SD Economic Outlook Seminar Features Augustana Professor
Wednesday, October 28, 2009
Augustana professor lambastes 'pathetic' corporate governance
Jeff Martin, Argus Leader
The nation's financial collapses of the past couple years were caused by several failures, "not one of which has been adequately addressed," an Augustana College professor told business people Tuesday at the third annual South Dakota Economic Outlook Seminar.
The failures were all hybrid in nature, meaning they involved shortcomings by both the markets and the government, said Robert Wright, Nef Family Chair of Political Economy at Augustana.
They included "pathetic" corporate governance which gives common stockholders little say in how publicly traded corporations are run. In some cases, top managers then are able to give themselves huge salaries and retirement packages and other perks, Wright said.
"What has the government done about this deplorable situation? Exactly nothing," he said.
Credit rating agencies no longer function in the best interest of investors as they once did, he said. Among other failures: The government has adopted the so-called "too big to fail" policy. That is an incentive for the nation's largest firms to "pursue risk with reckless abandon safe in the knowledge that old Uncle Sam has their back," Wright said.
He also touched on the importance of financial education, saying the nation's economy can't become stable unless a majority of its citizens understand the bare basics of investing.
There is a chance the U.S. economy could stagnate just as Japan's economy has in recent years. But the U.S. education system might help to keep that from happening, he said.
Compared to Japan, "America's educational system does a much better job of nurturing creative genius," he said.
The conference, sponsored by the South Dakota Chamber of Commerce and Industry, drew about 160 people to the Best Western Ramkota in Sioux Falls.