Power And Dollar

Gimmick? What Difference Does It Make?

Obama did not actually ask for pay limit.  Obama pretty much asks for pay through options: exercise to sell the stocks when you pay back the money to the government.  Obama also asks for more say for the shareholders.  Some will say such an ask is ridiculous.  Some will say if you want the money this badly, then this is the price to pay.  

 

Obama will likely get his way, not because of media bias, but because he is likely to get the votes for this one.  

 

Ideologies aside, what is really at stake?  This proves American economy is increasingly political.  Very soon, America will have a government with hands so full in the operations of the economy that it is not too different from China or India.  

 

Pay limit takes the headline.  However, if you read the content, the other point is the more important one: “bank shareholders will have a greater say about the salaries paid to company heads.  The measures will put in place greater transparency for costs such as holiday parties and office renovations.”  This actually follows the same concept of SOX. 

 

Obama is actually addressing quite a few things here.  

 

In large corporations, small shareholders never get a say.  The big shareholders usually end up being mutual fund companies.  Mutual fund companies tend to be silent partners.  So, they do not say much.  In fact, they do not even want a seat on the board.  Boards are still running the way it used to be 50 years ago, 100 years, old boys club.  However, the number of shareholders these days is: way too many.  However, 100 years ago, a large corporation did not have hundreds of thousands of shareholders.  These days, if you count the mutual fund holders, you easily have millions of shareholders.  Large shareholders get ways to take care of themselves, preferred shares or even board compensations for the lucky dozen.  The theme of transparency in this issue is actually consistent to one of his campaign messages.

 

Annual reports are informative.  For a large publicly traded company, say 100 million operating budget or 1000+ employees, tucking in ridiculous expenses on executives is too easy.  Even though SOX asks for any small thing that is “material”, what is half a million to a 100 million?  Obama essentially is having one stepping further: SOX is about relative to the nature and complexity of the business, let’s have it relative to ordinary people.  

 

Impact on economy?  For people who have >500k, do they spend all the money and let the money circulate in the economy and create jobs?  No, they tuck half of it in their 401k anyway.  In a way, Obama is actually tying up all their 401ks into their own company’s stocks.  Now, since these executives will have no diversification of the assets, they now have complete vested interests in the survival of the company.

 

So, political gimmick or not, this move actually does make a difference. 

Advertisements

February 4, 2009 - Posted by | activism, advocacy, banking, Barack Obama, business, Current Events, 美國, Democrats, economics, legislation, obama, politics, wordpress-political-blogs

No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: