It was a common trope in accounts of the housing bubble that greedy or shortsighted homeowners were extracting equity from their houses with second mortgages or cash-out refinancings to pay for extra consumption. What nobody mentioned was that the rentier class had been doing this longer, and on a much larger scale, to the country’s productive enterprises. At the top of every boom in the neoliberal era, there’s been a massive round of stock buybacks, which you could think of as shareholders cashing out their bubble wealth. It’s a bit like the homeowners “using their houses as ATMs” during the 2000s. The difference, of course, is that if you took too much equity out of your house in the bubble, you’re the one stuck with the mortgage payments today. Whereas when shareholders use businesses as ATMs, those businesses’ workers and customers get to share the pain.
There is a real problem with this kind of uninformed journalism: it assumes that the rhetoric of the Business Roundtable reflects the reality of corporate decision-making. The relationship between management and the stockholders (most of whom are institutions entrusted with the public's retirement savings) is a frequently contentious one, and one where management has the upper hand. The result is decision-making that consistently favors executive compensation over shareholder value. This conflict underlies the battle over the Proxy Access rule in Dodd-Frank. The Business Roundtable made it clear, as Dodd-Frank made its way through Congress, that defeating the Proxy Access rule was their number one priority. Moreover, Proxy Access was the subject of the first court challenge to Dodd-Frank after its passage. (The Business Roundtable won round one.) In spite of this, Proxy Access received negligible news coverage outside of the trade press.
#1 Posted by S Bayer, CJR on Thu 5 Apr 2012 at 02:26 PM