Over to you, stockholders…

Anyone who has read this blog for a while will know that I have some pretty serious concerns about the capitalist scheme of financing business. As I see it, the system works like this: People with money are able to use that money as collateral to borrow other people’s money, which they can then invest in ways that gain them still more money. Control and profit go to those who already have money, and corporate decisions (as well as many governmental ones) are made in the interest of those with money. People without money are left powerless and without many options for gaining money. Of course, we can go to work for someone else and maybe squirm up the ladder a few rungs. But this doesn’t change the overall dynamic, and even if we do make it up, it is only at others’ expense. Even in the best of times, the government implements policies to keep a “natural” rate of unemployment around 5%, as leverage against inflation. But these are not the best of times, and most of the people who are getting bailed out aren’t lending money, let alone hiring.

Nevertheless, I’m going to set aside this critique for a moment as I look at today’s news that Merrill Lynch distributed $3.6 billion in bonuses during a quarter that saw a $15.3 billion loss, as well as the company’s collapse and absorption into Bank of America (made possible by government bailout). What’s more, they did this early in order to get the money out the door before the new owners arrived.

This, quite simply, is looting. It is theft. It is taking something that does not belong to them.

I may be old-fashioned, but my understanding of the word “bonus” is tied to performance. That is, if you do a particularly good job, you get a bonus. Other people look at that and say, “Aha! If I do a good job, I’ll get a bonus too!” Merit is rewarded, the invisible hand of the market place keeps working its wonders as incompetents and crooks are breeded out of corporate leadership, and all boats rise with the tide.

If only we actually had a system that rewarded merit. Instead, millions of dollars have been shoveled into the hands of the very people who drove the economy into the swamp. The rationale appears to be that we need to keep doing this or we won’t be able to attract the “talent” needed to get out of the swamp, and that there is no way to outsmart the lawyers and crooks who will keep looting corporations in the face of whatever laws we can scheme up. But at some point, aren’t they worried about keeping investors?

To illustrate the hazard, let’s imagine that I owned one millionth of Merrill Lynch. I know that if I got my annual report that said, “You’ve lost $15,300 this year, and by the way, $3,600 of that went to bonuses,” I would do three things: First, I would have an absolute fit that the people who failed to prevent the loss were still gaining. Second, I would call my stockbroker and tell them to get me out of that madhouse. Third, I would start looking around for a lawyer interested in a class-action lawsuit.

Nevermind the taxpayer outrage about this, where is the shareholder revolt? Why are people putting up with this? Are you really so jaded and so trapped that you think this is the only way of doing business? If you believe in capitalism, you need to get off your butt and use your power as investors and shareholders, however limited it may be. You need to gather up you stock in these basket cases and dump it. If you do otherwise, you are putting your seal of approval on their thievery.

So where to put that money once you retrieve it from the crooks? I think that there are still companies out there that are doing relatively good jobs, but the overall state of the economy is not very good, so I would recommend that you put it in your friendly neighborhood credit union; they are generally solid, federally insured by their own equivalent of the FDIC, and most importantly not-for-profit. That is, they take any profits and put them back toward lower fees and higher intersest rates on your savings. Of course, they still have corporate officers, and some of these get paid handsomely. But there is an overall spirit of accountability to members, and because of that spirit, they generally avoided getting into the worst of this mess.

Once you have your money safely into a credit union, I would recommend that you look around for ways to invest it in your community. More on that soon.

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One Response to Over to you, stockholders…

  1. coopgeek says:

    Giving credit where it is due, Citi’s head honcho Vikram Pandit has said he will work for $1 a year and no bonus until the company returns to profitability. He joins a small list of auto execs who have made the same pledge, as described in this article: http://www.bloomberg.com/apps/news?pid=20601103&sid=a86BGz.hIWd0&refer=us

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