by Deb Cupples | Deathly afraid to break a habit, today's Wall Street Journal ran one in a lonnnng line of pieces that rises to the defense of poor rich-folks. It's called "Soak the Rich, Lose the Rich."
It's about budget-challenged state governments that are considering raising taxes for citizens who can actually afford to pay higher taxes -- and still live fabulously luxurious lifestyles.
Similar to Rush Limbaugh, who is plagued by a do-or-die desire to defend "the rich" (i.e., some of the same folks tied to corporations that send his company millions in ad revenues), the Wall Street Journal never quite gets to the root issue of how some of the rich "victims" actually made their money.
Most of them claim that they "earned" their money through hard work, etc. It's very Horatio Alger.
And some fabulously rich folks may have truly earned their money.
But all you have to do is look around present day (without turning to the WorldCom or Enron examples) to realize that many fabulously rich folks amassed personal wealth essentially by looting big companies (i.e., robbing ordinary shareholders like moi).
Consider, for example, the folks who were running Merrill Lynch a few years ago. A manager by the name of Dow Kim had a salary of $350,000 in 2006 -- not particularly outrageous. Including bonuses, Mr. Kim's total compensation that year was $35 million. (NY Times)
He wasn't alone. That year, Merrill's board of directors approved $5 to $6 billion in bonuses for some 2,000 employees -- despite the fact that Merrill reported pre-tax earnings of only $7.5 billion that year.
It gets worse: Merrill's 2006 "earnings" were inflated (just long enough to justify passing out $5 to $6 billion in bonuses, I suspect).
The very next year (2007), Merrill reported losses of about $8.6 billion. Merrill's Board did cut bonuses roughly 40% in 2007 -- meaning that the company still gave out $2 to $4 billion in bonuses that year, despite heavy losses.
If the folks in charge at Merrill had simply refrained from giving bonuses in 2006-07, the company (and its shareholders) would have had an extra $7 to $10 billion with which to pay off debts, grow the company, or offset future losses.
Instead, that $7 to $10 billion ended up in a few-thousand individuals' pockets. That's what I mean by "looting" companies and "robbing" shareholders. It's a blatant redistribution of wealth.
Unfortunately, it's legal -- due to lax regulation of public companies.
Merrill Lynch is not the only company whose upper employees seemed to build personal wealth by looting a company (or robbing shareholders) -- and this post doesn't even address those fabulously rich folks who increased personal wealth by taking tax dollars.
For more examples, check out the posts linked below. Memeorandum has commentary.
Related Buck Naked Politics Posts:
* Execs Made Millions While Driving Companies into Ditch
* Rich Got Richer and Faced Lower Tax Rates
* GAO: Bailed-out Companies have Offshore Tax Havens
* Are Bailout Funds Being Misused?
* Bank Execs May Return TARP Money if They Can't Keep Bonuses
* Lehman Execs Redistributed Shareholder Wealth (to Themselves)
* AIG Execs Redistributed Shareholder Wealth (to Themselves)
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