THE MT VOID
Mt. Holz Science Fiction Society
07/12/02 -- Vol. 21, No. 2
El Presidente: Mark Leeper, mleeper@optonline.net
The Power Behind El Pres: Evelyn Leeper, eleeper@optonline.net
Back issues at http://www.geocities.com/evelynleeper
All material copyright by author unless otherwise noted.
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Topics:
Honors and Statues (comments by Evelyn C. Leeper)
Digitized Books and Print-on-Demand (comments by Evelyn
C. Leeper)
Stealing the Company (comments by Mark R. Leeper)
THE CHRONOLITHS (book review by Joe Karpierz)
===================================================================
TOPIC: Honors and Statues (comments by Evelyn C. Leeper)
People have commented on the fact that I was not a Hugo nominee
this year and asked about it. I found a quote from Cato that
pretty well sums it up: "I had rather men should ask why Cato had
no statue, than why he had one." [-ecl]
===================================================================
TOPIC: Digitized Books and Print-on-Demand (comments by Evelyn
C. Leeper)
The National Yiddish Book Center is announcing the official launch
of the Steven Spielberg Digital Yiddish Library, believed to be the
only project ever to digitize an entire modern literature. There
are over 10,000 books available on acid-free paper for $29 each.
See http://www.yiddishbooks.org/ for more details.
Sounds kind of science fictional to me. :-) [-ecl]
===================================================================
TOPIC: Stealing the Company (comments by Mark R. Leeper)
There seems to be a new and an unpleasant trend in American
business. I call it "stealing the company," and it is happening
in more businesses than we would like to admit.
There are really three groups of people involved in questions of
power in a corporation, each with a different set of interests.
There are the employees, the stockholders, and the directors. By
directors here I mean the decision-makers including the Board of
Directors and the highest levels of management. These three
groups have interests in common, the financial health of the
company. Also, they are not very distinct at all. They overlap.
Upper management frequently may include people who have worked
their way up from being employees, or it did at one time. And
everybody holds stock. And presumably stock is the main incentive
for the three to work together. Everybody benefits if the stock
is high, at least in theory. To some extent the employees and the
stockholders also have conflicting interests. Companies that give
too many benefits to the employees make smaller profits, again at
least in theory, and that hurts the stock price. Particularly
with the cost of medical care skyrocketing, there is a smaller pie
for the employees and the stockholders to split.
Mediating between the stockholders and the employees are the
decision-makers of the company. They are charged with maintaining
a happy balance between decisions made for the employees and those
made for the stockholders. If you go too far in one direction,
you have sweatshops and nobody of value wants to work for the
company. If the decision makers go too far in the other
direction, the company profits are eaten up and the company fails.
Profits are the reward for all three parties.
Among the incentives of the decision-makers is the fact that they
are usually large stockholders. If they make bad decisions the
value of the stock declines and it is of less value to them. At
least that is the theory. But a large part of their power derives
from the fact that they are also usually the big stockholders.
The problem, as I see it, is that incentives for corporate
decision makers have increased tremendously in the last few years.
The decision makers whose only check on power is the value of the
stock they own have made the decision that the company has to
protect them from the negative effects of the price of the stock
falling. In spite of the fact that they own large tracts of stock
these days they benefit no matter what the stock does. In a
situation that parallels that of Mel Brooks's THE PRODUCERS,
frequently they can make more money managing a company that is a
flop than one that is a success.
How do they do this? Essentially, as decision makers they can
over-rate the value and importance to the company of their
particular brand of decision making. This is not to demean the
importance of good decision making to a company. It is a very
important asset. But any asset can be over-valued, particularly
when those who decide the value have a conflict of interest. Many
corporations are being managed into heavy losses while the people
at the top are being rewarded as if the company was a huge
success. In fact, their rewards have been effectively de-coupled
from their performance.
As an example reported in US News and World Report, this year
Christos Cotsakos, the chairman and CEO of E*Trade, decided that
his decision-making abilities were worth $80,000,000 of salary and
benefits per year. Is that an exaggeration? Is he really giving
the company that much value? How much of the company profit is
attributable to this man's abilities? Well, it is really none.
Since there was no profit. The company lost $276,000,000. The
stockholders paid Cotsakos $80,000,000 for him take that money and
to lose another $196,000,000 in addition to what they were paying
him. But the stockholders probably thought that salary is okay
based on the fact Cotsakos is probably the biggest stockholder.
That is what I call stealing the company... legally. The chief
decision-makers pay themselves a sizable proportion of the assets
of the company at the expense of both the employees and the
stockholders.
There was a time when the ratio of the highest salary to the
average salary in most companies was something like 20-to-1.
Today it is frequently 500-to-1. For many corporations it is in
the thousands. And fringe benefits of the job and stock options
inflate it far more than the salary, often in ratios in the
hundreds. And among the rewards they can decide to give
themselves is more stock. If the stock goes down it loses its
financial value, but not its voting power. That voting power is
really the engine behind the decision makers in the company. When
executives get more stock, even stock of low value, the company is
taking corporate power from other shareholder and giving it to
themselves. This accumulation of corporate assets and power is
the essence of this "stealing the company" from the other
stockholders.
