December 13, 2005
Excerpts: The Battle For The Soul of Capitalism - Part XXIV
A New Kind of Capitalism
The change from traditional owners’ capitalism to the new managers’ capitalism is at the heart of what went wrong in corporate America. It was reflected in the stock market bubble and the subsequent market burst, during which at least $2 trillion of wealth was transferred from public investors to corporate insiders, entrepreneurs, and financial intermediaries. Largely through stock options, executive compensation reached extraordinary levels, despite the production of corporate profits that were in fact, measured by the growth of our economy, less than ordinary. Managed earnings was an important engine of the system, and its goal, at least implicitly, was to raise corporate stock prices whether or not increases in intrinsic corporate values were achieved. It is that pathological mutation in capitalism that largely explains what went wrong. Explaining why it went wrong is the province of the next chapter.
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