Doing something about psychopathic corporations

This week’s Keep the Joint Running – about psychopathic CEOs and corporations – drew a huge response. The subject matter of many of the letters, such as the one that follows, has caused me to make an exception to my policy of not commenting on public policy. I promise – it won’t happen often.

– Bob

Dear Bob …

I do have to wonder about the comment about running publicly traded companies. Certainly, amoral behavior is, in the short run, sometimes advantagous to the value of a company. In our modern world this seems to be all that matters. It is not just that we focus only on success and not how it was gained, but we only focus on short term success.

If we were to find a way to have the value of a stock based not on its short term performance, but on its long term performance, I think that you would find this amoral character traits to become less of an asset and more of a liability. We are finding more and more that bad behavior gets caught and the end line value of the company whose management uses it turns out to be zero (or less).

– Long-term thinker

Dear Thinker …

I’ve thought about this subject quite a bit. Much to my chagrin, I find myself favoring a tax break on dividends – not because of the “don’t tax the money twice” nonsense but because investors who buy a company’s stock in order to earn dividends are looking for reliable profitability more than growth of the stock price. While I’m not an accountant, and even less a financial gamer, I suspect it’s much more difficult to continue awarding quarterly dividends when financial performance is fictitious than growing the stock price.

So an increase in the capital gains tax coupled with a reduction in the tax on dividends ought to start shifting things in the right direction.

– Bob