Do the Right Thing

For some reason I was drawn to the recent headlines from various financial rags about the cash “hoarding” going on among American companies.  You might recall similar headlines prior to the US presidential elections, which one side blamed on the other, and we’ll get to that in a few paragraphs.  The amount of money is staggering.  One writer compared it to the GDP of Germany (Deutschland uber alles except Cisco and Microsoft, so there).

The last time I looked at my local credit union I was getting about 0.11% on my savings, and I’m old enough to remember 5% was a common rate.  I’m not so naïve to believe these companies are getting the same return, but they can’t be getting that much more.  Why the heck save your money for virtually nothing?  I’m not any kind of a macroeconomist, but if you are barely beating inflation, why not invest it in something that will make money?  Like rebuilding your assets?  Or some promising little start-up?  C’mon. 

According to Moody’s, around 25% of the cash was due to overseas operations that the companies do not want to bring back because they would have to pay tax on it.  I understand that.  Tax avoidance is a big deal.  However, the less tax paid by big business ultimately means the more tax I have to pay, or the more tax my kids have to pay down the road. 

One quick sidebar – I’m one of those wishy-washy moderates.  I’m a progressive on some things, a libertarian on some things, and a conservative on others.  But I believe strongly that the taxes I pay are the biggest bargain imaginable.  Stop and think for a second what your taxes do for you – police, fire department, good roads, decent schools, safe food, etc etc.  It’s not perfect, but consider the alternative…  Off the soapbox…

Companies didn’t just start doing this recently.  As mentioned above, it became an issue in the election because one side blamed the other for the “uncertainty” caused by a slow economy, and due to this uncertainty companies were unwilling to invest said hoard into their operations.  “Uncertainty” is just one small step away from “fear”, and fear is the real driver here.

What would a high-level exec at a rich company fear?  If they screw up and their board decides to ditch them, they all have a golden parachute (courtesy of their shareholders, of course) so they would never end up in some men-only motel in downtown Detroit.  They’d probably still sit on someone else’s board and still play at the same country club and still have their mega-expensive but ultimately useless yacht.  No, they fear what we all fear when you play at the company obstacle course – they are deathly afraid of looking stupid.

Getting the scarlet “S” invisibly tattooed on your forehead is not that bad for you and me.  Your peers know, and maybe their wives, and most definitely your boss because he/she is usually the one doing the tattooing.  We take crap, but we roll with it.  We eat sh_t every day anyway.  It’s part of the job.

But when you are the CEO it’s a different story.  Nobody dares to give you guff because you’re the CEO, dammit.  They made you CEO because you’re the best of the best.  It’s likely you had a big head before, but now…now you have your own plane, or you spend a cool million on your office, or you get $15 MM per year for two years after you are dead to ensure you don’t compete against your old firm (yeah…wtf!).  You are Tiger Woods in the land of the duffers.

It would be nirvana if it weren’t for all those pesky analysts, writers and bloggers.  Those little people who have the gall (the gall!) to write about your actions as if you were fallible.  They criticize!  They spin the facts around to make others think that you make mistakes.  You never make mistakes.  Well, you’ll show them.  You’ll sit on your hands and do nothing.  Don’t give the bastards any fodder.  Do the safe thing.  Hoard your cash.

But you can’t win.  Some of your greedy investors will sue to get to the cash.  Or some corporate raider will make noises about taking the company so they can get their grubby hands on all that moulah (but you don’t mind that one so much – raiders drive up your share price, making you richer, and even if they succeed you still have that parachute!).

Boys, do the right thing.  Find some little start-up that is short of cash.  Do your due diligence thing, and then find some spare change under the driver’s seat in your limo, and you’ll be a hero to those paramecia pouring their guts out to make the little engine go.