Sweet Sorrow

This should be the last post of this blog, so after this we part ways, or more accurately I will see the only people who read this blog in class on Tuesday.

But even though I am leaving this blog somethings are staying the same. Surprisingly enough Robert Benmosche of AIG is deciding to stay at his current job. This announcement was made after the media started to report rumors that he was quiting due to salary and compensation caps being put in place. Benmosche's announcement was interesting in that he is deciding to stay when so many people are not.

AIG has already fallen victim to the new government management. By placing caps on the salaries and compensation packages talented managers are leaving AIG. This is most obvious when looking at the hundreds of resignations received after AIG asked for its employees to pay back half of their retention awards. Although many pledged to return the requested amount (totaling 45 million dollars) only 19 million has actually been collected. Collecting anymore seems optimistic as more than four hundred of these employees have left the company.

Before anyone says good riddance think about what this means for management. Not only is the company losing valuable resources and knowledge, but it will fail to attract new talent in the future. Why would you chose a job where you make $500,000 when you could make $2,000,000? The government management of AIG is allowing other companies to cherry pick the talent from the company. Pay caps don't seem like the answer to me, but then I didn't support the raise of minimum wage. Yet, I work at McDonald's for minimum wage.
The only good news on the horizon is that Benmosche is still negotiating with the Treasury department. I hold out hope that his continued presence will stabilize AIG's stock further and help protect shareholders. Because the company needs stability not all of the managers leaving for greener pastures. Some of the best performing companies pay their CEO's millions in bonuses, because it equates to less than 3% of their profits. Think about what percentage of the profits goes into a partners pocket and this percentage seems much easier to swallow.

So this will be my last words on this blog, nothing historical but instead a slightly conservative rant. Because I don't want to be a shareholder of a government corporation, I want the right to decide were to invest my money even if I decide to "invest it" in a cute pair of heels.

Are You Common?

No, I am not asking if you are average. Statistically speaking most of us are average, but as a stockholder it is important to know if you hold common stock or preferred stock. Why? Because it can mean more money if you hold preferred stock, and frankly I like money. First off what is preferred stock? Preferred stock is a designation that states that the shareholder is to be paid at a different amount/time than a common shareholder. Specifically this is advantageous in a bankruptcy were the preferred share holders are paid after the debt holders but before the common share holders. Additionally, the company may negotiate the share directly with the individual and set a dividend rate that is high than that of common shares. Moreover there are different types of preferred stock such as Cumulative preferred stock, which states that if the dividend is not paid it will accumulate for future payment. Or participating preferred stock, which allows for dividends above the negotiatd amount under certain conditions. A rare form of stock is actually the putable preferred stock, which allows the holder upon certain conditions to force the issuer to redeem the shares. Some preferred stock can be multiple variations of the above and can even be converted into anther form of security or stock under certain conditions. So why doesn't everyone buy preferred shares? Well in the United States publicly traded preferred stocks are mostly limited to financial institutions, and Public utilities. And preferred shares don't usually have voting rights, which is why there is a class designated as "Special Voting Preferred Stock", that has certain limitations. Plus as many bankruptcies have come to light in recent news how much money makes it past the creditors? If the corporation had money to pay the preferred stock then they probably would not be filing for bankruptcy. Additionally, common stock is said to perform better than preferred stock. Remember shareholders are granted certain privileges such as voting, dividends, and access to financial documents. The amount of shares owned normally translates into how many votes you may have in elections such as the board of directors. So one hundred shares in a local small corporation may be the controlling interest, but wouldn't even be a minority vote in Wal*Mart.

Veil

Spinning twirling, fluttering.
So thin and gossamer
Forever between us.

The corporate veil is somewhat elusive. It's definition depends a lot on the particulars of a given situation. Yet, stockholders, shareholders, and directors all care about it. Much like being a limited partner the corporate veil protects investors. Allowing one to limit their risk to a set numerical number instead of personal liability. The only problem is that more and more often we hear about debtors piercing the corporate veil and looting shareholders assets. While most innocent shareholders have nothing to fear, it is very important to examine your activities with any company you invest in, after all you wouldn't lend money to someone you knew was performing an illegal activity, right?

Most often the corporate veil is lifted to protect creditors. As a corporation can form a corporation, it can be quite difficult to find an actual person who can be held responsible, additionally parent corporations can move funds from one company to another in some very shady manners. Some important things to watch are as follows.
Who manages the corporation, and what are their qualifications?

• How much access do you have to the company records, are they complete, and do any records look strange? If one company is transferring a lot of cash to another without any consideration, now might be the time to bail.
• Are corporate accounts commingling with another corporation or individual? This goes beyond the people who borrow from petty cash, and looks into embezzling.
• And does another corporation really run the show? Pay bills,and day to day expense, make important decisions, ect

As always I encourgae everone to watch their money and be careful. Also for further reading check out Reverse Peircing of the Corporate Veil by Jay and Arthur Winston, Winston and Winston P.C. , as this article sets forth what a creditor will have to prove to get to the real money.

