Saturday :: Jan 26, 2008

The Public Company


by paradox

With the sub-prime mortgage meltdown casting a fierce glare on American economics—capitalism for the poor with socialism for the rich—it’s an opportune time to examine another allegedly vastly beneficial capitalist enterprise in our United States fortress of inequality, the public company.

Public ownership raises vast sums of cash, can allow any citizen to directly benefit from dividends and higher share price in capital markets, and creates a more illuminating accountability structure for management versus private ownership. All of these advantages were supposed to mitigate the loss of personal ownership intensity: if one doesn’t own a company, how could one truly care enough to best manage it?

In our time and place with the planet the American public company ownership model has failed, failing as spectacularly as the sub-prime mortgage market this very moment, but after all is said and done in looking at the incredible mess citizens should remember that economic environments and variables are malleable, manageable elements in the human experience, the economic environment wasn’t always this way, it’s not that difficult to influence it, we don’t have to accept current conditions and demanding that our politicians actually fix it can truly deliver positive results.

The first variable failure in the American public ownership model is Accounting—American companies cannot execute honest bookkeeping, there is no way to look at a company’s numbers and know the truth is represented. When companies aren’t going under like Enron and Worldcom even successful ones like General Electric cook their books to get perfectly rising numbers. Economists call it “smoothing,” everyday citizens call it lying.

The second great variable to fail is the Board of Directors, in theory the real leadership of any public company. It’s the Board that chooses the CEO and makes broad direction decisions, allegedly keeping close eye on the CEO, but as we all know this has evolved into a complete joke, most Boards are chosen toadies of the CEO, a lavish perk in already fat life to make sure their friend and benefactor keeps his or her job with no questions asked.

That’s how we get CEO compensation packages that shatter records every year, handy 2004 figures show an incredible 431-1 ratio of CEO to average worker pay. CEO’s get spectacular platinum parachutes even after horribly failing, but at least in some rare instances they do lose their jobs. After failing horribly and abusing their people in the most appalling manner possible, leadership of Circuit City awarded themselves a $1 million bonus last year, a common story in exalted annals of American business.

This brings us to the third major variable failure, an element vastly more murky and difficult to understand than crooked accounting and kiss-ass Boards: the American culture. American public companies were not run by vapid inequality queens in the 1950-70’s, and currently European public companies suffer nothing like the CEO abuses seen in the American environment. Somehow in the early 1980’s the American culture decided that anything goes as far as CEO behavior was concerned wasn’t just acceptable, it was cool.

It’s tempting to flame the vile greedy souls of Wall Street as the instigators of American public company failure, but the 1980’s were a time when someone like Jane Fonda aggressively marketed herself as middle-aged sex symbol fitness machine. It wasn’t just the business types, for whatever mysterious reasons the American people had decided total self-absorption was in and hip, go for it.

Since then there have been many years and many public company failures (defenders of American capitalism, do you really want to go there?) to convince the American people that greed is good sucks, terrible burdens are being inflicted upon our people that demand societal and business change, the amazing record-breaking wrong track polling numbers aren’t there solely from Iraq, nor did the populist message of John Edwards arrive in a vacuum.

Well, how this is all fixed, or at least made better? That’s always the $64,000 question; there are no easy answers or fixes to bring about cultural/societal change. Support and participate independent journalism and liberal political blogs, these critical cultural change agents are already having a blessed positive effect on our political discourse. Accept the Democratic Party as the primary change agent structure, working to make it better instead of huffily insisting one is too good for it. Employ all the tiny personal change agent tactics possible (voting, bumper stickers, writing, casual conversation), and most of all know change is possible.

American public companies weren’t rapacious failing inequality machines in the past, other peoples on the planet certainly don’t tolerate public companies like ours, and continued patient efforts for change will bring results, probably a lot sooner than we think.

paradox :: 7:44 AM :: Comments (4) :: Digg It!