The American Spectator

Print Email

Text Size

The Investor

(Page 2 of 2)

It wasn't enough for the company to grow. It had to keep growing, and keep growing a lot. This isn't even possible once a company reaches a certain size, but these CEOs and their managers -- for the money, for the acclaim, for the success -- had to make it happen -- for the shareholders, for Wall Street. The game became so sophisticated that CEOs learned to create lesser expectations, only to have analysts develop a "consensus estimate" and a "whisper number," reflecting the predicted margin of exceeding expectations.

Even the worst of these excesses were accomplished with a certain amount of idealism. Ken Lay, I guarantee you, did not think, when he walked past his receptionist, "I hope I can make her retirement money disappear." In just about every one of these stories, you start with very smart people becoming very successful. To perpetuate the success that our culture has turned into a drug, they lose sight of the rules, as the results --immediate results -- become the focus. Sometimes, this means empowering liars or becoming a liar. Other times, it involves creating an environment conducive to corner-cutting or deceit. But it all came from the same place: free markets, rewarding whatever makes money for investors.

So what should we do about this? A lot less than Congress thinks. It is unfortunate that a bad market reveals the excesses of the good times and creates dislocations. But our system is the best way imaginable to get good corporate leaders and encourage people to provide the capital to keep growing American business. Maybe we despise Ken Lay and Jeff Skilling, and aren't thrilled that Lee Iacocca and Michael Eisner continued to pull down nine-figure stock option gains after they ceased providing shareholder value. But where would Chrysler and its investors be -- not to mention hundreds of thousands of workers -- without the 1979 model of Iacocca? And where would Disney be without the first release of Michael Eisner?

Sure, we have to punish the wrongdoers, get investors some of their money back, and make big-company operations a little easier to understand (something which, by the way, will not occur as a result of all this attention). The best solution is for us to regulate ourselves a little better, staying away from companies with operations and stocks that seem to defy gravity, or which claim to make money without exactly explaining how. More important, we have to resist the urge to jump on the populist bandwagon whenever Congress announces its scoundrel of the week. This is a bad way to make laws, especially with a system that has many more merits than excesses.

topics:
Business, Environment, Law