Vanishing the People’s Wealth to Make the Bosses Richer
blog.nader.org
blog.nader.org
Unfortunately, asking a CEO whether their company is undervalued is like asking a barber if you need a haircut. That's how you run into situations where companies with absurd cash reserves like Apple and Microsoft are buying back their own stock, but for what purpose? They already have boatloads of cash! They don't need to raise any more!
There are plenty of simple options to deal with this. A law could require stock buybacks to be matched with dividends or taxed at a punitive rate. Alternatively, it could be mandated that buybacks require a majority of shareholder votes, thereby aligning shareholder needs with company activities.
The historically-more-normal way of doing this is via dividends (which Microsoft also started doing).
After all, I would be more comfortable with more shares at a lower valuation than fewer shares at a higher valuation, since Mr Market is an inconsistent figure and I would stand to gain more (from reinvested dividends) if the stock rises than lose (with buyback-inflated shares) if it falls.
Shouldn't we also be asking why unusually (I'm guessing this is unusual) so many companies are earning so much money yet see few worthwhile investment opportunities for the future of the company?
Some of the best technologies of the last 100 years have been born out of public investment. The need for intense number crunching during the Manhattan Project and the Apollo Program turbocharged computer research. The government's desire to have a self-repairing information network that could largely survive a nuclear attack led the development of what we have as the internet today.
It is unfortunate that the free-market-at-all-costs crowd balks at the idea of the public spending a portion of their money on R&D because they cannot generate a private profit, even though public investment can create new platforms for investment, lower costs for consumers, and ultimately create a larger and wealthier customer base to sell more things to.
What I got from the article is that the author seems to believe that the buy backs are only for getting the executives bonus sold in a way that does not devalue the stock, thus preserving the (undeserved) bonus. But this is only implied, not stated.
In the article, Nader is objecting to the extraction of wealth by management that doesn’t know how or want to deploy it to increase the value of the company and its stakeholders. The money flows from consumers, taxpayers (corporate welfare) and from the sacrifices of workers whose needs and increased productivity could be rewarded with better pay and pensions.
So the key distinction (at least in my mind) is the inclusion of stakeholders vs. just shareholders.
Any company that wants to change the world should include a pledge of duty to stakeholders (the "Corporate Social Responsibility" Model), as well as to shareholders. As an investor, I'm more apt to invest in a company that acknowledges it is a part of the society that enables it to profit.
Granted, companies that do this are less likely to be able to hide behind the Business Judgment Rule; but then again if you're an investor that's probably exactly what you want.
http://www.nytimes.com/blogs/boss/2012/03/14/for-b-corps-a-n...
I'd say the race right now is between new methods of distraction and keeping the collapsing system going just a bit longer with increasingly insane economic tricks. I'm not sure a breaking point is inevitable, there might just be a reasonably smooth slide into neo-feudalism.
Gorbachev noted that the USSR had a military that could have gone toe-to-toe with the US, but they couldn't provide toothpaste for their people. Everyone else noted the lines to buy basic necessities. Communism simply didn't work very well, economically. That wasn't propaganda; that was simply obvious comparison of the experience of living on different sides of the Iron Curtain.
Then there was the whole "freedom of speech" thing in the west and the whole "gulag" thing in the east. That was real. The difference was real. (Yes, I know the US seems to be rapidly eroding actual freedom, but it was a real thing at the time, not merely propaganda.)
But you can look at that as part of the same system, getting the people on your side, both with actual benefits and imagined ones was a large part of the superiority of the western system.
What comunism ideologues were fighting was not a particular palatable form of capitalism (softened by external pressure) but the ultimate state of the system.
Thanks to comunism collapse, we will happily enjoy the culmination of this superior system.
Not much -- the initial economic conditions at the beginning of the Cold War pretty much dictated how, even if the systems had been equal, a spending war that didn't erupt into a full-scale armed conflict had to end, unless one side capitulated in fear of a full-scale armed conflict.
That's not to say that the economic system of the developed West wasn't a better one than that of the Soviet Union and its satellites, or that their political systems weren't better, from a moral standpoint. Just that that's not why they won; the victory was overdetermined by other factors.
No, it didn't. Capitalism was displaced throughout the developed world and replaced with the modern mixed economy while Leninist/Stalinist "Communism" was still on its upswing.
Though since (just before, really) the fall of Communism, there have been growing, but somewhat sporadic, signs of it reasserting itself (or, at least, the mixed economies in some of the developed world moving back towards capitalism), resurrecting a lot of the struggles that preceded it being tossed out in various places the last time.
The Soviets, for all their faults, at least kept the system in check. The amount of propaganda in the West against communism, socialism, etc until the 90s leaves no doubt that the establishment considered it a valid threat. Eye of the Tiger.
No different than Time Warner or Comcast the moment Google Fiber comes to town.
Shame that neither the PROC nor the EU has been able to take up the slack caused by the fall of the USSR.