Thursday, May 24, 2012

When You HIre People That Principle Strength is Fleecing Others, Don't be Surprised When They Fleece You

Response to: JPM is Just a Symptom of Wider Corporate Governance Issue – Why Do Shareholders Matter Less and Less?

I have been outraged for quite some time by actions of corporate leaders taking from the corporation what they don't deserve. Sadly there are very few investment options to avoid insiders dipping buckets into the treasury and using it for their personal desires. Most of the time this is done within the bounds of the law (sometimes it isn't).

But when you want to invest in stocks sadly it is a matter of only excluding the most abusive executives from consideration (which includes any large financial institution I looked at so I never invested in them in the last 15 years). If you tried to exclude all companies that were being ripped off by the executives you can't find enough decent options. So you have to accept a certain percentage of the profits will be lost due to executive shrinkage.

They act like cleptocrate dictators - taking from what is owed to others because they can get away with it - not because it is somehow deserved. I have written about this over the years 2005: Excessive executive pay 2006: Obscene CEO Pay 2007: No Excessive Senior Executive Pay at Toyota or Honda, where Honda has Never had Layoffs and has been Profitable Every Year 2008: CEOs Plundering Corporate Coffers 2009: Another Year of CEOs Taking Hugely Excessive Pay - CEO’s Castles and Company Performance 2011: Taking What You Don’t Deserve, CEO Style 2012: Massively Unjust Executive Compensation Damages Companies and Investments

The issue of shareholders finally getting tired of being ripped off by the executives of their companies reminds me of the statement by Martin Niemoeller "First they came for the communists, and I did not speak out - because I was not a communist... Then they came for me — and there was no one left to speak out for me." The executives taking what they don't deserve isn't as important as societies not speaking up as liberty is taken away by police states but the process is similar.

Most of the people running our companies have no business doing so. They don't have the moral fiber to do so properly. They have systemically denied reasonable pay to employees, denied reasonable customer service to customers, denied to pay taxes owed (fleecing foolish tax authorities)... All in the name of taking more for themselves. It is not wonder, when their main focus seems to be how to fleece those they should be providing value to, that they turn on the owners and fleece them as they run out of others to fleece.

No comments: