Rebecca Burgess, at AEIdeas, has some. The graph below summarizes the situation; RTWT, though.
Some Thoughts on Military Veteran-ness and Civil Society
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Tag Archives: political economy
The SEC’s Abuse of Authority
Actually, it’s Dodd-Frank’s abuse, and the SEC is only implementing the abuser’s requirement, but still….
At issue here is an SEC proposed rule that purports
to give investors greater clarity about the link between what corporate executives are paid each year compared to total shareholder return—the annual change in stock price plus reinvested dividends, according to people familiar with the measure.
There are a couple of things wrong with this. One, minor on the scale of this…rule’s…transgression is the idea that stock price and dividend handling are the measure of a business’ management. No, these are the outcomes; the actual measures are on the business’ financial sheets. Those P&L, Cash Flow, and Balance Sheets, among a host of other performance reporting documents, are freely available to shareholders—and to prospective shareholders: they’re public documents.
The larger problem, though, is this: the executives’ performance is the business of the shareholders, not the government. This is just a backdoor effort to insinuate government deeper into the management of private businesses.
Dodd-Frank needs to be repealed, and D-F-related SEC (and others’) rules rescinded as soon as this administration can be replaced.
Choices
The Air Force says that if an amendment to the defense funding bill that extends the operational life of the A-10 makes it into the final budget, it’ll have to mothball a bunch of F-16s or maybe delay deployment of the F-35.
The F-35 is overpriced and undercapabled. I vote for delaying that—or cancelling it altogether.
Or a choice not currently on the table: the F-22 is even more overpriced than the F-35, and it’s even less capable; albeit it’s less capable in an air-to-air environment rather than the A-10’s or F-35’s air-to-mud milieu. Cancel that albatross, too.
Venture Capital
The Department of Energy’s Loan Guarantee Program—its green energy loan program—is a money loser, according to the GAO.
The Government Accountability Office says the DOE’s oft-touted $28 billion loan program will cost taxpayers $2.21 billion over the lifetime of the loans. Not only that, the costs to taxpayers for green loans has risen about $500 million as “the result of loan guarantee defaults” from companies like Solyndra and Abound Solar.
That’s not bad by itself; the sorts of projects and companies being loaned to via this, essentially, venture funding program are high risk, losses are normal, and for a venture capital effort to lose money overall isn’t at all unusual.
What makes this particular program and its losses bad, however, is that it’s a government program. True venture capital entities, whether they fund through lending or any other method, are private companies. The participants in a private venture capital enterprise are voluntary participants who know, or have the opportunity to learn, beforehand the risks entailed in such a thing and who commit their own money to the effort.
When government gets involved in venture capitalism, the participants—the taxpayers—are not voluntary, they’re dragooned into the effort by the government’s commitment of those taxpayers’ money; the taxpayers have no opportunity to evaluate, before their money is irrevocably committed, the risks being run; and government is committing OPM to the enterprise, not its own money (indeed, the government has no money of its own to commit; it has only those taxpayers’ money).
Government has no legitimate role in the venture capital market.
Regulation and Inflation
Here’s one example of how regulation drives inflation, in the milieu of corporate CEO compensation. Charles Murray, at AEIdeas, provides it.
On multiple occasions the SEC [Securities and Exchange Commission] amended its rules to increase the disclosure of compensation data and to force boards to explain their rationale for the amounts. That, combined with the influence of the arbiters of corporate governance, created an inviolable requirement for compensation committees to be advised by consultants. A perfect recipe for increasing compensation.
Thusly:
In 70’s and even the 80’s the compensation of the CEO seemed to be mostly a matter arrived at between the board and the CEO that resulted from discussions and negotiations and the public disclosure was a matter of a few pages. But there was then nothing like the pressure to conform to best practices backed up by the reliance upon the advice of consultants and the concomitant availability of market data that there is today.
…
You can guess how it works. No board that isn’t about to fire its CEO really wants to admit that their CEO is a less-than-average performer by paying him or her less than average. But if the lowest-paid CEO’s are always being brought up to the average, then the average increases every year. Then for the high performers to be paid well, their compensation needs to be increased, but that raises the average…and so on every year. And the compensation committee and the board always have this market data before them, the recommendations of their consultants and “best practices” to adhere to. These influences are not easily resisted. You see the result.
It’s hard to believe the enormously intelligent regulators didn’t see this coming from the jump. The apparent abuse—that obscene CEO compensation—seems just another excuse to justify their jobs.