have learned something from the outside that they want to put in the context of whatever else is happening in the nervous system. The brain, when awake, is continually generating a picture of the outside world. When new information from the outside comes in it has to be put into context with whatever else was happening just before.ASK: Is there ever nothing going on—no dance—inside the brain?LISTEN: Sometimes there is nothing as far as consciousness going on, like when you fall asleep. At that time you are not generated. That particular dance, that is you, is not being created by the brain at the moment. If you are asleep but dreaming then the brain makes another dance during which you exist but you don't care about the external world. You can exist on your own with dreams, hallucinations, or deep thoughts, or you can relate to the outside world. Normal people want to relate to the outside world. If you happen to be a schizophrenic you may not. You may want to hallucinate somewhere in a corner. You are consumed by your thoughts. You are fascinated by whatever is inside your head. ASK: What part of the brain does this coordinating? We've all heard of different areas. Frontal lobes do this, another area does that.... LISTEN: If we look at the nervous system there are basically two functions. One is sensory—the ability to respond to the outside world—and the other is the ability to do something about it, the ability to modify the world. As the nervous system gets more complex in higher animals there's another totally astounding property, which is the ability of the nervous system to invent things inside the head, which it can then make into reality. All my life, even as a child, I have been amazed that you can think of something that doesn't exist and then by using the motor system—painting, talking, constructing—you can make them be part of the external world.ASK: Make a pie, for example.
The brain is the ultimate organ. It can make a reality. It can dream it.
LISTEN: Make a pie that didn't exist before. So it gives you an idea of the unbelievable ability of the system. Not only can it see or move, but it can also make a reality. It can dream it. From that point of view, it really is the ultimate organ. Each part of the brain has a particular function with respect to the nervous system. The visual cortex has one function, the frontal lobes have another function, the auditory system has yet another function. And yet when we look at the external world we see things as having properties that are inseparable from the object itself. ASK: Can you give us an example?LISTEN: Imagine I have a little bird on my hand. I can see the bird. I can see its color. I can see its shape. I can hear it sing. I can feel its weight on my hand. It might peck me. All of these things occur simultaneously, so we say that the bird has those properties. But all those properties are put together in different parts of the brain. So one wonders how the brain makes a collage of all these sensory inputs to generate one single precept—the bird—out of all the different sensory systems activated. This is called the binding property. Since we don't know for sure how it works, we call it the binding problem.
Our experience of a bird is made up of many different sensory inputs, including color, sound, smell, and touch. How does the brain put all this information together simultaneously?
We are not sure exactly how it happens, but there are good ideas about how it may happen. One of the ways we can attempt to understand how it happens is by studying people who have mental or neurological problems. Someone with a lesion on his or her visual cortex would be able to hear and feel and move but would not be able to see, so you know that he or she injured the conscious component that sees but not the other conscious components. So consciousness has parts.
How does a three-pound mass of wet gray tissue (the brain) succeed in representing the external world so beautifully? In this interview with noted neuroscientist Rodolfo Llinás of the New York University School of Medicine, find out how the rhythm of electrical oscillations in the brain gives rise to consciousness, and how failures in this rhythm can lead to a variety of brain disorders.
ASK: Let's start by talking about why one needs a nervous system—or a brain—in the first place.LISTEN: That's a very intriguing issue. The nervous system is about 550 million years old, and it first came about when cells decided to make animals. Basically there are two types of animals: animals, and animals that have no brains; they are called plants. They don't need a nervous system because they don't move actively, they don't pull up their roots and run in a forest fire! Anything that moves actively requires a nervous system; otherwise it would come to a quick death. ASK: Why would it die if it didn't have a nervous system?LISTEN: Because if you move, the variety of environments that you find is very large. So if you happen to be a plant you have to worry only about the very small space you grow into. You don't have to do anything other than maybe move up and down. And you're following the sun anyhow, so there is no planned movement, and therefore there is no necessity to predict what is going to happen if, which is what the nervous system seems to be about. It seems to be about moving in a more or less intelligent way. The more elaborate the system, the more intelligent the movement. ASK: So you need a nervous system in order to be able to predict the future? LISTEN: Yes, and in order to predict you have to have, at the very least, a simple image inside that tells you something about the purpose of the outside world. That is common to all nervous systems of all forms that we know of. Each animal has a different universe—the universe it sees, the universe it feels, the universe it tastes. Earth probably looks very different not only for all of us as individual humans, but also for different animals. ASK: How does consciousness come into this view of the brain? Is consciousness a mysterious phenomenon, in your opinion?
"We assume we have free will, but we don't."
LISTEN: I don't think so. I think consciousness is the sum of perceptions, which you must put together as a single event. I seriously believe that consciousness does not belong only to humans; it belongs to probably all forms of life that have a nervous system. The issue is the level of consciousness. Maybe in the very primitive animals, in which cells did not have a single systemic property—in which each cell was a little island, if you wish—there may not have been consciousness, just primitive sensation, or irritability, and primitive movement. But as soon as cells talked to one another there would be a consensus. This is basically what consciousness is about—putting all this relevant stuff there is outside one's head inside, making an image with it, and deciding what to do. In order to make a decision you have to have a consensus.
