Cartoon 793: The Model

Most businesses are set up with a Board of Directors. The purpose of a Board of Directors is to bring expertise and a more comprehensive perspective to a Company’s management decisions. But let us look at the Directors of a Forturne 500 company. Several Board of Director seats are usually occupied by management. A significant number of the remaining seats are occupied by high level management from other companies. A few seats are reserved for prestige and celebrity members. A few more are occupied by nominal major Investor representatives. Therefore a Board of Directors is really an insular enterprise of corporate management culture and disinclined to execute true governance.

High level corporate management receives the bulk of their compensation based on the stock price. The higher the price, the more likely there will be a big dividend to Investors. This dividend represents the Return On Investment (ROI) that Wall Street and Investors treasure. The calculation of success is measured quarter-to-quarter by Wall Street Analysts in terms of preceived profitability. It is in Management’s best interest to crank up as much profit as possible in order to achieve the largest bonus. The Investors are happy each profitable quarter.

Most of Forturne 500 top corporate management play a game of musical chairs. They leave the company when the music representing profits shows signs of major hickups or stopping. Investors take their profits and move their money if they realize the music is stopping. They typically move their money anyway in twelve months seeking better quick returns. Wall Street makes its profits off the movement of money in terms of fees and creative packaging of large transactions. It really does not matter to Wall Street if a business is rising or falling. For Wall Street both situations create profits generated through the movement of money based on speculation.

Investors, Wall Street and executive management is only interested in immediate profits. Investors and Wall Street penalize business investment in sustaining an enterprise. They run corporations into the ground over the long term. They do not perform resonable due deligence. The statement by our utility Regulators of their failing to hold business accountable is epidemic. Here are some critical industries, agencies and areas where this is known to be true; the railroads, airlines, water and waste treatment, food producers and processors, banking, the Pentagon and CIA, mergers and acquisitions, pharmaceuticals companies, chemical companies, natural gas exploration and corporate media ownership.

An oxymoron is saying Congress is a regulator and protector of the public interest. A Congressperson is only a regulator opperating on personal self interest. They are governed by who has the money and what they must do to get it. They are chattel.