First up we have
this aptly titled piece from Sunday's NY Times:
Editorial: Making Your Own Luck: Published: June 25, 2006
A series of investigations may show that many companies have been rigging the timing of option grants to jack up their value, to the benefit of executives and the detriment of shareholders. [snip]
What is surprising is the number of companies caught up in this widening scandal.
Dozens of companies are under investigation for the practice by the Justice Department, the Securities and Exchange Commission and the Internal Revenue Service, and even more by corporate boards themselves. There are a number of ways to manipulate grants to ensure that options quickly end up "in the money," whether it is backdating, picking the lowest price in a time window or timing the grant ahead of good news that will buoy the share price.
It is far more common than not for a company's top executives to also be the company's principal shareowners.
Stock options are supposed to align the interests of executives with those of shareholders, not give the former an unfair advantage at the latter's expense. A difference of a few dollars in the share price can add up to millions in profit given the large size of many grants to executives. Option timing undermines the whole point of a stock option, which is to give executives the incentive to put in the extra effort to ensure that the corporation performs better. Then when the stock rises, shareholders and executives alike benefit.
Handing out in-the-money options is legal -- provided companies disclose them and count them as expenses. Instead some executives have apparently decided to cheat and pretend the timing was not manipulated to increase the odds of a big payoff. In many cases corporate boards seem to have been complicit, asleep at the switch or kept in the dark.
In yet another disturbing situation, an invitation to sit on the board at a given corporation is usually extended exclusively to the current or former CEO's of other companies...how's that for putting the fox in charge of the hen house?
Worse, there are numerous cases where the corporate boards of corporations are cross-pollinated, where the CEO sits on the boards of the companies of the individuals who sit on their company's board...
Hard to say if this is merely the club like atmosphere enjoyed by those at the top of the food chain or another example of keep your friends close and your enemies closer...
If we were to posit that insider trading isn't rare, it's just rarely prosecuted, how much hope is there for the positive outcome this article champions?
Op-Ed Contributor
Trading Up
By SUSAN SECHLER and ANN TUTWILER
Published: June 26, 2006, Washington.
AFTER protests, walk-outs, missed deadlines and deadlock, trade negotiators in Geneva have been moving toward a deal on agricultural subsidies and tariffs that could clear the way for a world trade agreement. The deal negotiators are discussing goes much further than the last round of trade talks. But it will not spur significant growth in low-income economies, the ostensible intended beneficiaries of negotiations known, after all, as the Doha Development Round. [snip]
The United States and Europe oppose these changes. [snip]
But the study went on to model two adjustments that would make the deal more meaningful for poor countries.
The first was to exempt from duties and quotas all exports from the least developed countries to the richest countries. If such exports were exempted, the benefits from the deal increase to $70 billion -- with nearly half of that gain going to the poorest countries. [snip]
The second change proposed by the International Food Policy Research Institute lowers the percentage of "sensitive and special" agricultural products that can carry high tariffs from 5 percent to 1 percent. This modification increases world income by $7.5 billion beyond the $54 billion. Because it applies to all countries, the benefits of this change are spread more evenly. [snip]
But making the trade deal truly benefit the world's poorest is not simply an act of charity or a public relations gesture. The extra increase in market potential could also enable the poorest countries to attract more investment in roads, ports and training, helping their businesses to grow and opening more opportunities for American and European companies.
I read crud like this and my head explodes. Question number one is why these are countries 'poor' in the first place? Looks a lot like mismanagement is the culprit here.
SO....
Pouring a ton of free trade into these `impoverished nations'' will result in what? It will make those who have a long history of mismanaging their society richer than they already are.
Even the author of this piece uses the qualifier `could' in her upbeat assessment.
It `could' start raining money...
or monkey's `could' start flying out of my butt...
Free trade agreements aren't some new, `untried' theory. The economic desert this nation has become is the end result of current free trade agreements.
Let's tie this in with the first article.
CEO's use global labor arbitrage to increase company productivity by reducing labor costs (along with domestic labor requirements.) As profits rise, these same CEO's cut themselves sweet (ly timed) stock deals to skim the gravy off the top.
As our thirty-year history with such agreements has shown, the influx of new jobs does little to elevate the circumstances of the impoverished nation's workforce. There's no incentive for the local employers to pay more than the local prevailing wage for most types of labor.
Not to rip the scab off of a sensitive topic but there is no guarantee free trade agreements will improved the lot of impoverished nations any more than an additional $2 a gallon tax on gas would be spent to develop alternative energy!
For decades the government has been using your SSI contributions for day to day operations, covering what they `borrow' from you with IOU's! You get some of your federal taxes back at the end of the year but you get none of your SSI back when you file.
How many of you caught Molly Ivin's column this past Sunday? I haven't seen a single diary (not I read them all, a friend e-mails it to me so I have no link) about the fact that the EPA's Superfund is BROKE!
Quietly, without a fuss, the tax on known corporate polluters was allowed to `expire'.
Live near a Superfund site? Be afraid.
There are countless examples of this kind of criminal mismanagement.
Let me be clear on this.
This isn't a Democratic problem...this isn't (solely) a Republican problem, it's a management disaster!
If we fail to change how (and by whom) our society is managed, nothing will change.
Thanks for letting me inside your head,
Gegner