Every now and then we hear of corporate scandals and of questionable ethical practices. We curse the business men and move on. We say that all corporations want is to make big bucks at ANY cost, and we pretend that ofcourse, we have nothing to do with it. Well, surprise, surprise, we DO have something (a lot, actually) to do with it.
(Read here how the chief of enron was indicted)
Former Corporate Leaders Take a Fall .
(Here are more links if you want to do further research on enron)
http://power.about.com/library/weekly/aa071201a.htm
http://dir.yahoo.com/Business_and_Economy/Business_to_Business/Energy/Enron/History/
Not so long ago, people were largely involved in agriculture. Typically a person (or a family) owned the fields in which paid workers worked in. Whatever may be the problems with this society, it had one good thing. At the time, a worker knew exactly who he or she was working for. This made it easier for worker to approach the owners and the owners had a responsibility to treat people well, after all to quote from Spiderman, "With great power comes great responsibility".
Now consider the scene at a corporate office, an employee who's father is sick, and needs leave to look after him. Lets say John (the employee) goes to Smith (the manager)
"Hmmm Mr. Smith, I need some leave to look after my dad."
"Very sorry to hear he is unwell, but ofcourse you can take the leave that you have earned."
"Dad has been sick for a while, and I have already exhausted the leave that is due to me, and it seems like a long haul ahead for us."
"Well YOU are not sick so I can't give you sick leave. You see the company has to work, the show must go on. If I dont show results, I could lose my job!"
John is answerable to Smith and Smith is answerable to his boss, where does the chain end? How about the CEO? After all the Chief Executive Officer, is the Boss of all Bosses right? Well it appears not, the CEO is answerable to a board of directors who (
in theory) guide the company on all policy issues and let the CEO do the day to day running.
In reality, the board of directors are the representatives of the share holders. They represent the REAL OWNERS accurately by merely asking how much money the company has made. Most of a copany's shares are held by Financial Institutions (FIs), who have representatives on the boards of various companies. So who are these representatives accountable to? What interests do they represent? Most FIs get their money from small investors like you and me. Hence the final owners of these companies are those who have invested in mutual funds, individual investors like you and me.
What was the basis of your investments in Mutual Funds?