December 8, 2006
Reforming Corporate Governance is the Ultimate Impossible Dream
This excerpt from William Thomas’s 2005 Annual Letter makes it clear why you should read all his Letters:
“… the irresponsible directors of Corporate America’s 500 biggest businesses have continued to facilitate the wholesale transfer of wealth from their companies’ owners to their managers. Something is seriously wrong with a system that prevents companies’ real owners from controlling the compensation of their hired managers. Something is seriously wrong with a system that pays the 50th highest-paid executive 865 times as much as the average worker or the 250th highest-paid executive 171 times as much. This is not capitalism. It is grand larceny, which enables elite capitalist con men to rob the proletariat. It threatens our economic system and paves the road to socialism.”
December 8th, 2006 at 8:43 pm
*L* First he mention the proletariat in an effort to make the case for more government oversight and then he tells us that this will steer us AWAY from socialism. If the get rich schemes of corprate america bother the owners of the corporations then they can fire them. It is their right. Make an example out of the people who are taking their money. But it is definitely not up to legislators to tell shareholders what they should be doing with their ownership. THAT is socialism.
December 8th, 2006 at 8:54 pm
brandon: He never makes the case for more government oversight, does he? My impression was that was the last thing he was advocating.
December 8th, 2006 at 9:45 pm
“Protectionism may be the final answer”. To whom do you think he is referring? ”
fast becoming a nation whose primary job opportunities are for computer nerds” No one will argue that computers have by and large made things vastly more efficient and just as we were once a nation of farmers we moved beyond that to production and now we export services. When did write this bill o’ rights?
“Our country is facing a problem that seems insurmountable. Eventually, we must achieve far greater manufacturing efficiency.” Why? If no one will purchase the goods manufactured then wouldn’t that be akin to the same situation as the farmers who are subsidized to produce goods that no one ever has an intention of buying because of overproduction?
“Eventually, we must accept a lower standard of living to eliminate some of the huge disparity with cheap foreign labor.”
Accept a lower standard of living? Rather than have the have-nots of the world move up we should look to moving down as the soloution?
“Finally, we may have to rely on tariffs, import quotas and other protectionist measures.”
Even most economists who advocate hybrid socialism realize that tariffs and import quotas just create more problems.
Now, onto the Shareholders BOL. I agree with much of what was written by Don Hodges. The following is what I regard as the most important part of the whole letter…
>>>>>>>>>And, Regulation FD, which the SEC mandated for a good
reason, to stop the flow of inside information, has had an unexpected
harmful result of stopping the flow of information…
period. It is more difficult to get relevant information of
any kind from companies than ever before. They operate
behind a veil of secrecy. A typical reply to the most innocent
of questions is, “We can’t tell you that because of Regulation
FD.” Ignorance and lack of facts in investment decisions rules
the day. Can anyone be expected to believe that the good is
served when analysts and enterprising investors can’t probe
and get relevant information about their companies? What
about Enron and WorldCom, or Global Crossing or Tyco?
Maybe those disasters would not have occurred, or at least
the executives would not have gotten away with millions, if
there had been less of a wall with SEC blessing. There is
something terribly wrong with an iron curtain stopping analysts
and investors from finding out what is going on in companies
in which they have a stake.
December 8th, 2006 at 9:48 pm
Chairman, I didn’t mean/want to sound ungrateful you run one of the best blogs on the net imho. Keep up the good work.
December 8th, 2006 at 9:50 pm
I was going to make a similar post as brandon. I am on board with him up until his protectionism hat.
December 8th, 2006 at 10:20 pm
brandon: I appreciate your comments… it’s just I was a bit confused because I excerpted from the 2005 letter in which he also bashed the SBA (and rightly so). He mentioned protectionism “as the final answer” in 2006 (which like you and Dan, I don’t agree with).