I want to dedicate my first post on this blog to the Occupy Protesters.  These guys and gals have been hanging out on the corner of the building where i work for a few weeks now.  They are nice, and polite to passers by, even though in the evening on the way home, they make it hard to pass.

I don’t know what they are upset about, but they seem to be holding firm in numbers.  Today they got a better drummer.  Sometimes the drumming and chanting is loud enough that I can hear it in my cube on the 19th floor.

I have joined in making sport of them, and have been reading about their issues and methods with interest.  Some of us in the office even made fake protest signs with slogans like “Soylent Green is People”…  Not that funny.

Early this week, though, I read a post on Mark Cuban’s blog that resonated with me.  I reposted on twitter, but today I wanted to blog about it in a

little more detail.  Mark had 4 points and then went on a huge long rant about CEO compensation and the abomination it has become.  I found his point on college loans interesting.  Because we can and are willing to borrow to pay for college for our kids (mine starts in fall 2012, so I am very interested) the cost of college education has gone up for everyone.  Why has the cost of college education (even state schools) gone up at twice the CPI over the last 40 years?  Still the generation that this limit is imposed on will suffer, somewhat.

The rest of his points, I agree with.  He is a pretty smart guy.  And the arena of corporate CEO’s is pretty much his playground.  I also agree with his points on wall street.  Wall Street (i.e. the financial industry) exists to make money, traders talk about “pulling money out of the market”.  That market is where I invest – they pull money out of my dang 401k.  Ouch.  We glorify what they do, because they take huge risks, but at the end of the day, they are taking risks that impact my bottom line.  Tax the hell out of it. 

But how did it get this way?  Well back in 1973 we passed this ERISA law, which required pensions and such to be accountable for their funding level, and most companies a) started moving away from defined benefit pensions to 401k type programs, and moving their pension funds out of their corporate mattress to independent investment management firms, and this pushed huge amounts of capital into the market, as investors clamored for more performance on their retirement funds (so they could retire early?).  So we all have a stake in corporate performance through the stocks and funds we hold in our retirement plans.  But we don’t get a vote most of the time on how those corporations that we own tiny pieces of act, or what they do with our money.  Most likely if we hold mutual funds, we don’t even know which stocks they hold, nor do we care when they are performing.  At the end of the day, we are just as greedy as those damned CEO’s we are lambasting, but we simply don’t have the opportunities that they have. 

Because of this “institutional investment:” in corporations, CEO’s are graded quarter by quarter, instead of based on the long term value they add to the company.  The fund managers are graded by their ability to out perform the market by picking stocks, and they are incented based on the assets in the fund that they manage – the more assets they manage, the bigger the bonus.  How do I get more assets, follow the short term gains.  Yes Mark, tax the hell out of wall street.  Why do they get bigger bonuses based on assets under management, because the more money, the more fees they charge.  In the institutional world fees are bps (bips) or basis points, tenths of a percent.  if your fund has 400 million dollars, and you charge clients 80 bps, you get 3.2 million dollars in fees – some percent of that is a bonus or incentive to the manager. 

This afternoon, I read this post from Harvard Business Review blog, that seemed to get at the same thing, from a different angle.  This was talking about how to incent CEO’s to focus on the long term, not on the stock price, or market cycles, or quick bux.  So why don’t most corporate boards of directors insist on this type of structure and incentive?  Because they are comprised of CEO’s of other companies.  Its a freakin’ club.  OK. 

So what to do.  How can this be fixed.

I have been having a conversation with myself and friends who will listen to me blather on about the complexity of interactions between government, business, and the economy and how hard it is to fix things once they get complicated.

We all feel that government has been coopted by big business as special interest.  In many ways, we see evidence of this, in terms of subsidies, grants and bail-outs and of course we react to the sensational ways these things are covered in the media.  And the media is what?  a big business.  Hmmm..  I thought the media was supposed keep government officials honest but when the political campaigns spend so much on media, It is hard to know who is keeping who how.  People hold the government responsible for our economic competetiveness in the global economy, and rightly so, because governmental trade policies are for that very purpose.  However, without the creation of wealth (GDP) what are we really worth?  If self-interest is really the motivation of Corporate CEO’s why not the same motivation for government officials.  Because of the need for media spend to win a campaign, few men have the personal wealth necessary to fund a campaign on their own, and so they use the Party as a means, and the raise funds.  That is they ask people to donate money to their campaign.  And for this money, those donors have some expectation that their interests will be served.  So people who are elected to represent our interests, are beholden to “special interests” who help fund their campaign.

How can a government whose election process is so media laden and costly, not end up filled with officials who are beholden to those who helped them fund.  I have no answer for this.

How can we expect government populated by officials who are relying on donations to fund their campaign to represent our interests without external bias. 

These corporations who donate to fund campaigns, aslo create jobs and employ millions of us.  These companies are the engine of our economy.  How can government not ensure the health of these companies, without putting millions of jobs in this country at risk.

OK Occupy Protesters – I am with you.  I want things to be different, but I don’t have answers or even suggestions.  When I do, I’ll let you know here on this blog.