Talking back, part one

The following is from a reader who regularly gives me grief. I thought I’d share his thoughts and my responses. Because of space it will appear in two parts.

Hello, Mr. L.,

You, the conservatives are always espousing the virtues of personal responsibilities. What about corporate responsibility?

If I rack up thousands of dollars on my credit card and instead of paying it down to a manageable level I keep adding to the debt. Would it be proper for me to go to bankruptcy court and have the debt erased?

Yes. Bankruptcy is a perfectly acceptable and legal solution for individuals looking to get a fresh start from bad financial decisions or just plain bad luck. The same goes for corporations. Creditors who get hosed in the bankruptcy process should recognize it as a bad business decision on their part by extending credit to such individuals in the first place. But then that’s the nature of capitalism. The caveat, of course, is that if you’re a bad credit risk, you will pay more to a creditor for them to offset that risk.

Why does United Air get a pass? Instead of using profits to fund the pension fund, they used it pay the CEOs millions of dollars in pay and benefits to make poor decisions. When the bill comes due, the CEO gets a golden parachute of millions, and the staff who keeps the airline running has to take a pay cut and survive the firing process. The employees of any business with a pension plan have a contract with the employer. I work for you, and you put in money into a fund and manage it for me. United and others violated the contract, and they get a pass. Why?

At the end of the day, which would you prefer: a) kill off United Airlines completely or b) find a way to save it and as many of the employees as possible. Employees that can’t survive the firing process are those who probably spend more time watching Desperate Housewives than they do improving their job skills. I don’t begrudge a CEO making a gazillion dollars or his/her golden parachute. (OK, I do when they run a company into the ground, but that’s an issue between the stockholders and the Board of Directors—who hire such idiot CEO’s in the first place—and are ultimately responsible to the stockholders for such bad decisions.)

The reality is that pension plans and Social Security are nothing more than a Ponzi scheme designed to appeal to people with an entitlement mentality. “I work for you, and I’m entitled to a safe, secure retirement.” Never have I ever heard of a union or employee say, “Hey I know business is tough, I’ll take a pay cut until things get better.” If corporate greed is so bad, what about employee greed?

As to trusting someone else to be responsible for your money, do you call your broker every day and tell him to buy this stock and sell that? If the market takes a nose dive, is it your fault because you didn’t see it coming and tell the broker or it is the broker’s fault who also didn’t see it coming? Do you actually take the time to move your money around and call the bank to go from CD to money market accounts to stocks?

OK, first let’s get one thing straight. Stockbrokers and most—but not all financial advisors—are glorified sales people, no matter what title and designation they may use to the contrary. Anyone who has a vested interest in collecting a commission based on the transaction is a sales person—and so has a direct conflict of interest with the client.

Next week: Part 2