Dan,
The CEO's that are getting millions to billions for showing up at their desk each day (hired hands of us stockholders) -have done a terrible job, while abusing their fiduciary responsibility and paying themselves 100% and more of the earnings of the companies they were hired to operate. They're like clerks in a store that keep all the profits for themselves, leaving the owners with nothing.
On this, I agree with you. The basic idea of operating the company to make profit for the owners seems somewhat lost on the executives, especially of the tech companies. The lack of earnings is replaced with a bet on growth, and while the growth succeeds in some cases (in most it doesn't), in cases where it does, it is a profitless growth. Rather than small company owners visiting big companies to learn how to run things, it may be a better idea of some of the CEOs to visit some small companies, to see how they operate - and make profit.
I think the whole idea of stock options should be disposed of - for employees and executives. I would not be against profit sharing - sharing of real profits - between the owners (stockholders) and employees, to be used as an incentive.
A separate issue is that too much wealth in too few hands kills off consumption. I tried to make it clear that it's just as bad when the wealth is spread around too evenly (then there's not enough investment). I'm concerned that we've gotten to the point where too much income is in too few hands - which is limiting total demand and resulting in recession and deflation.
I think this is an interesting question, which can be approached in number of ways, but let me ask something very simple: If income (after paying taxes) is not consumed directly, what happens to it? The only thing I see that is left is investment of one kind or another. It is an investment for the person investing the money, but this investment turns into other things which in terms ends up being consumption.
For example, you put your money in the bank, the bank lends the money to someone (or a more sophisticated version of you buying into a mutual fund which buys an MBS) to buy a new home, which will employ architect, construction people, people who make appliances, of course lawyers, etc all of whom will use their income for other consumption (and some investments). The person who got the mortgage will get the house (which he otherwise could not afford) and he will live in the house tomorrow, which itself is consumption.
You can take another case of some investment in R&D and such, which in the end ends up as consumption of for people doing the research etc. What am I missing?
Joe |