This colored scanning electron micrograph shows the synapses, or connections, between two nerve fibers (in purple) and a nerve cell (yellow). The picture is magnified 10,000 times.
ASK: But it all just boils down to cells talking to one another?LISTEN: Some people believe we are something beyond neurons, but of course we are not. We are just the sum total of the activity of neurons. We assume that we have free will and that we make decisions, but we don't. Neurons do. We decide that this sum total driving us is a decision we have made for ourselves. But it is not. ASK: So this mass of wet gray tissue that is our brain is made up of neurons?LISTEN: The brain is made out of cells. It is a long and very distinguished group of cells—about 550 million years or so old. These cells have a small mass. Our brain is about one-and-a-half liters, or three pounds, but it has 1010 cells, which is a huge number of cells. Ten billion cells. And each cell has 1,000 to 10,000 or so synapses—the connections between the cells. So the brain has trillions of synapses. ASK: How does the brain keep all these different neurons communicating in synch?
"Neurons like one another very much. They basically chat all day."
LISTEN: Neurons like one another very much. They respond to one another's messages, so they basically chat all day, like people do in society. "Where can I park?" "How much is it going to cost?" "Am I going to get a ticket?" One set of neurons talks to another set of neurons, and they talk back, so we have a dialogue between different components in the brain. And the dialogue is not between one cell and another cell, but rather between many cells and many other cells. It's like having a huge number of people holding hands, dancing together, making ever-changing circles and organized together in such a way that every cell belongs, at some time, to some circle. It's like a huge square dance. Each dancer belongs to a particular movement at a particular time. ASK: And there's music that keeps them all dancing together?LISTEN: Right. It's generated by the neurons themselves. Neurons have an intrinsic rhythm, a bit like a hum. They generate this electrical dance at a given frequency because they have similar rhythms—they hum in unison. But as in the case of choirs and dancing, you can have two groups doing different things at the same time. Now imagine that each group doing something represents an aspect of an external event, like a color.
Scientists have recorded the "hum" of neurons communicating. This movie shows the response of cells in the cortex to a visual stimulus.
ASK: That's the brain's job—to represent an external event?LISTEN: Right. Imagine many cells making an activity circle, with electrical activity going around and around like a windmill. Imagine that out of this circle come a few cells into the center and perform a particular dance that the other cells see but are not necessarily part of. Now these cells that do this particular dance may be cells that have learned something from the outside that they want to put in the context of whatever else is happening in the nervous system. The brain, when awake, is continually generating a picture of the outside world. When new information from the outside comes in it has to be put into context with whatever else was happening just before.ASK: Is there ever nothing going on—no dance—inside the brain?LISTEN: Sometimes there is nothing as far as consciousness going on, like when you fall asleep. At that time you are not generated. That particular dance, that is you, is not being created by the brain at the moment. If you are asleep but dreaming then the brain makes another dance during which you exist but you don't care about the external world. You can exist on your own with dreams, hallucinations, or deep thoughts, or you can relate to the outside world. Normal people want to relate to the outside world. If you happen to be a schizophrenic you may not. You may want to hallucinate somewhere in a corner. You are consumed by your thoughts. You are fascinated by whatever is inside your head. ASK: What part of the brain does this coordinating? We've all heard of different areas. Frontal lobes do this, another area does that.... LISTEN: If we look at the nervous system there are basically two functions. One is sensory—the ability to respond to the outside world—and the other is the ability to do something about it, the ability to modify the world. As the nervous system gets more complex in higher animals there's another totally astounding property, which is the ability of the nervous system to invent things inside the head, which it can then make into reality. All my life, even as a child, I have been amazed that you can think of something that doesn't exist and then by using the motor system—painting, talking, constructing—you can make them be part of the external world.ASK: Make a pie, for example.
The brain is the ultimate organ. It can make a reality. It can dream it.
LISTEN: Make a pie that didn't exist before. So it gives you an idea of the unbelievable ability of the system. Not only can it see or move, but it can also make a reality. It can dream it. From that point of view, it really is the ultimate organ. Each part of the brain has a particular function with respect to the nervous system. The visual cortex has one function, the frontal lobes have another function, the auditory system has yet another function. And yet when we look at the external world we see things as having properties that are inseparable from the object itself. ASK: Can you give us an example?LISTEN: Imagine I have a little bird on my hand. I can see the bird. I can see its color. I can see its shape. I can hear it sing. I can feel its weight on my hand. It might peck me. All of these things occur simultaneously, so we say that the bird has those properties. But all those properties are put together in different parts of the brain. So one wonders how the brain makes a collage of all these sensory inputs to generate one single precept—the bird—out of all the different sensory systems activated. This is called the binding property. Since we don't know for sure how it works, we call it the binding problem.
Our experience of a bird is made up of many different sensory inputs, including color, sound, smell, and touch. How does the brain put all this information together simultaneously?
We are not sure exactly how it happens, but there are good ideas about how it may happen. One of the ways we can attempt to understand how it happens is by studying people who have mental or neurological problems. Someone with a lesion on his or her visual cortex would be able to hear and feel and move but would not be able to see, so you know that he or she injured the conscious component that sees but not the other conscious components. So consciousness has parts.
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