Years ago, in the midst of languishing stock prices, investors frequently questioned the ability of corporate executives to provide a reasonable return on their investment, giving rise to pressure to tie executive pay to stock performance ("The betrayed investor," Cover Story, Feb. 25). Instead of improving the long-term outlook for company prosperity, this misguided theory would motivate executives to develop complex short-term methods to raise stock prices to increase their pay and keep hungry investor groups off their backs. Now, the same investors are counting their losses and wondering how this happened.
San Marcos, Tex.
It struck me that all the "cures" discussed in your story share a common problem: They propose to add complexity to a system of inspection/audit/oversight that is already incredibly complex and burdensome.
There is little likelihood that small public companies could meet the increased cost of new compliance issues and liability insurance. Do we really want to close the public capital markets to small companies?
Dennis I. Schneider
Congress should not force companies to treat stock options as an expense, because it is bad accounting. Issuing options does not affect the size of the pie (net income)--only how that pie is divided (earnings per share). This is already reflected in the diluted earnings per share number everyone uses. If this measure is passed, professional investors will work around the misinformation; individuals will only get more confused (i.e., just the opposite of what is intended).
The investor class that "is angry and disillusioned because it feels betrayed" should take personal responsibility for irrationally confusing gambling with investing. As the stock market dropped, the trillions in market value was not exactly lost; it was transferred from misguided rubes to sophisticated investors.
William John Mikus
"The betrayed investor" is not quite right. Investors who exercised some degree of prudence didn't do so badly. A better title would have been "The betrayed speculator."
Thomas T. Semon
Englewood Cliffs, N.J.
I, too, lost a lot of money by blindly investing in equities, much of it in company stock. My portfolio is down by approximately $100,000 since early 2000. Then I began educating myself on asset allocation and risk management. I learned how Standard & Poor's 500-stock index or Wilshire 5000 index funds provide market diversity and eliminate underperformance. In addition, I learned how high-grade bond funds and cash reserves can balance portfolio risk. And I learned that my financial future is my responsibility and not my company's, a broker's, or the government's. To believe otherwise serves only to undermine our capitalistic system. I plan on teaching my children what I've learned so that they don't make the same mistakes.
A better title would have been "The lazy investor." Since biblical times, the rich have tried to take advantage of their position, so this is nothing new. In almost every sidebar to this article, people are complaining about how they put their money in the hands of someone else and lost some portion of their investments. If it was so important to them, why did they ever trust someone else?
Kingwood, Tex. Investment risk now seems to hinge on the character or moral fiber of a company's leadership rather than a company's product ("A new economy needs a new morality," Cover Story, Feb. 25). America's corporate culture needs character-development training more than risk-assessment training. Only corporate leaders with real character will gain back the trust of the investing public.
Claremont, Calif. You and others keep urging transparency as a solution for the present crisis in financial reporting and investor confidence ("The wrath of the investor class," Editorials, Feb. 25). The financial sections of annual reports are perhaps twice the size of those 20 years ago, when reports to the Securities & Exchange Commission were not available online. Did the large mutual funds that employ their own analysts who have access to senior members of management sell before the bubble burst? Generally, no. Disclosure won't help unless the investor heeds the warning signs.
William N. Briegel
Your editorial states: "Investors were appalled by the extravagant behavior of these [Enron] executives who bestowed upon themselves special rules and special rewards." Then why isn't the outrage the same for the extravagant extras bestowed by boards of directors on the CEOs and upper management of firms, in the tens of millions of dollars in stock options and salaries, regardless of the supposed performance of the stock price of the company under management? Enron is only one element of the problem, folks.
Forest Hills, N.Y.