The American Spectator

p> Regarding your article on dividends, a couple of thoughts. First, a Board’s primary objective should be to maximize shareholder value, which can be effected through capital gains (i.e., reinvesting for future growth) or through dividends (i.e., return of capital). As I see it, reducing or eliminating the tax bias against dividends is beneficial precisely because it will promote the free flow of capital toward its most productive use. If a company determines that the next growth project would deliver subpar returns on capital, then the Board should return the capital to the business owners and allow the individual shareholders to redeploy the capital as they see fit. Perhaps some other management team in some other business has a use for the capital that is superior. Better that capital be returned and redeployed than be bottled up in a company with suboptimal return potential or that has to swing for the fences to diversify — that’s just bad corporate finance. Finally, I agree completely that any attempt to fix the inefficiency should focus on corporate deductibility rather than tax breaks to individuals. br> — Paul Berman /p> p> Certain industries are very mature and new investment is not warranted for all of the profits generated. Should they start to dabble in some new sidelines? No! What do they know about other businesses than their own? Better they return the money to the shareholders who can buy shares of the same company or another company. This is more efficient use of capital, despite your false thesis. br> — Basil Weir /p>

Michael Craig replies: I agree with my critics that paying a dividend is better than making bad acquisitions or letting the CEO steal the money. But neither is as good — for investors or the economy as a whole — as investing the money to improve the company. If a company’s only choice is to pay dividends or do something stupid, you should take your money elsewhere. That’s how capital moves efficiently. Corrupt, inept companies won’t be any more responsible by paying dividends. But they will deprive better companies of capital, by competing for it with good companies who will be judged by their ability to pay dividends, or by forcing those good companies to divert money from worthy projects to maintain the dividend. As Groucho Marx said, “Those are my principles. And if you don’t like ‘em, I’ve got others.”

p> COUNTERREVOLUTION br> Re: Francis X. Rocca’s Forty Years of Sexual Intercourse : /p>