Capitalism in America

The Capitalist, Free Enterprise economic system, as established in the United States today, has proven to be the most efficient and successful economic system in the history of the world. More people have a higher standard of living than at any other time or place in history.

The tacit implication is that most Americans understand how a business enterprise is started and is operated. It is my guess that most people know very little about it, and understand less. I am one of the majority.

Information has always been available from the media, but most people have had little reason to care about learning. I think there has been a dramatic change in attitude since November 2001. Then like a lightning bolt, we learned that Enron owed about $3.2 billion and was about to go bankrupt.

Wait a cotton pickin' minute. My pension fund has shares of stock in Enron. Some of my friends have Enron shares in their 401(k). How can a company get that deep in debt with little or no notice. I cannot conceive of anything like that, but I am sure it wasn't easy.

After the Enron problems were exposed, the media in their articles, began to talk in a new language replete with acronyms. CEO, COO, CFO, Accountant, Auditor were used to describe people, and most of us had no idea what their job description was. Does the CEO tell the COO what to do? Does the CFO provide the money for the COO to spend? Is an accountant just a bookkeeper who is paid ten times as much? Who is the Auditor responsible to, and work for? Is he smarter than an Accountant? There were many questions in my mind but few answers.

It wasn't long until we started to hear about compensation. These executives seemed to be making salaries beyond my comprehension. I had never met a man that I thought earned and was worth $100,000 a month. Now we were hearing about men being paid $1,000,000 a month - and more. To further complicate understanding, it seems as if the greater the compensation the more likely a corporate bankruptcy.

This is reminiscent of an old story titled Brewster's Millions, where a person inherits a huge fortune - if he can spend a million dollars in a month. What the story then illustrates is that it is very hard to spend a lot of money. Nevertheless, it appears than some known, unknown, or yet undiscovered executives have managed to do that, and more.

There are other people apparently paid by the corporations called Directors. It isn't clear to me if there is a set number of Directors a corporation must have, or can they hire an unlimited number of their friends?

There has been limited news coverage of this aspect except for Enron. From what I have read in the newspapers, there seemed to be about 10 Directors who were paid a reported $350,000 annually. What or whom do Directors direct? Never explained. Do they punch a time clock? Never mentioned. What are their duties? Apparently flexible.

When one or more of the Enron Directors were asked whether they didn't see a bankruptcy imminent, the answer was - no. There was nothing seen, heard, nor read that suggested that the company was in any financial trouble. Ah, yes. I have seen the three monkeys, See no evil, Hear no evil, and Speak no evil.

I have a few shares of a Mutual Fund. For several weeks I have been getting form letters with a Proxy vote form. I throw them in the trash, but they keep coming. I see no evidence that the NAV of my fund would be any less if the three monkeys had been the sole members of the Board of Directors. Should I participate and aid and abet a fraud?

Is it possible that some men with deceptive titles actually broke some laws - like fraud, or theft, or gross deception? Based on historical precedent it appears quite likely that they did, and at a level never previously seen.

The final unknown is whether any of these men who committed criminal acts will go to jail? We naturally don't know, but the probabilities are becoming clearer. One of the popular television shows today is COPS. The show involves video camera film taken by police during their normal tour of duty. On this show we see a young man who steals a Twinkie in a convenience store being taken to jail; a driver who is driving without a license will go to jail; a person caught with a piece of drug paraphernalia will also go to jail.

As far as I know, eight months after Enron collapsed, and serious criminal acts involving billions of dollars are discovered, no one has been arrested, indicted, or tried in a court for any of their actions.

The author of this article is a perfect example of an incompetent stockholder. He wasn't ripped off by some people at Enron who reached outside the company and stole his money -- he was ripped off by the very people who worked for him. As an owner of Enron, he is perfectly capable of filing criminal charges and bringing civil suits against the people who ripped him off, the people on the board of directors who were either complicit or incompetent, and anyone else at Enron or even his mutual fund company who might have been involved.

He won't do any of these things, and for the same reason that he didn't even know he owned part of Enron until after the sh!t had hit the fan -- he was simply too lazy or disinterested to do any research or even read those proxy statements that were mailed to him.

In other words, he treated his stock mutual fund as if it were a bond fund of U.S. Treasury bills paying an interest rate of 20% to 30% every year.

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