Money Magic

I blame this post on Google, boredom, and the fact that I never outgrew pixie dust.

I have been to Disney world, many, many times. You name a ride and I have been on it, I have seen the restaurants change and construction signs go up. I have even sat through the history of Disney twice, which in hindsight is a little sad. So while bored I decided to Google Disney stock holders. Which directed me to this , which is actually interesting the Walt Disney Company Shareholders information site.

The Walt Disney Corporation gives information on dividends, annual reports, stock split history, historical financial information, online shareholders accounts, merger information statements, tax information, and even a newsletter all online. That's right Mickey stepped into the digital age, and now with a click of your mouse you can learn all about the company and your share. Several other major corporations,Meijers/Walmart/ ect. have also taken steps like these, but I found Disney's website the most user friendly. Imagine never having to worry about losing your tax information, because you can just log in and look at your 1099 DIV.

I like that corporations are posting more information for both shareholders and the public, but I do question how secure the account information really is. Which may be why some corporations do not have websites that allow shareholders to log in and look at the performance of their shares. Plus I miss the paper stocks that use to be issued. The FAQ's specifically states that the Disney Corporation no longer issues papers stocks as commemorative gifts. I think that this website might have killed a little bit of the magic of Disney for me. Much like seeing all seven of the dwarfs' heads go rolling by on a cart (backstage tour my sophomore year of high school ;). Good or bad I guess online access to all acounts including shareholders information is just part of the land of tommorow.

Death of My Money

Previously on this blog I have discussed the topic of the Government's investments. While I do not approve of many of the bailout programs, I have seen their impact. So when I goggled bailout I was interested to find the article "Where Bailout Money Goes To Die" by Rick Newman. I mean with a title like that how can you not read it?

The focus of this article is not to debate the impact of the programs. Its to follow the money and learn what we need to do in the future. Mr. Newman makes an interesting point in looking at the bailout from an investors point of view. Afterall the government is investing your tax dollars into these failing companies, so what return are you getting on that investment? I wish I could say that the bailout was a huge sucess and the government is getting a return of all the money invested, yet that really is not the case.

Tarp has had an impact on keeping several companies out of bankruptcy. Yet the spending for such a project is astronomical. And interestingly enough Tarp money has been centered on the Eastern seaboard. While I understand that this is the headquarters of many businesses and population It still seems unbalanced.

More unbalanced is the price that we may pay. I have listened to several people complain about Government spending, the theory being that you know where you want to spend your money. The same is true about investments. You know how much you are willing to risk on an investment. The government doesn't have the same ability to cut its loses and move on. In fact Mr. Newman points out that the government is not a suave investor since it has lost more that $148 billion to dying companies. This is $1233 per household. I understand the importance of continuing some bailout programs, but every single household in the United States does not have $1233 that can be thrown away on a bad investment. An investment that is only referred to as an investment my politicians. Since many companies have no guide lines as to how the money must be re-payed. An investment that does not even have the protection of stockholders, where what you put in is what you can lose.

So if you get the chance please read "Where Bailout Money Goes To Die" by Rick Newman. Every investor should be informed, and the article is more than a little funny. Additionally, http://bailout.propublica.org/ offers several trackers and graphs to view where the bailouts are going. Including the image above.

Live Better

A friend just sent this to me so I had to share. I love feel of this ad because it echoes the horror movie trailers that are coming out. Plus Wal*Mart has been in the news a lot this week.

I know that Wal*Mart has been blasted by the media for several years. Yes, I do shop there and I understand that they "nickle and dime" their employees. I understand that they are sending a lot of jobs overseas. I do believe that they should offer more benefits to their employees but that is getting off topic. I still like to save money, so I sometimes shop at Wal*Mart.

Recently fox news had a debate on weather Wal*Mart's are destroying America. The Democrats said yes and stated a lot of the facts from the video. The republicans said no. They quoted several studies that show that Wal*Mart brings economic growth to cities and encourages the development of small businesses. This is one of the many reasons that citys across the nation are now welcoming Wal*Mart's instead of fighting them.

Yet more importantly Wal*Mart is doing excellent in the stock market. They are apparently making $25,000 in profit every minute, (see video website). They publish the issues to be voted on by stockholders on their website. They have some of the largest shareholder meetings in the country. They are a thriving business that has benefits and flaws. The 8 million dollar bonus they gave to their CEO is less than a lot of CEOs in the U.S., but still is money that could have gone to either the stock holders or the employees.

So love Wal*Mart or hate it, the corporation is still changing America. The question is does this business model make shareholders and customers live better?

