TheBrutalTruth
Well-Known Member
It's kind of interesting. I read a lot, and one of the books that I picked up was entitled, The Battle for the Soul of Capitalism. Interesting read. It attacks the current system as not being Owners' Capitalism where the owners benefit from owning shares in the company and the executives, and managers see it as their duty to look after the interests of the absentee owners (shareholders), but as Managers' Capitalism where the managers are looking after their own interests.
The book was written by the person that ran the Vanguard Mutual Fund and addresses the issue of insane CEO Pay (They are stealing from the owners of the corporations), the issue of High Load Mutual Funds (they are stealing the profit that the capital of others would have gained), and puts it in a frame work that actually makes sense.
There's no debate over whether there should be an end to Capitalism. It addresses the current failures by putting them in a logical framework. The owners (the shareholders) are the ones getting screwed over by out of control management, and out of control managers of mutual funds, who continuously raise their fees (or receive more money from their fees) despite declining performance.
The problem isn't Capitalism, Capitalism of course is a system that demands integrity, morals, and high standards of ethics. In order to remain in business you have to establish a brand that people are willing to trust. People must be willing to say, "Yes, I can count on Brand X always being made with safe ingredients that were not adulterated in an effort to cut corners and seek higher profits."
A simple example is looking at the response of a giant conglomerate (I Think it was Mars (at least I think its Mars that makes M&Ms)) when some one says they found a rat bone in an M&M. They don't issue a press release denying the accusation. They immediately issue a press release stating that they are going to investigate.
Why? Because if they try to deny it, and end up being caught lying about it then it is going to cost them billions. Whereas if they investigate it they are going to learn what went wrong. Are capable of explaining to their customers how a mouse bone got into the M&M and what steps they are now taking to make sure it never occurs again.
All of that to protect their bottom line. Under a Socialist System of course the State Ran Business would likely hide behind its status as being owned by the government, and refuse to do a damn thing, because the bureaucrats are not likely to be punished for costing the company billions in revenue, due to them being bureaucrats.
However, the book does state that the Capitalist System that we have is no longer true to the principals of Capitalism (No Surprise There) where the owners are the ones that reap the benefit of owning shares in the corporations.
Instead we have a weird, f*d up Managers' Capitalism, where the managers are the ones reaping the benefits at the expense of the owners.
It also goes on to address the government's failure of making sure that the law regarding Fiduciary Responsibility of Management (Executives) and the Directors to the Owners (Share Holders) is met.
In short it can be summarized as arguing that Capitalism is not what is failing, but its the Government that is failing.
Due to government interference in the markets most people are likely to invest in a company that is hundreds or thousands of miles away from where they live. In companies where they do not know the management. Before, it was likely that you would at least know the person that was soliciting you to purchase shares. Know you don't even know that much, because it is illegal for a person to attempt to sell shares in their own company with out going through an IPO.
Before, you could actually judge a person that was starting a company, and judge their character, because they might have approached you personally to sell you shares. Now, unless you're related to them, it is likely you are never actually going to see them.
Unless, they are on TV, Acting like an empty-headed Celebrity (AKA Bill Gates with his Mosquito Stunt.)
This is not a failure of Capitalism. It is a failure of government intervention. Instead of stepping in to ensure that managers were acting with in the bounds of the law, which makes them responsible to the owners of the firm (shareholders) the government has taken steps just to ensure that the managers are fully reporting all the numbers.
Instead of taking steps to force CEOs to not loot their company (especially in the case of Failed CEOs) the federal government is now encouraging this idiotic behavior.
One need to look no further than Goldman Sachs, Lehman Brothers, AIG (most of the money given to AIG, passed through to Goldman Sachs, JP Morgan Chase, Lehman Brothers and Bank of America amidst other major bail out recipients), Bank of America, JP Morgan Chase, Morgan Stanley, and the list goes on (and on, and on, and on...)
The government has failed to hold CEOs and Directors up to having responsibility for the owners of the corporations. In short the Government has worked to ensure the failure of Capitalism, by letting it become transformed into a system where the bureaucrats (managers) get rewarded (regardless of their FAILURE or success.)
Of course, I'm not stating that the government needs to interfere. What the government needs to do is empower shareholders to demand results.
What individuals need to do is also stop putting money in to Mutual Funds --- who seem to be working against the owners, first by not voting in shareholder meetings, and thus not speaking up against corrupt management, and second, by charging exorbitant load fees that take the lions share (40% - 80%) of the returns the investors in the Mutual Funds would expect to receive --- and start investing directly in the companies that they want to. This way they can actually vote their proxies and move towards gaining more control over the management of the corporations.
