Last years corporate tax cut from 35% to 21% provides a perfect example of how modern business purposely and repeatedly screws the shareholder. Ostensibly the purpose of the tax cut as Trump put it, was to “spur investment, increase wages and bring home capital from overseas!” Nothing of the sort happened of course. The only wages that were increased were senior management and the board of directors through an accounting slight of hand known as “stock buybacks.”
A large part of the ‘compensation package’ for corporate bigwigs is the issuance of mass quantities of stock out of thin air. When corporations got this Congressional giveaway last year in the form of a huge tax cut, did they increase dividends to shareholders? Did they do any of the things Congress said they were going to do with this windfall? Hell no. They paid senior management and the board of directors real money for the stock they had earlier issued them out of thin air.
All that huge giveaway did that further bankrupted this nation, was to further enrich very rich people. Americans are so stupid nowadays they don’t realize that even just 60 and 70 years ago corporations in order to be competitive paid share dividends of 4%, 5% and 6%. An amount historically typical to be paid for the use of your money. Today the vast amount of business pays no dividends. The few that do are the S&P 500 average of a pathetic 1.5%.
It never ends with modern business. As I have pointed out time and time again on this blog, is another way American business screws the working man and the country is their manipulation of labor costs. What job they can’t ship overseas, they bring in cheap foreign workers under H1-B and H2-B visas to do the job cheaper. It will either be made overseas, or be made here by overseas workers. Below is another example from an excellent book called ‘The Intelligent Investor‘, by Benjamin Graham. Originally printed in 1949, the 70 years since show without a doubt, that the more things change, the more they stay the same.
Even Graham would have been startled by the extent to which companies and their accountants pushed the limits of propriety in the past few years. Compensated heavily through stock options, top executives realized that they could become fabulously rich merely by increasing their company’s earnings even for just a few years running. Hundreds of companies violated the spirit, if not the letter, of accounting principles – turning their financial reports into gibberish, tarting up ugly results with cosmetic fixes, cloaking expenses, or manufacturing earnings out of thin air.
Business for the most part rarely tries to come up with an innovative product or method of doing business, they generally spend their time trying to cheat and defraud the shareholder and the customer. Rather than work for it, business prefers the easy way. Most greedy people are sweat averse.
[Regrettably, this book like most others, while pointing out the malfeasance of the corporations, lets the watchdog off the hook. Rarely do they hold the SEC accountable. Corporations are going to do what they can get away with, that’s why the taxpayer pays government agencies to bring down the hammer when they operate outside the law. Contrary to their belief, their existence is not for the hell of it, it is to protect the public.]