November 16, 2002
What's Needed to Restore Faith in Markets
by Bryce Willis
When CEOs, directors and vice presidents of large corporations misrepresent earnings, keep unpaid loans to themselves or otherwise defraud stockholders of millions of millions, a small fine and a hand slap will not restore faith in the stock market. The vote of the stockholders is no longer a deterrent to these happenings.
Stockholders are throwing their proxy votes in the trash because of the legal mumbo jumbo way of stating the issues. Lawyers using a whole booklets to explain the proxies, when a few words would explain them, is discouraging stockholder participation in the vote and is causing voter antipathy.
Another stockholder “protection,” the class action suit, is no longer for the stockholder but for the lawyers who initiate the suit. I have been included in many suits lately where the corporations actually defrauded the stockholders, but all the suits managed to do was to pay a small group of lawyers millions while the losing stockholders have forever lost their cause and get nothing.
What investors need to see, to restore faith in the market, is the government cleaning up big-time management theft with penalties that are so severe that managers (who have been crazed with greed) will be afraid to steal from their owners. Stockholders are not able to control CEOs (including their money-controlled directors) with billions of dollars at their disposal for legal defense.
I hate to see government in a position to suppress business further, but our capitalistic form of government depends on the trust and protection of the investor who finances the huge, successful corporations in American.
One other thing needed is tort reform. The billion dollar suits are making the lawyers rich, but taking away the earnings that should be going to the stockholders. After all, earnings or at least the hope for earnings is the only thing to make a stock worth owning.
I realize that Congress has some good statesmen, for the good of the whole, but is mostly made up of lawyers who are not likely to initiate laws against themselves. The president has the right to take a good cause directly to the people for a vote. And that is what we need to happen.