Second-Best Camp

Gretchen Morgenson attempts to explain the S.E.C. rule changes to limit the power granted to Investors from the 2006 Court of Appeals decision against American International Group. The essence of the S.E.C. rules is again to make it functionally impossible for Investor groups to challenge current Management Boards, and even worse, their ongoing policy for the Corporations. Lack of proxy access prevents effective nomination of a competitive Board alignment, and stops Investor-sponsored policy changes from being voted upon under the proxy system. Injured Investors should appeal for another Court decision which would insist all policy initiatives and Board Electees must be on the proxy without Management supporting or disparaging any policy or Electee, if Investor signatures of 1000 can be accumulated prior to the proxy printing process.

The previous argument ties in well with this article by Joe Nocera. The Question revolves around exactly when is a market created in the realm of C.E.O. Pay Packages. A unitary slate of Candidates on a proxy cannot possibly lead to the development of a market for Pay Packages, where Management sets the Candidates, who approve all the Pay Packages–including Those for themselves; it is a real retention here to remember that Management has current total control of the issuances of the proxy system. Still, there is a market for Pay Packages, if one checks the extortion practices exercised by fellow Corporate Managements. It reminds of a set of Bank thieves in a Bank Vault, trying to estimate how much they should steal by the weight they must carry.

I was meandering through the Internet landscape, and came across this Post by Dani Rodrik. He talks about the market imperfections which cause him, and others of the Second-Best camp, to doubt the efficacy of economic models to perfectly predict economic results. I belong to the Second-Best camp myself, though unlike the others, I find the real imperfection derives from moral corruption of Managers, rather than from hidden Market deterrents to classic performance. It is the pursuit of cheap, illicit Profits which brings on almost every imperfection in the Market system when examined. I also, though, belong to the Third Camp, which finds Government probably the worst vehicle for economic success ever devised. lgl