Shareholders Can Fix American BusinessesCommentary by Pete du Pont
September 09, 2002
President Calvin Coolidge said that the business of America is business. If that's true, America is in bad shape. American business values have dropped considerably in the past year. Industries with fertile balance sheets and flush income statements today clamber for market share, while residual industries, suppliers and vendors simply try to survive.
The reasons for America's current economic woes are varied, but two things have combined to sustain them. First, the destruction of World Trade Centers I and II shocked an already weakening U.S. economy deeply, far outstripping even the OPEC-inspired supply shocks of the 1970s. And the recent spate of corporate accounting scandals has served to broaden the economic crisis by further undermining what little confidence was left in U.S. enterprise.
However, beyond 9/11 and the collapse of Enron, WorldCom and associates, elected government officials insist on blaming our current financial malaise on the Bush tax cuts. Rather than focus on helping the economy to recover, politicians seem more concerned with rescinding tax cuts mandated for the future, which will only increase spending and further erode economic recovery. If most of the talk in D.C. has been bipartisan, the walk has carried decidedly more self-interest.
That's why the most frightening prospect arising from the financial anemia afflicting the U.S. economy is that too many voices are beginning to propose that those same politicians might be the agents required to solve U.S. economic woes. Let's think about that.
The history of U.S. government involvement in business is littered with failure, to say the least. From dismal, misguided 19th century efforts to create a federal bank to Fed tight money policies that deepened, broadened and prolonged human suffering during the Great Depression, government involvement in business has been disastrous, from protectionist tariffs to high taxes and heavy regulation of various industries.
There can be no question that conflicts of interest, squandering corporate assets and the absence of accountability destroy the value of U.S. businesses. Fixing problems wrought by greedy corporate managers is easy enough. Boards of directors can be held to established standards, as can managers. The shame of a few serious jail sentences will be exponentially effective in producing proper conduct in the rest of corporate America. But, in the end, it always falls to individual shareholders to save American commerce.
Individual investors must put fears wrought by 9/11 behind them, and rigorously root out "Alice in Wonderland" accounting by reclaiming their rights. If government wants to get involved in economic recovery, then lawmakers should rigorously enforce existing securities and corporation laws, create more incentives for investment, take the handcuffs off small business owners, and then let the market work.