New Ventures Society


   Biases


There are several items that we think should be included in the By-Laws of the companies we create with the requirement that a 75% of all shares is needed for amendment.
1) Salaries for highest paid office is limited to 25 times the lowest paid full time worker. Thus a max of $500,000 for a company with a $20,000 receptionist. We feel that the Boards that grant $50 million salaries are doing a disservice to their shareholders, and that no executive is worth those exorbitant rates. especially when they have a money losing company. This is not to say that they can not be awarded options to buy shares and thus participate in the fortunes they create. Just that they must exercise those options and hold the shares for several years, thus showing their faith in their leadership. Putting their money on the line.
2) There would be no buying of company shares by the company. This is a bankers and management ploy to puff up the short term earnings, inflate stock prices, cash out excessive options, and then take on massive debt to buy the shares. The net result is that management loots the company and the shareholders face massive losses in bankruptcy a few years later after inflated share price delude them into thinking all is rosy. Examples being GM, Radio Shack, and the current attack on IBM. AP has recently pointed out that 75% of companies in the S&P 500 cheat on reported earnings. It may not be "cooking the books" like with Enron but the earning are at least "warmed over" by classifying expenses as capital investments, ignoring "non recurring" losses from discontinuing ventures and other tricks that hardly reflect the true state of affairs.


In general we will try to instill the basic virtues that small businesses possess in the Chaos of Wall Street by setting a good example. There are a host of features that shareholder try to get companies to adopt that may be worth possessing, but caution needs to be exercised, some are designed to enable Wall Street predators to take over and loot companies.


Likewise it is better to develop a company from scratch rather than engage in a Mergers and Acquisition war that results in a premium over replacement value. Andrew Carnegie built his company by selling steel for less and using the best technology, then buying out the competition at their bankruptcy sale. J P Morgan built US Steel by paying a super high premium for every steel company, issuing watered stock and then raising the price on all steel products. When given a choice of cash or stock Carnegie chose cash, not wanting to play Wall Street games. The practice of buying market share by merging shows that management does not know any better way of using the available funds, a situation that the shareholders had better fix by replacing management.


Henry Ford is credited in his landmark $5 a day wage with wanting his workers to be able to afford one of his cars. That is pure nonsense, he just calculated that the turnover was so high that he saved money by avoiding the cost of constantly training new hires.