Comments on: MIA – U.S. shareholders who care Sun, 28 Jul 2013 14:34:09 +0000 hourly 1 By: hackack Tue, 03 Jan 2012 14:05:29 +0000 Great work, Chrystia, as evidenced by this comments section. A few duds but for the most part this has been an uncommonly rewarding comments section to read. As a writer myself, I understand what an accomplishment that is!

Good point above about the downside of Asian family capitalism. Doesn’t negate the bigger point, but is useful to keep in mind. No system is perfect…

By: JETsr Thu, 29 Dec 2011 10:27:07 +0000 US needs a revamp!!! The non-inheritance policy was fine when you were shying away from colonial systems of the past but things have changed now. So instead of putting the capital to good use over a long-term(from 1 generation to another) the current system is inherently trying to waste it. Occupy wall street is stupid, its looking for another short term fix without addressing any fundamental/core issues. You need less power in the hands of management and less power in hands of money managers who have thr salary linked to next quarter’s performance!!!! You need owners(not necessarily to lead the company) to keep a check and wield power in fragmented shareholding pattern of today.

By: FrankfromPrague Wed, 28 Dec 2011 06:54:53 +0000 When I first started investing in stocks – a long time ago now – and owned 6 Shell Transport & Trading shares, I used to get an interim report, an annual report, plus an invitation to attend the AGM and vote. They dropped through the letterbox automatically. I also had a share certificate. Now my stocks are held through internet-based nominee accounts, I receive no coomunication and have no contact with the companies I have a stake in. Maybe I could if I wrote to my brokers and went through the hassle of organising this. But it’s been made too hard for me to bother. Also, I feel like a dinosaur owning stocks in individual companies. Shouldn’t I just be investing in those souped-up derivative-based ETF’s where my sole interest is in the index? The small shareholder is still out there, but he/she has been squeezed, marginalized and disenfranchised. If it’s possible to develop internet-based trading systems, surely it’s also possible for companies to communicate with shareholders through these same systems? Regulators, do something useful for the little man for a change!

By: jfxwsr Tue, 27 Dec 2011 23:59:45 +0000 Great article. Long term thinking is missing, and the bundling of 401ks and pensions in non-individually voting shares is a problem addressed in the comments. While I do not have answers for this issue, I do think that voting rights that would vest more slowly – say 10% to 20% annually, would insure that votes were given from a longer term perspective. Higher transaction taxes on short term trades would also reduce speculation and encourage investing. Lastly, the people who know what is happening in a company and whose vested interest is the highest should have a heavy vote in what happens in a company – these shares gaining voting power over time as do those of investors – at 10% to 20% annually. Worker involvement will lead to more transparency. I own and run a small eight figure business, and could not currently conceive of turning the good people I work with or the good people who do business with us to ‘corporate America.’ Our capitalist system bears little resemblance to that described by Adam Smith, in which with, with perfect competition, the consumer benefits from the best possible option. Perfect competition has been quite perfectly killed by our corporatocracy – the best government that money can buy – as monopoly and duopoly dominate more parts of our society.

Great article. We need change, and need it soon.

By: DaffyP Tue, 27 Dec 2011 11:06:06 +0000 Excellent article. Yes, while we all still are impressed by the entrepreneurial spirit of closely held (and privately owned US companies) – not least those of the Silicon Valley, something negative seems to happen some years (or decades) after US firms are listed on the stock exchanges. The biggest culprit here seems to be the US proxy system, which for practical purposes undermines the democratic nature of a corporation or joint-stock company (plc). In Scandinavia, where the countries have almost identical companies’ legislation you see few of the limitations of the US proxy system. As a result, shareholders may actually influence on the election of directors. Take the case of banks, for example. As a result, when a bank is in trouble, it is easier (and more natural) but no less fair, to penalize the shareholders (forcing the bank to write down share capital) when banks have huge losses caused by too much risk permitted by its management (and ultimately by its board – and thus its shareholders). Both Norwegian and Swedish banks and their shareholders learned this the hard way, fortunately, in the banking crisis of the early 1990’s (and Iceland did in 2008-09). Maybe this would have been something for US banks too? There, there were no forced write downs of the capital of the largest banks, no “hair-cuts” for the shareholders, although the share price dropped). Maybe understandable since the shareholders hadn’t contributed much to the election of its directors anyway. The boards were primarily composed by the CEO’s themselves. Corporate governance, transparency, accountability and responsibility and “corporate democracy” go together. This also means that e.g. mutual fund managers in Scandinavia often actually (!) vote at annual shareholders meetings, a novelty in US terms. Therefore, I hope that more listed US firms listen more to the likes of leading pension funds like CALPERS, and sovereign wealth funds like the Norwegian Petroleum Fund when it comes to enabling true corporate democracy and transparency amongst US listed firms (not to say that all is bliss in Europe either).

