Michael,
I agree with your point of view on just about everything. Frankly, I'm shocked that anyone is shocked at accounting irregularities. Anyone with half a brain knew that GE, etc. were "managing" earnings. What is "managing" earnings? It's using a slush fund such as GE Capital or GM Finance, etc. to move a little here, a little there to make quarterly and annual numbers.
As for the bigger accounting stuff, although I'm not big on government regulation, I really think accountants should only be allowed to do accounting (not consulting) and if they don't like the returns on that business, they should find another business. Clearly we need more than a Big 4 or Big 5 group of accounting firms. Maybe you control the number of accounting clients any licensed firm can have. I doubt that we gain so much, economically speaking, from economies of scale where Peat Marwick "does it's magic" on 800 or 1000 public companies. Sort of like antitrust, we should require any public accounting firm to do the books on no more than 150 public companies. They could pick which ones to keep. Also, require that public accounting firms remain partnerships of individuals with full liability, perhaps even with "super liens" on real property so personal bankruptcy doesn't keep the Florida mansion in the family.
You'd end up with a big 50 accounting firms focused on accounting and each one fighting to do a higher quality job to obtain the bigger clients. All the accounting stuff is fixable, easily so.
And bubbles end badly, big bubbles end very badly--I've got no problem with that.
But the current stock option/stock buyback 3-card monte game is something more. Shareholders (owners) should know and vote on the compensation of the managers, something which is clearly not the case anymore. If a manager is going to dilute your earnings (collectively, via stock option issuance) by $50 million, then use $50 million of the shareholders' money in the corporate treasury to buy back $50 million in stock, all the while over the course of a year cashing in "incentive options," then that's another scam that has to be obliterated. The truth is, and Warren Buffet has shown, we don't need no stinking incentive options to run a business.
We actually get the government and regulation we deserve, and I'm afraid this is what we deserve. So far.
Kb |