Blacklists and Golden Parachutes

Tell me if you've heard this story before. A women balances her checkbook and transposes two of the digits, so instead writing .83 she writes .38. So when she writes a check she is over drawn by .50 or so on her account. Her check bounces and the bank starts hitting her with fines, she calls the bank and receives gets customer no-service. Months later the bank has her overdrawn on the account by hundreds of dollars thanks to fines and blacklists her with all the banks in the state.

When I first wanted to open a bank account my dad told me this story, he said it happened in over on the east coast but was an important lesson. He then pointed out that I was eligible to bank at a credit union. The lesson was more than just math the lesson is to watch the money. As a member of the credit union you are a share holder, as a member of a bank you are the customer.

Now, I don't believe that credit unions are the end-all be-all of the financial world but the news has certainly attracted attention to banks. The woman in the antidote couldn't bank within the state until she paid the bank hundreds of dollars over a .50 mistake. I overdrew my checking account one time, the credit union posted a fifteen dollar fine to my account. That's it that was the end of the issue. But to be fair banks tend be more profitable for investors, especially the CEO's. http://www.youtube.com/watch?v=1FV4c4QJZ2c Now I don't begrudge him is pension of 53 million, but he is supposedly walking away with 125 million dollars. That is quite the golden parachute for a CEO who had to be bailed out by the United States government.

I have to wonder what are the stock holders getting? At the current moment Bank of America Stock is worth $16.34, yet last year around this time it was worth $30.00. To be fair the credit union I belong to only gave me a ten dollar dividend at the end of of last year, but I only had two shares. Plus the American taxpayer now has a vested stake in Bank of America without receiving any of the protection or rights that share holders get.

Maybe a new CEO will be better for Bank of America, but somehow I don't think so. In the meantime just remember credit unions help people through life. Bank of America helps Ken Lewis. Follow the money and watch your stocks, because a ten dollar profit is better that a loss and a government bailout any day.

Rights

Okay so the stock market is finally leveling out a little. Although small dips occur, the housing industry and other industries are starting to recover. As we examine the ongoings of wall street we question why did this happen? Government bailouts should not be needed to sustain a practical business model. As usually we look to the leaders of the companies to see what went wrong, but not everything is in the control of the CEO. As we look to invest in the future we should be prepared to look at companies from every angle. Just because stock holders are not legally responsible for actions of a corporations, doesn't mean that they do not have rights. And doesn't every American need to exercise their rights?
In many cases a customer si seen as the first priority. After that a company owes its loyalty to the employees and investors. As a stockhold you own part of the company, so therotically the company should do things that wil benifite you. Yet often "common shareholders are (treated as) the corporate equivalent of a vulture that eats only after the lions and hyenas have had their share."
The following is a list of the six main common share stockholder rights.

1. Voting power-this includes for positions on the board of directors and the ability to vote via proxy.
2. Right to increased share values: while you are not guaranteed that you will make a profit you are entitled to be paid, after bondholders and preferred shareholders.
3. Right to transfer ownership: you can participate in the stock exchange, see also right to lose your shorts.
4. Dividend Entitlement: when dividends are declared you are entitle to receive your share.
5. Right to inspect corporate books and records, this is an antiquated right but it is still important you need to study your investment so you will no when to bail before the company needs a bailout.
6. Suing for Wrongful Acts: that's right the most American of all your rights to form a class-action suit and have your day in court.

You should also read the companies Shareholder Rights Plan to understand all of your rights. If you have more time please visit All Business at http://www.allbusiness.com/personal-finance/investing-stock-investments/4113225-1.html, for more information on shareholder rights.

Shareholders

A corporation is a fascinating entity. It represents a separate legal entity and encompasses thousands and millions of people. Customers, employees, shareholders and many others are connected together by a corporation, yet a corporation is ultimately lead by only one person, who may end up damaging the company for their own good.

During the course of the next few weeks I want to examine shareholders. Even in the current market people are still willing to buy a tiny piece of a company. While investors would never dream of backing a small start up company they will still back a huge corporation. Yet, as mentioned above they may have little or no actual power in the company.

Nearly everyone knows about Enron and the scandal that the CEO's created, but the shareholders who faced that nightmare learned from the experience.

Enron shareholders feel vindicated by Gayle B. Ronan, talked with several shareholders and their feelings about the lawsuit. Most felt relieved that the CEO's would be held responsible in a court. This is a concept that I hope to discuss later. The CEO's may have been fired, but what if any responsibility do they have to the shareholders? How do large corporations such as Walmart conduct their voting? I hope to look at these and other such issues in this blog at a later date.

» http://www.msnbc.msn.com/id/12985808/

First Blog

This is a test blog since I really have no idea what to write about.
Possible Topics include:
How different size/format organizations use paralegals
Different types of bussiness organizations
How bussinesses compete in the current market
How corporations are treated by the federal government
How corporations that don't sell anything make money
How employee rights differ by bussiness signs
What rights do shareholders really have
How accountable are CEO's and who are they accountable to.
Or an alternate topic that I have never thought of.