Recommended Reading - Capitalism Should Return to Its Roots, The Icahn Report

Carl Icahn, management gadfly and investor, has gotten back on his high horse and made some valuable suggestions on how to control corporate managements in today’s troublesome business environment.  According to Icahn,

The real problem (not just executive pay) is that many corporate managements operate with impunity—with little oversight by, or accountability to, shareholders. Instead of operating as aggressive watchdogs over management and corporate assets, many boards act more like lapdogs.

Despite the fact that managements, albeit with some exceptions, have done an extremely poor job, they are often lavishly rewarded regardless of their performance. We must change this dismal state of affairs if we are to rebuild our economy in a sustainable way that rebuilds confidence. If we don’t, these problems will keep recurring as investors pile into the next Wall Street innovation or asset bubble, enabled by the kinds of managements that nearly sank Wall Street.

The problem, as I have long maintained, is that boards and managements have been entrenched by years of state laws and court decisions that insulate them from shareholder accountability and allow them to maintain their salary-and-perk-laden sinecures.

What we need are fewer government rules at the state level that protect managements. We need to return capitalism—our great national wealth machine—to its roots, where owners call the shots to managements, not the other way around.  

Icahn goes on to suggest ways to help correct the problem.  While most of Icahn’s suggestions are self-serving, since he is a major investor himself who often attempts to change a company’s management he is frequently invested in, he is nevertheless, on the right track. His latest blog piece makes a number of valuable suggestions that should get consideration by investors and the powers that be.  The blog piece is worth a read.