Stupid and Meek- Recipe for Exploitation

The stock market has rallied significantly in recent weeks, with the S&P 500 up 40% from its lows a few months ago. Clearly investors are piling on. However, there are plenty of reports documenting the grossly excessive executive rewards at all financial companies including the Sachs and the Citi- firms that have relied on taxpayer money to survive, and are now distributing the ill-gotten wealth to the select few at the top. A report in the NYT on Alliance documents the grossly unethical way the company awards compensation to its execs- using a "cash earnings" calculation that is fudged to get the highest amount of money possible for the executives. When asked about it, Robert Minicucci, chairman of Alliance’s compensation committee and a general partner with Welsh, Carson, Anderson & Stowe, a large private equity firm, apparently said that Alliance’s board is “very interested in pay-for-performance.”“How many companies do you know that have gone from $12 to $48 in the last six years?” Mr. Minicucci asked. “It is hard to say that shareholders are buffoons here and directors are asleep at the switch.” Alliance is one of the firms that was bailed out by the government's Term Asset-Backed Securities Loan Facility.

Who pays for all these crooked schemes? Ultimately, cash is cash, and options are worthless unless exchanged for cash. Customers, including consumers, are paying fees, rates, and other charges that could be lower if this looting were stopped, while the true earnings for shareholders would remain the same or even go up. Taxpayers would be saved a lot of money because the institutions would be forced to put money back into the system, rather than trucking it to the executives' houses. However, the funny thing about the U.S. is that the majority of the public is ignorant, and chooses, willingly, to remain ignorant. No wonder, then, that the stock markets are zooming- the shareholders are counting on the ignorance, and the meekness of the public. When one in five adults has no health insurance, the real unemployment rate is more than 15%, and firms make massive payments to executives on the back of taxpayer bail-outs and there is no protest on the streets, it is perhaps fair to condemn the taxpayers. It is when the majority don't show up for work and instead clog the streets that education for the executives, ethics education, that is, will begin.