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September 20th, 2009
08:12 pm


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Inflation question

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Date:September 21st, 2009 11:30 am (UTC)
Easy credit was available to business as well. This contributed to so many companies being leveraged. Indeed, the other problem with the economy is the reward cycle for business was significantly warped. This is also a result of government policy (and common law) curtailing the mechanisms by which business owners (stockholders) could hold those actually managing the business accountable. In particular, the effective elimination by the SEC and the courts of Delaware of the shareholder derivative suit -- by which shareholders could hold officers accountable for wasting corporate assets -- and the rise of common stock with effectively no voting rights, allowed those who controlled the corporation, but did not own it (the officers) to establish lavish salaries and engage in risky behavior.

Tax incentives for corporations likewise have had significant warping effect on corporate spending, often encouraging behavior that had nothing to do with increasing value.
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