Nation of idiots 437

On Fri, 2 Sep 2005, Kamal R. Prasad

Yes (you are wrong) This sentence above contradicts the sentence just below.

ALL, repeat ALL, decision-making is done by the executives, NOT the shareholders. The shareholders NEVER make day to day decisions. I have been reading the WSJ for 25 years and it is maybe once or twice in one year that some company is sued by a clbutt action by shareholders for mismanagement.

When a

This is a big misunderstanding of how Wall Street Works because the sequence of causation is when the company "looks good" then the stock price goes up and that is how the shareholders benefit. Except in the case of dividends (not all stock pays dividends) where the dividend rate is changed up or down by small amounts (really insignificant) all the BENEFIT is by pure psychology of argitrageurs!! Outside of that, money does not flow between company and shareholders (unless a company buys back its own stock or sells stock for money)!

the rgeedy execs get rewarded with bonuses for

The greedy executives get rewarded when they can manipulate ANYthing to make a company look better and all kinds of fools and suckers buy up stock, thus bidding up the price, thus increasing the value of the executives stock options.

If they generate a loss

You know, this very very rarely happens. I've been reading more about this than you. It is a solid, established, 200% true fact that the vast majority of executives are: i) overpaid, ii) get salary and package increases far larger than anyone else, and iii) even get salary and package increases EVEN IF THE COMPANY DOES POORLY. Remember, I've been reading the WSJ for 25 years and this is the fact, the reality, the way it works.

What anything says about the process of buying stock is: i) there is voting stock (not all stock is voting stock, and they can vote for officers at the annual meetings, that's all), and there is ii) non voting stock (which usually pays a little bit higher dividends, maybe). That stock is, most of the time, ink on paper statements from a broker. I have seen these statements. I have owned some stock in mutual funds. Its like "owning" a valuable antique but someone else has "possesion" of the valuable antique. But its not a valuable antique. Its like your bank account at a bank. You put in money, they put numbers into the computer and send you a statement every month. If the interest they pay you changes, then that affects the growth of your account. Stock? You might not get interest, but the price per share changes. Do you think if you "own" a "piece" of the company that has 10,000 shares and you have one share that you can walk down to that company with a shovel and axe and slice out 1-10,000 of the company? Just think about that. They will throw you in jail.

The impact on the local economy is that it shifts money from the buying power of the local peons to the accounting department of the company and the bonuses of the executives and maybe the stock option package.

I have reservations, in general, about shareholder-arbitrageurs. I don't think they make money by honest work.

Fine, if you want to rationalize and justify that its OK to have a small number of very rich and powerful people who can continually rape and pillage a large number of poorer and poor people, then I hope you go to hell.

CEOs and executives. The shareholders don't care about anything except when the price of shares go up so they can sell at a profit no matter what happens to victims.

insist on

You have such a sad misunderstanding of shareholder power. As I have explained above and at least several times in the past months, it is so very very very rare that shareholders have any effect or influence corporate decision making that it essentially never happens. It would be in the WSJ if it did, and I'm telling you it essentiall never happens. If the CEO is hired or fired, it is the Board that does it. Sometimes, SOMEtimes, the board puts pressue on the CEO (eg. there were a lot of articles in the WSJ about the Board putting pressure on Carly Fiorina at HP, and she finally quit after they scheduled a number of meetings and dragged her through administrative fire). I think you are reading something about stocks that is in a comic book.

And, in another fair number of cases a fine or settlement is levied on the company to pay: i) the govt, ii) individuals, or iii) a clbutt of individuals.

Then, for sure, the shareholders really do "own" nothing but the value of those little ink marks on paper and the only value those little ink marks on paper have is that the shareholders can tell the broker to sell or buy.

I have nothing against the shareholders in the context of this discussion. I have a lot of things against the CEOs and the mindsets of the executives who are so dumb and stupid that most of the time they can and do one of two things: i) in good times, hire more people, ii) in bad times, fire more people. Oh, yes, they also do iii) take home obscene amounts of money for very little responsibility.