Dear Friends,
It seems to me, a painter who charged for paint but used white wash, a drywaller who put up cardboard instead of sheetrock and a paver who used clay slurry instead of asphalt, would not deserve a huge bonus, but that is exactly what our CEOs do… and get. The difference in treatment for the new class and the rest of us is as stark as it is baffling. You would think people would start a rumpus over it. Instead, we take it, doing our best at our job and settle for shoddy workmanship from the new class. Meanwhile they demand us to deliver excellent quality at high rates of productivity for ever lower wages. Our economy, wages and standard of living corrodes every day for it. Today the new class is fighting an undeclared war against the hoi polloi. So much so that now we live in the age of the principle agent dilemma.
Our businesses have become so politicized they no longer function as profit making enterprises but lackeys of the progressives. Examples like Target are glaring. Target has decided to poke it’s customers in the eye with such absurdities as allowing men into the woman’s bathroom. On the face of it that decision alienates customers, corrodes the value of the shareholders and puts employees jobs at risk. The decision to follow a political regime changes Target from a retailer that provides value to customers, jobs for employees and returns on investment for shareholders, is a form of corporate suicide. The CEO however will not suffer for his decision, there will be no negative consequences for him, but the fallout for everyone else will be disastrous. From children being abused in the bathroom to shareholders loosing their hard earned money, the rest of us will be on the loosing side of that gambit. If Target goes belly up from that policy, the CEO will still get his bonus, and another cushy job, where he can impose his absurd political beliefs on the rest of us, even as he has used cardboard in place of drywall.
Stock buybacks is another example of how the new class embezzles money from shareholders. Stock buybacks, the main reason the stock market has risen to record highs, provide no real return to shareholders but instead corrodes the actual value of their stock. The new class borrow money against the real value of the company, diminishing that value, then buy it’s own stock artificially increasing the stock price while eroding it’s actual value, because that money is not used to buy the means of production so the company can be more profitable in the future, nor is it used to expand territory, or integrate with it’s suppliers or retailers to provide a basis for future profit growth. All a stock buyback does is make a short term stock price rise, in the absence of future profit potential, so the upper management, the new class, can get huge bonuses for that price increase. In other words, they use clay slurry instead of asphalt, the moment it rains the reality of what they have done will become apparent.
The new class is in favor of any and every regulation that comes down the pike. Regulations make the job of a CEO much easier. While that statement may seem counter intuitive it is truth incarnate. Regulations are easy for a large firm to follow, with their armies of new class lawyers and deep pockets to meet them, regulations are death for small businesses that compete with large corporations. To paraphrase Milton Friedman… If a CEO faces competition from a small business that makes a better product at a lower price point, that CEO can lower prices and increase quality, which both lowers his bonuses and makes her work harder, or they can go to their trapped regulators and get the small business shut down. Obviously, as history shows, they will go to government to stifle competition. In doing so they crush innovation, the lifeblood of a market economy and drive down wages by lowering demand for labor. It is almost like they are using white wash instead of paint.
We pay top dollar to our principles for inferior work. Every day the new class is living the principle agent dilemma everywhere we look. They politicize their firms, they destroy value and stifle innovation, all to the very real detriment of everyone else. The new class is the agent and the rest of us are the principles. We own companies when we have IRAs and we are the citizens of government, we are the principles, the new class, CEOs, lawyers, journalists, bureaucrats, teachers, politicians, professors, etc… are our agents. They are supposed to work for us. The trouble is, the agent will abuse his position for personal gain all day long, if they can get away with it. Many people do raise a commotion, but in the end only empower the new class to further abuse their positions, because the new class channels that anger to increasing their power as our agents. Regulation is increased, journalism veers decidedly leftist, political correctness becomes ever more ingrained and our liberty is washed away by it. The problem starts and ends in our colleges and universities where our children are indoctrinated into the new class mindset. It is past time to wrest our education system from Marxists and progressives and instead teach common sense, work ethic and basic logic.
Sincerely,
John Pepin