One of the figures that the book had is a figure discussing the increase in Executive Compensation. It has gone from 4% of Industry Returns to 10% of Industry Returns.
This is money that doesn't belong to the executives, but to the owners.
It also illustrates that we do not have a true (owners' Capitalism) but a weird hybrid system (managers' Capitalism) that can be more likened to Socialism where the State (or its Agents) steal everything and try to redistribute it.
Of course, one can hardly trust the government with its exorbitant pay rates.
8x what the "Average" American earns for the President
4x what the "Average" American earns for the Representatives and Senators
6x for School Administrators
Then there's the pensions and retirement guarantees given to the above. Which cost even more money.
Even as Social Security goes down the drain the State and Federal Employees don't contribute. Despite the fact that Government Employment has increased dramatically over the last 50 years, soaring for 3 Million to over 15 Million.
That's a lot of employees that should be contributing to Social Security. Looking at that it also becomes a little more obvious why Social Security is failing. As government grows the number of employees to retirees under Social Security continues to go down (and down, and down.)
It is impossible to trust government (many of which are former Executives who looted their owners) or to trust the current executives. The only solution, the only way of restoring the United States (and True Owners' Capitalism) is for the owners (shareholders) to demand that the government make sure that when shareholders vote limits on Executive Compensation that such votes are BINDING (as opposed to NON-BINDING.)
The arguments put forth by government that such a decision would be a management decision and effect day to day operations of the company is complete and total Bunkum. By the very definition of the term the OWNERS of the firm should have the power to tell the Employees (Including (or perhaps Especially Management)) that they are not going to be LOOTING the corporations any longer, and stealing a lion's share of the profits of the corporations.
The shareholders should be able to force Executives to accept PERFORMANCE BASED Compensation. That is, if the CEO actually doubles the size of the business, and its net income, then they will see their salary double. They will still be capable of getting bonuses for hitting goals, but such bonuses will likely be in the form of Stock Options that can not be exercised for 10 - 20 years to make sure that the CEO and other Executives are not pulling Enrons (Inflating Earnings by using Special Purpose Entities).
Anyway, I'm out of time, so I'm going to stop here.
Though I'd recommend any one interesting in trying to understand more of the details about the fucked up situation in this country, and our abandonment of true owners' capitalism to check out the book.
Battle for the Soul of Capitalism
The book was written by the person that ran the Vanguard Mutual Fund and addresses the issue of insane CEO Pay (They are stealing from the owners of the corporations), the issue of High Load Mutual Funds (they are stealing the profit that the capital of others would have gained), and puts it in a frame work that actually makes sense.
There's no debate over whether there should be an end to Capitalism. It addresses the current failures by putting them in a logical framework. The owners (the shareholders) are the ones getting screwed over by out of control management, and out of control managers of mutual funds, who continuously raise their fees (or receive more money from their fees) despite declining performance.
The problem isn't Capitalism, Capitalism of course is a system that demands integrity, morals, and high standards of ethics. In order to remain in business you have to establish a brand that people are willing to trust. People must be willing to say, "Yes, I can count on Brand X always being made with safe ingredients that were not adulterated in an effort to cut corners and seek higher profits."
A simple example is looking at the response of a giant conglomerate (I Think it was Mars (at least I think its Mars that makes M&Ms)) when some one says they found a rat bone in an M&M. They don't issue a press release denying the accusation. They immediately issue a press release stating that they are going to investigate.
Why? Because if they try to deny it, and end up being caught lying about it then it is going to cost them billions. Whereas if they investigate it they are going to learn what went wrong. Are capable of explaining to their customers how a mouse bone got into the M&M and what steps they are now taking to make sure it never occurs again.
All of that to protect their bottom line. Under a Socialist System of course the State Ran Business would likely hide behind its status as being owned by the government, and refuse to do a damn thing, because the bureaucrats are not likely to be punished for costing the company billions in revenue, due to them being bureaucrats.
However, the book does state that the Capitalist System that we have is no longer true to the principals of Capitalism (No Surprise There) where the owners are the ones that reap the benefit of owning shares in the corporations.
Instead we have a weird, f*d up Managers' Capitalism, where the managers are the ones reaping the benefits at the expense of the owners.
It also goes on to address the government's failure of making sure that the law regarding Fiduciary Responsibility of Management (Executives) and the Directors to the Owners (Share Holders) is met.