By: Tanj Tue, 27 Dec 2011 01:25:08 +0000 Dynasties are handicapped by narrow choices for talent and you do not have to look far to find failures. Some successes like IBM can be argued both ways – it prospered greatly from two generations of Watsons but they did not have a controlling interest, nor even agree on their approach, so it was arguably a meritocratic succession. Many companies with a strong founder end up ejecting them long before retirement as their skills fail to match the needs of a company thet grows beyond them, or times which have changed. Dynastic leadership is unlikely to be useful in making a company good over the long term.

Dynastic shareholding, perhaps. It naturally creates a long term outlook while not constraining the talent with which the company operates. Still, the investors are free to do that today, there are many institutions with a long term investment outlook, and quite successful ones too. The composition of management and board will be a major concern for them. If a company has no attraction as a long term play then its price will not be underpinned by this major market segment.

Take a look at how many companies exist today with good profits and good dividends but low market valuation. The reason is almost always “poor long term outlook” or “lack of vision”. It is simply not true that the stock market reacts only to short term issues.

By: FoxxDrake Tue, 27 Dec 2011 00:37:33 +0000 I think it all comes down to this…

In America, American’s don’t own anything.

Perhaps one has a 401k, IRA or other interest or annuity. However, that doesn’t mean there is much of anything between the investor and the investment.

I put money into a 401k and the Union, the Company or Prudential (whomever) invests my money and the money from millions of others into stocks, bonds or whatever. Do I own Coke? Dell? or Microsoft? Perhaps, perhaps not.

I don’t own the company I own the “instrument.” If my 401k or CD or Annuity goes up or pays out … what do I care? If it doesn’t I pull out of that 401k plan and go into another…perhaps that money gets re-invested in the same place, perhaps not.

And that’s only IF one has a job.

I don’t OWN anything. I own a little nest egg, a little retirement fund…and that’s how it IS for the 99%.

The “OWNERS” are the 1%. The less than 1%. The .0001%.

They own…and they own EVERYTHING!

And OWNERS are fine with the way things are.

The whole system is rotten beyond measure.

It’s the slavery of old but in Matrix form…most are asleep; slaves and they don’t know it (even if they toss and turn in their sleep).

But whats worse is that it’s a feed-back loop. The same people that are hurt by the system are the same people so dependent upon it.

Why do companies need MORE and MORE profit? Why is PROFIT and increasing stock value so important?

Because without increasing quarterly profits the stock falls, investments (401ks) shift and managers are out on their arses.

And this is why things are OUT OF CONTROL.

By: fred5407 Mon, 26 Dec 2011 19:50:17 +0000 I think what you are seeing in the US is the end of US capitalism as we know it. When a company has no roots, no long term goals, and no responsibility to support the government and the lower paid workers you will see failure. We are seeing it in the Banking industry where the big greedy banks will fail. We will also see our Congress and Administration fail because they have lost long term focus and really have “Lost Heart”.

By: tedi46 Mon, 26 Dec 2011 16:59:23 +0000 I very much agree with you Mrs. Freeland.
Congratulations! You returned my hope that there are people who can think.
I could only add that quarterly capitalism in combination with powerful agencies can really destroys economies, can create crisis, recessions, deprecions since there are driven by people expectations. The most harmful being the short term investors, who really don’t care about the future of the companies they invest in
So there is nothing better than the family driven companies, with great sense of responsibility, even in USA they are the best performers – take Cargil company for example.
Great article indeed!

Teodor Ivanov

By: K-dub Mon, 26 Dec 2011 13:55:21 +0000 I would extend the American sense of “Archcapitalism” to “Archgovernment”. America also believes it runs an exceptional form of government and that its Democracy needs no improvement or refining, instead it takes the view that all problems are political and could not possibly be a result of a dysfunctional democratic system. The result? As you quite rightly mention, “quarterly capitalism” or short-termism in general. The inability of any Western nation to accept short-term pain for any long-term gain has been on full display since 2008.