Quest for Real Value of Stocks
Tom Petruno told it like it is [“Finding Stocks’ True Value,” Market Beat, Feb. 24].
He described how a major source of misinformation, or at least obfuscation, in reporting true profits is associated with corporate stock options. His quote from investor Warren Buffett was particularly apt. He went on to explain that stock options became popular because “investors didn’t want bigger dividends because of the tax bite.”
Thus he has shown how lowering capital gains taxes relative to other sources of income has distorted the market and led to abuses. It is interesting that the public has been brainwashed by scores of highly paid economists into believing that money derived from labor or interest is not used beneficially in the economy, but that capital gains are.
In other words, profit a company makes is of lower value to the economy, presumably because it is wasted. Cashed-in stock options go directly to job creation. This is not what they taught us in Econ 101.
The honest way to resolve the distortion is to eliminate the favoritism shown to capital gains and tax all sources of income equally. Wow! That would be attacked more furiously than honest reporting of profits.
Emil Lawton
Sherman Oaks
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Petruno touched a nerve of past, present and future corporate business troubles.
What is the common thread that the leaders of successful companies share?
They all share and have developed the highest level of both personal and corporate integrity, values, morals, responsibility, leadership, trust and vision.
The development and incorporation of strong character traits are the common thread of respected leaders like Jack Welch, Warren Buffett, Lee Iacocca and John Bogle. They have the ability and good sense to surround themselves with people of equal abilities, talent and good judgment who can serve as examples to be emulated.
The leaders of today’s headline corporate failures lack integrity, moral values and good judgment and deserve to be exposed for their greed, ineptitude, poor judgment and invisible responsibility.
“Garbage in, garbage out” appears to reflect the new accountability mantra.
Corporate executives have a public fiduciary responsibility to do more than manipulate tax laws and accounting loopholes to provide the projected quarterly estimates Wall Street wants to hear.
The 21st century boardrooms need to put that same kind of energy into nurturing their strengths instead of feeding off their weaknesses. Only then can they replace their shortcomings and failures with credibility and promise.
Glenn Biron
Costa Mesa
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Of course some technology and telecom companies will be hit hard if forced to include options as an expense.
But in this post-Enron era, it would certainly help investors in figuring out a stock’s true value. Hopefully it won’t take another Enron scandal for Congress to take some action.
Josselyn Baumgartner
Los Angeles