In short it can be summarized as arguing that Capitalism is not what is failing, but its the Government that is failing.
Due to government interference in the markets most people are likely to invest in a company that is hundreds or thousands of miles away from where they live. In companies where they do not know the management. Before, it was likely that you would at least know the person that was soliciting you to purchase shares. Know you don't even know that much, because it is illegal for a person to attempt to sell shares in their own company with out going through an IPO.
Before, you could actually judge a person that was starting a company, and judge their character, because they might have approached you personally to sell you shares. Now, unless you're related to them, it is likely you are never actually going to see them.
Unless, they are on TV, Acting like an empty-headed Celebrity (AKA Bill Gates with his Mosquito Stunt.)
This is not a failure of Capitalism. It is a failure of government intervention. Instead of stepping in to ensure that managers were acting with in the bounds of the law, which makes them responsible to the owners of the firm (shareholders) the government has taken steps just to ensure that the managers are fully reporting all the numbers.
Instead of taking steps to force CEOs to not loot their company (especially in the case of Failed CEOs) the federal government is now encouraging this idiotic behavior.
One need to look no further than Goldman Sachs, Lehman Brothers, AIG (most of the money given to AIG, passed through to Goldman Sachs, JP Morgan Chase, Lehman Brothers and Bank of America amidst other major bail out recipients), Bank of America, JP Morgan Chase, Morgan Stanley, and the list goes on (and on, and on, and on...)
The government has failed to hold CEOs and Directors up to having responsibility for the owners of the corporations. In short the Government has worked to ensure the failure of Capitalism, by letting it become transformed into a system where the bureaucrats (managers) get rewarded (regardless of their FAILURE or success.)
Of course, I'm not stating that the government needs to interfere. What the government needs to do is empower shareholders to demand results.
What individuals need to do is also stop putting money in to Mutual Funds --- who seem to be working against the owners, first by not voting in shareholder meetings, and thus not speaking up against corrupt management, and second, by charging exorbitant load fees that take the lions share (40% - 80%) of the returns the investors in the Mutual Funds would expect to receive --- and start investing directly in the companies that they want to. This way they can actually vote their proxies and move towards gaining more control over the management of the corporations.
One of the figures that the book had is a figure discussing the increase in Executive Compensation. It has gone from 4% of Industry Returns to 10% of Industry Returns.
This is money that doesn't belong to the executives, but to the owners.
It also illustrates that we do not have a true (owners' Capitalism) but a weird hybrid system (managers' Capitalism) that can be more likened to Socialism where the State (or its Agents) steal everything and try to redistribute it.
Of course, one can hardly trust the government with its exorbitant pay rates.
8x what the "Average" American earns for the President
4x what the "Average" American earns for the Representatives and Senators
6x for School Administrators
Then there's the pensions and retirement guarantees given to the above. Which cost even more money.
Even as Social Security goes down the drain the State and Federal Employees don't contribute. Despite the fact that Government Employment has increased dramatically over the last 50 years, soaring for 3 Million to over 15 Million.
That's a lot of employees that should be contributing to Social Security. Looking at that it also becomes a little more obvious why Social Security is failing. As government grows the number of employees to retirees under Social Security continues to go down (and down, and down.)
It is impossible to trust government (many of which are former Executives who looted their owners) or to trust the current executives. The only solution, the only way of restoring the United States (and True Owners' Capitalism) is for the owners (shareholders) to demand that the government make sure that when shareholders vote limits on Executive Compensation that such votes are BINDING (as opposed to NON-BINDING.)
The arguments put forth by government that such a decision would be a management decision and effect day to day operations of the company is complete and total Bunkum. By the very definition of the term the OWNERS of the firm should have the power to tell the Employees (Including (or perhaps Especially Management)) that they are not going to be LOOTING the corporations any longer, and stealing a lion's share of the profits of the corporations.
The shareholders should be able to force Executives to accept PERFORMANCE BASED Compensation. That is, if the CEO actually doubles the size of the business, and its net income, then they will see their salary double. They will still be capable of getting bonuses for hitting goals, but such bonuses will likely be in the form of Stock Options that can not be exercised for 10 - 20 years to make sure that the CEO and other Executives are not pulling Enrons (Inflating Earnings by using Special Purpose Entities).
Anyway, I'm out of time, so I'm going to stop here.
Though I'd recommend any one interesting in trying to understand more of the details about the fucked up situation in this country, and our abandonment of true owners' capitalism to check out the book.
Battle for the Soul of Capitalism
