Sunday, March 09, 2008

Shareholders vs. Consumers : An Old Trick

The defenders of corporate greed and institutional usury attempt to split the loyalties of consumers and investors who, often enough are the same person, into two rival factions. After all the other ridiculous pseudo-philosophical arguments and historical revisionism miserably fail to support their objective, they then turn back to the old ‘divide and conquer’ strategy. This is effective because it uses a truth, an obvious truth, and by some ‘logical’ extension, abuses that same truth to defend a detestable status quo.

This is similar to the rationale that says “Corporations are people, too.” Well, duh. The intent is to deflect the problems of corporations as entities by saying that they are, somehow, just like regular people. It’s bullshit. We all know it’s bullshit, but taking the time to break the claim down and explain why it’s bullshit is nigh impossible on the fly. The shortest answer might be to say, “Corporations are people, yes. But like people who behave badly or have misguided or dangerous notions, they should be carefully monitored and regulated to make sure they don’t act on those impulses.”

The ‘Shareholder vs. Consumer” tactic is more effective than the ‘corporations are people’ tactic, because it pits the conflicting interests of the same individual against himself! However, in the following ‘observations’ I will explain, or try to, why this is a fallacy that derives from the roots of corporate financing and misperceptions of how the market works. If you really believe that higher consumer prices are good for the common investor, then read on.


  1. Let’s do the arithmetic. While there is no doubt that consumers may also be shareholders, does the dividend the average shareholder receive equal to or exceed the amount of money now spent at the gas pump, either before or after taxes? I have some small investments in petroleum and not only does my monthly output because of the increased prices for everything exceed my dividend, the percentage of return that I receive on my stock has also gone DOWN, in spite of the price per barrel skyrocketing. I received a better dividend when oil was $25 per barrel than I do when it is over $100.
  1. The mega-wealthy shareholders who hold the most of the stock wouldn’t have to worry about gas prices anyhow, even if they didn’t own it. I don’t see why the majority of consumers should be required to feed their irrational greed for wealth they do NOT need. That the average American should have to fore go some small luxuries in order for someone else to earn a dividend is wrong. I won’t deny them a profit, but why s profit so holy that it allows all and any abuse in it’s attainment?
  1. I don’t understand why any consumer should worry about the problems of investors. If a person has enough money to gamble in the stock market or lend to a wealthy speculator, then it follows that they must have also enough plenty over to pay all their bills, take a nice vacation, and eat out once in a while. Many Americans can’t manage that much these days and much of it is due to the rapid increases in gas prices and petroleum derivatives along the ripple effect those increases place upon our economy. If a person has enough left over to play the market then why should their wants take precedence over the needs of those who aren’t so fortunate?
  1. I fail to grasp why corporations need investors at all. After all, isn’t it good business not run solely upon the ‘confidence’ of investors but rather upon sound business practice that turns the profits from real goods or services back into the company? For a company like Exxon-Mobil to have to ‘borrow’ money from others is ridiculous! Every other small businessperson buys his equipment, mows a few lawns, pays off his loans, and then turns some of the money into getting better or more equipment. His profits and reputation build with time without the need of complicated financial engineering schemes and political lobbying. A corporation exists solely to draw money from outside the company into the hands of those running the company so that they can PLAY WITH IT without taking any risk of their own. Their goal is NOT to put as much as they can into the company, but to take OUT as much as possible.
  1. If the defenders of the status quo are truly concerned for shareholders, then maybe a discussion of the bloated and exorbitant CEO compensation packages should be addressed. Every CEO that takes millions in salary and options robs each and every shareholder of monies they are due. Sure. The CEOs deserve to get paid well, but how well? As an investor, I have already done he company a huge favor by risking my money, so why should I also have to coddle a CEO, especially when it’s costing me? I didn’t invest in Enron to help Ken Lay. I invest to help myself. The billions and billions of dollars taken from corporations by individuals who do not risk nearly as much as I do, percentage wise, is obscene and it robs the common shareholder of his portion of the take.

An investor might begin to realize that his investing perpetuates the system and actually causes the inflation that downgrades the real value of his own investment. As corporations, financial institutions, and those who manage them feed the continuing addiction to wealth and ‘success’, it is the consumer AND shareholder who takes the hit, along with employees in most cases, to ensure the corporate profits.

“The chief weapon of sea pirates, however, was their capacity to astonish. Nobody else could believe, until it was too late, how heartless and greedy they were.” (Kurt Vonnegut, 1922 - 2007)

Kol Tuv

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