Regulation in capitalism is dependent on risk. When actual risk is distorted by limiting it through the corporation, or increasing it with the derivatives, the “free” market can’t work.

You and I, Steve, are selling a product. We actually produce something of value that is bought by someone. Banks are moving other people’s money, and insurance companies are gambling syndicates, they produce nothing.

The stock market does not finance businesses. By the time an enterprise is ready for an initial public offering [IPO] it is already a viable business. The companies whose stock is listed on the major markets are not really benefiting from changes in the price of that stock, until, or unless, they offer more stock. Most of the transactions involve entities with no connection to the companies that have issued the shares being traded. The people doing the trading aren’t investing in the companies, they are betting on the price of the stock. Often the two have little in common.

While stock prices have gone up, the value of the companies has been decreasing: they lease instead of buying land; they maintain minimal inventories; they have increasing debt loads; they outsource critical functions. The corporations are becoming shells populated by a few managers, with the core of their business actually owned by someone else. As the salaries of executives have soared, their real responsibilities have been diminishing.

Most of the “unfortunate business decisions” reported on today would have properly been classified as fraud and perjury not long ago.

An ethicist says the problem is a lack of ethics… what a surprise. And if you have only a hammer, a lot of your problems look like nails. What’s wrong with saying outright that many of these people are greedy, amoral bastards? I’ve never been ashamed to turn a profit in my business, but I’d certainly hang my head in shame if I’d done what they have. Call a greedy bastard a greedy bastard.

Meanwhile, there are worse things than being cat-blocked. With Tabitha and Samantha, you may call a spayed a spayed, but don’t expect not to be sprayed. This morning I saw the neighbor hosing down an area rug in the back yard; as they are the owners of the aggressive indoor/outdoor cat, I think I know what happened. Indeed, I could smell what happened. Among neighborhood cats, this may be the Battle of all Mothers…

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My argument is that these people aren’t anti-ethical, they are a-ethical, they had no ethics to begin with, so they have no concept of what Mr. Longstaff is discussing. The business schools are producing people who believe that they are entitled to obscene amounts of money because they have figured out how to cheat people.

I’m being cat blocked.

I know many of us do.

A reason why the crisis hasn’t affected Australian financial institutions (an apt descriptor that last), is that executive salaries and bonuses are reviewed by the shareholders before they can be enacted, and there is a shareholder review board that are very strict about bonuses especially. Since Rudd became PM< they Gov has limited the max bonus allowed to their annual salary. Of course, it’s not perfect, and we did have a big disaster with one company, but it limits the damage significantly.

Our free-to-air TV Network, SBS, have very informative program called Insight. Last weekend they did a special on Executive Salaries that might be worth some or your time. 🙂

There is one honest CEO (and the ONLY One I’ve heard of anywhere!)

Harold Mitchell

Harold Mitchell opened Mitchell & Partners in 1976 and remains executive chair. The media buying agency has an annual turnover of $1.3 billion and profit of about $34 million. Harold boasts of taking no salary since he turned the company public, and pays his CEO son ‘half of what equivalent CEOs earn’. Despite working five days a week Harold is clear he doesn’t need a salary because he takes home a decent whack in dividends. He was awarded the Officer of the Order of Australia in 2004 for his services as an arts and cultural benefactor and fundraiser.

He get’s paid $millions on his shareholding dividends. So basically, he has a definite vested self-interest in ensuring good performance, or he doesn’t get paid anything. What a novel concept! 😉 Most CEO’s in the USA taking in over $100million a year couldn’t care less if the company performs well, they get paid anyway.