A powerful tool for stealing the company has proven to be stock
options. The people with the power can issue themselves large
numbers of stock options almost invisibly to the stockholders. If
the company does well suddenly a substantial piece of the improved
company value and voting power goes not to the pre-existing stock
holders but to the people exercising those options. If the
company does poorly the options need not be exercised. The
stockholders have been made to take the risk of the company doing
poorly, but they have had taken from them much of the potential
benefit if the company does well.
One new strategy of the few and powerful is to buy off the
auditors. Many auditors have opened up a side business of
consulting for the companies they audit. For some this has become
their biggest source of income. However doing separate business
with a company they audit represents a substantial conflict of
interests. It is a small matter for them to over-value the
company by, among other approaches, turning a blind eye to
questionable company investments. This has the effect of
increasing stock price. The heavy hitters at the top can unload
tracts of stock at a very large profit. The small stockholders
feel good temporarily because the stock is high. But that feeling
does not last. The true value of the company becomes obvious with
time and the stock loses the greatest part of its value. The
stock drops and the top managers again issue themselves options.
If the value ever comes back they can they can pick up the stock
at those same low prices.
The extreme case of stealing the company would be for the higher
echelons to decide that the only thing of value is their service.
The corporate decision makers could then just divide up the assets
of the company among themselves and let the stock go to zero. The
Securities and Exchange Commission would probably have something
to say about that. But they have been edging up on doing just
that little by little by issuing themselves bigger and bigger
rewards and by manipulating the auditors. They steal the
financial futures of the stockholders and the employees and until
now the law has little it can say. And in many companies have
management that is following just that sort of strategy.
So what can you do? I would like to say just choose stock
carefully and know the management of the companies you buy stock
in. That is excellent advice except for the fact it is totally
impossible. How do you do it? Maybe eventually the FTC will move
in and limit the powers of these people. Until then the abuses
will probably have a chilling effect on the stock market. Whom
can you trust when the CEO and the directors can find legal ways
to divide a company up among themselves. Till now what has
stopped them from doing that is ethics and the threat of a bad
reputation. Accounting firms have lived in fear of tarnishing
their reputation. Today's accounting firms and high executives
seem to have discovered that those are hollow threats of the
possible and money in the hand is very immediate. The most
successful strategy is to take the money and run. [Note: this
editorial was written while I was on vacation in early July.
Since then it has become even more timely than it was then. The
President is starting to make sounds like he will be looking into
corporate problems. I am not sure I believe it, but we shall
see.] [-mrl]
===================================================================
TOPIC: THE CHRONOLITHS, by Robert Charles Wilson (Copyright 2001,
Tor, HC, $23.95, 301 pp., ISBN 0-312-87384-0) (book review by Joe
Karpierz)
I remember reading the first reviews of THE CHRONOLITHS in Locus
last year and thinking to myself that it sounded like a good book,
and that I should pick it up at some point.
Then I never got to it - it always works that way. I read one or
more reviews of a novel and decide to buy it and read it, and
never get to it unless it's nominated for a Hugo.
Like THE CHRONOLITHS.
Even though it was only three years ago, I vaguely (the mind is
the second thing to go, and I forget the first) remember really
enjoying DARWINIA, the last novel Wilson wrote that was nominated
for a Hugo. So I went back and reread my review, and by gosh, I
did like that book.
I haven't gotten to this book yet, have I?
Sigh.
This book started out so well, and ended in such a boring fashion
that I really am severely disappointed.
Our protagonist is Scott Warden, and he's a computer programmer of
sorts. He's also a derelict slacker (is that redundant?). He's
in Thailand with his wife and daughter, whom he basically ignores
in favor of plain old having a good time. His life is changed one
day when he is on hand for the arrival of the first Chronolith, a
large monument from the future to a conqueror by the name of Kuin.
>From then on, his entire life in influenced by the fact that he
was present at the first Chronolith appearance. He loses his job
because of it; gets the next one, working for a scientist who is
intimately involved with studying and understanding the
Chronoliths (first for the government, and later for her own
reasons) because of it; meets his next wife because of it - well,
you get the idea.
Throughout the way, there is the usual stuff concerning radical
groups springing up worldwide both "for" and "against" Kuinism,
weird science dealing with something called tau turbulence,
dealing with the temporal and causal effects of the Chronoliths,
and the final "climactic" battle with the future.
I went into this one with high hopes, and it started off okay, but
once again I ended up being disappointed with the direction the
story took as well as the ending that was chosen. It's not that
it was anti-climactic, there just wasn't any climax at all. I
looking forward to at least one encounter with Kuin, and although
it's hinted that we did indeed have several encounters with him, I
found that hint to be a cheat. I wanted to go to the future and
see his world and what it was like to have him be the conqueror -
instead, he remained a mysterious figure that was completely
uninteresting to me.
The good things about the story were the characters and the
writing. I do enjoy Wilson's writing style, and the characters in
this novel were well developed. Unfortunately, they weren't
enough to carry the story.
Two down, and I still haven't found a winner. On to COSMONAUT
KEEP. [-jak]
===================================================================
Mark Leeper
mleeper@optonline.net
Vision without action is a daydream. Action with
without vision is a nightmare.
-- Japanese Proverb
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