Getting it Wrong

Sir Martin Sorrell suggests that the problem with business today is that companies are too timid about taking the long view, so they spend most of their profits on things like stock buybacks, as opposed to investing in capital improvements or R&D.

While this is a nice theory, and the modern publicly held corporation does have an unrealistically short time horizon, this is not about timidity.

This is about managers looting the companies futures for their own personal benefit.

You see, much of the modern manager's remuneration these days is in stock options, and if the stock price goes up, they make 7, 8, and 9 figure paydays, while if the stock does not appreciate, they get nothing, so they, as basic capitalism predicts, manage the firm for their own private benefit by mortgaging the future.

This is not timidity, this is honest services fraud, or at least it was until the Supreme Court found 18 U.S.C.§1346 to be unconstitutional except in the case of a bribe or a kickback. (I actually agree with the decision, the law was too vague and prone to abuse.)

I'd like to go back to the pre-Reagan regulations, which defined most stock buybacks as illegal stock manipulation.