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MSN.com
How the stock
market destroyed the middle class
By Rex Nutting, MarketWatch
WASHINGTON (MarketWatch) — There’s something seriously wrong with an
economy that nurtures a few billionaires but can’t sustain the middle
class.
Many factors have been blamed for the plummeting fortunes of the
American middle class: globalization, technology, deregulation, easy
credit, the winner-take-all economy, and even the inevitable tide of
history.
But one under-appreciated factor is a pervasive business model that
encourages top managers of American corporations to loot their company
for short-term gains, depriving those companies of the funds they need
to build and enlarge, and invest in their workers for the long haul.
How do they loot their company? By using large stock buybacks to manage
the short-term objectives that trigger higher compensation for
themselves. By using those stock buybacks to manipulate the share
price, which allows them to use inside information to time their own
stock sales. By using buybacks to funnel most of the company’s profits
back to shareholders (including themselves).
They use the stock market to loot their companies...
Read the rest of the article at MSN.com
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