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Old February 1st, 2016, 06:38 AM   #1
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Make America Great Again Get Rid Of The Dumbest Idea In The World

The idea, called shareholder value theory, is that the sole purpose of publicly-held corporations is to return profit to shareholders.

Customers be damned. Society be damned. Families be damned. Results be damned. America be damned.

Privately held companies, which are free from the pressures of shareholder value theory, invest more and create more value than publicly-held companies. Privately held companies invest 6.8 percent of total assets, compared with 3.7 percent for publicly-owned companies. Rather than invest, publicly-held companies are more likely to spend money on stock buybacks.

Why? Because once again, their mission is driven solely by short-term profit to shareholders rather than long-term value.

Boeing’s move to Chicago was one example. Here in Cincinnati, a health care company called Omnicare recently moved across the river from Covington, Kentucky, for incentives worth $7.3 million. Ohio Gov. John Kasich touts this as part of his success in creating jobs. However, the company moved less than a mile. No “jobs” were created. The company just took advantage of a political situation to secure $7.3 million from a local government. Is paying $7.3 million for a company to move across a river really the best use of public funds?

Shareholder value theory has removed all responsibility from corporations, has incentivized unethical behavior, and has created a race to the bottom. In the U.S., it has also put companies at war with people and our democratic government.

Keep in mind, shareholder value theory is new, dating back to Milton Friedman in 1971.

It didn’t come from our founders. It’s a recent radical remaking of society.

In the American Revolutionary War, we actually fought as much against the monopoly of the British East India Company as we did against the British. It wasn’t just any tea we dumped into Boston Harbor. It was British East India Company tea.

We did this because the British East India Company was responsible for the British government passing the Tea Act of 1773. The reason for this legislation was to allow the East India Company to cheaply dump tea in the colonies and still make a profit and also, simultaneously, to tax the tea.

After America won its independence, we were very wary about any kind of corporate charters and didn’t allow any for nearly 100 years.

When we started chartering corporation again, we did so only for public works projects like railroads. And corporate charters could be revoked if they caused significant harm.

How to really make America great again: Get rid of 'the dumbest idea in the world'
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Old February 1st, 2016, 06:56 AM   #2
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When in the market I day traded and made a pile of money, paid capital gains every year and got out as a rich retired country squire. I knew when to quit but some people don't.
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Old February 1st, 2016, 06:59 AM   #3
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I think paying executives in the form of stock options and stock buybacks have accentuated this race to short term greed at the cost of a corporation's long term growth.
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Old February 1st, 2016, 07:18 AM   #4
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I disagree with many of the premises of the OP. A successful corporation works for stability and growth, not just short term worth spikes.

The get rich quick type companies are more apt to be small scam artist type operations.

Allowing corporations to buy politicians and thus instill things like the "Disney Law" and removal of finacial regulations is what is hurting the US people more than evil boards of directors.
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Old February 1st, 2016, 08:06 AM   #5
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Allowing corporations to buy politicians and thus instill things like the "Disney Law" and removal of finacial regulations is what is hurting the US people more than evil boards of directors.
But aren't those laws bought and paid for by those very same "evil" BoD ??
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Old February 1st, 2016, 08:13 AM   #6
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But aren't those laws bought and paid for by those very same "evil" BoD ??
Yes, and they are good for the long term strength of the corporations affected. So start by killing Citizens United. And make lobbying a capital offence.
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Old February 1st, 2016, 08:20 AM   #7
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Yes, and they are good for the long term strength of the corporations affected. So start by killing Citizens United. And make lobbying a capital offence.
When a Board of Directors votes to compensate their executives with back dated stock options, the executive's focus turns to short term performance. In seeking the short term performance figures that will make the executives wealthy, they choose to use profits to buyback corporate stock in an effort to raise stock price instead of using those profits to reward workers with raises. The accumulative effect of corporations buying back shares rather than rewarding workers is to rob workers/consumers of the disposable income necessary to support long term profits of the very same corporations. Personally, I think this behavior will have a devastating effect of corporate profits in the decade ahead.
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Old February 1st, 2016, 08:41 AM   #8
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When a Board of Directors votes to compensate their executives with back dated stock options, the executive's focus turns to short term performance. In seeking the short term performance figures that will make the executives wealthy, they choose to use profits to buyback corporate stock in an effort to raise stock price instead of using those profits to reward workers with raises. The accumulative effect of corporations buying back shares rather than rewarding workers is to rob workers/consumers of the disposable income necessary to support long term profits of the very same corporations. Personally, I think this behavior will have a devastating effect of corporate profits in the decade ahead.
If that is done in a legal manner, it can be seen by investors, and the investors will know that it hurts them, even in the short term. Those Directors won't last long.

Strengthen your SEC enforcement. You don't even need new laws, just strict enforcement and a few perp-walks.
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Old February 1st, 2016, 08:48 AM   #9
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If that is done in a legal manner, it can be seen by investors, and the investors will know that it hurts them, even in the short term. Those Directors won't last long.

Strengthen your SEC enforcement. You don't even need new laws, just strict enforcement and a few perp-walks.
I'm not suggesting that stock option compensation and stock buybacks are illegal under current law. And, I think investors are also more concerned with short term profits over long term growth. If corporations continue to use profits for stock buybacks, which they've done at a record pace in the last decade, then workers not receiving wage increases will turn into consumers unable to afford these corporation's products in the future.
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Old February 1st, 2016, 09:27 AM   #10
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Yes, and they are good for the long term strength of the corporations affected. So start by killing Citizens United. And make lobbying a capital offence.
And how do you propose we do that when because of CU corporations can now pour nearly unlimited amounts of cash into the political process ??

We need to go way beyond reversing CU. We need to ban all corporate donations. Ban all PACs. If a person wants to contribute to the political process they can directly support a candidate or a party with limits on how much.

If they want to buy an ad for or against some proposed legislation or ballot initiative, they can buy it directly and put their actual names on it. No hiding behind innocuous sounding PAC names like "Foundation for Family Values" or "Real Patriots for Change" etc. etc. etc.

We also desperately need term limits and a 10 year waiting period before a former congressman can work as a lobbyist.
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