The rot in American business culture is a matter of public outcry now. Many CEO's have had such an obsession with the stock prices of their companies that they have often neglected their core businesses. These CEO's have many times taken decisions which only had temporary effect on their share prices, but jeopardised their long term business prospects. Perhaps the system of fat pay packets/ incentives is directly linked to the profits generated by the company. This leads to the root cause of the problem ie. 'Overleveraging'.
The very survival of a nation devoted to 'free enterprise' has been questioned by honest tax payers - Why should they be liable to bail out the unscruplous executives who have inflicted this financial pain, forcing the unprecedented Govt. bail out package. Consider this: Mr. Stanley O'Neil pocketed $161 mn. package before quitting Merril Lynch last year, Mr. Richard Fuld was able to pull out over $490 mn., while Lehman brothers was tottering. This smells of total lack of accountability, the role of Govt. regulators is highly questionable.
These and many other questions about the well being of the Financial system/ Business culture will continue to disturb investors and tax payers alike. We must bear in mind that markets are not a perfect reflection of the underlying worth of the companies you have invested in. But then is a State regulated system better than a Free market system? Given a choice the free market system is always better beacuse it helps in the price discovery process and also increases the efficiency. Markets at times may behave in a chaotic manner, but it is the duty of the regulators to restore normalcy in the long run. The investors, on the other hand, must not expect miracles from the markets in terms of returns, because the markets may not neccesarily always move up. Reasonable expectations from the markets are always fulfilled in the long run.
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