bravetoaster said:
I may just be completely naive when it comes to the world of the stock market and whatnot, but if you own shares of a company, is it not YOUR responsibility to know what the company does, how it works, etc.?
Nope. I know nothing about Aastrom Biosciences, Inc.* but they're publicly traded (ASTM on NASDAQ) so if I go to a broker and plop down US$183 (+ fees) I can get 100 of their stock ASAP. Or $1830 for 1000, etc. I have no interest in the company at that point except increasing their stock price and then selling it. While I could theoretically do this by promoting long term research down encouraging pathways, I'll be old before I have the money. I could also encourage them to claim they've found the next Viagra and then sell the stock for a king's ransom when everyone in the world wants in on it. What do I care if that bankrupts them? I'll be out before it happens. There's a name for that, BTW: It's called pump and dump [http://en.wikipedia.org/wiki/Pump_and_dump]. Or I could take the middle road and encourage them to do things that will ultimately ruin the company but don't do so right away. This is what many shareholders do. Day traders don't keep stock. Market volatility shows that stocks are getting shifted like mad all the time.
(* Can you tell I picked that off a list?)
As an investor, my interests are better served by short-term gains even if they destroy long-term viability. This is why CEOs that cannibalize companies and then use their golden parachutes the minute things go south are so common: They're doing what the shareholders WANT. I could point at various vehicle recalls and how their shareholders were so happy about the "cost cutting" (more like corner cutting) measures the car makers took the year before.
I work in the tech industry, and I'm seeing this a LOT. As the founders of companies are aging out and replaced by career CEOs who have no interest in the company's good name, products are getting downright shitty. Hell, I was working for HP when Carly Fiorina took over. You would not believe how many of the old repair techniques stopped being viable because metal was replaced with plastic that broke under the slightest strain. Or when she moved ink/toner cartridge design into its own department instead of as a subset of the department making the device in question. Saved money since you now only had one group of ink cart makers, but the very next run of printers changed from asymmetrical cartridges to symmetrical cartridges that could be installed wrong in several different ways. The engineers for the printer had tried to accommodate with a fancy plastic lid meant to keep you from swapping color and black carts, but it didn't work because the cartridges could easily be installed BACKWARDS, which caused the printer to stop working until you did some voodoo** on it. Which is the kind of call we were hit with on the first day of sale.
(** Yanking the power cord out - turning off the unit didn't work, you had to pull out the power - at a very specific time. Oh, the stories I could tell. Opening and closing the lid on a printer 12 times to test something because a button was too expensive, the list goes on. If I ran ol' Carly over in a bus I wouldn't shed a tear.)
bravetoaster said:
but then excuse stockholders from having any personal responsibility or having to educate themselves or have any clue about what's being done with their money.
There's no legal requirement for a shareholder to care, beyond not violating certain federal regulations. So most don't.
Related interesting reading from Wikipedia:
http://en.wikipedia.org/wiki/Externality - regulations exist to force externalities back on companies.
Less related but still interesting reading:
http://en.wikipedia.org/wiki/Diffusion_of_responsibility - a good person does good things, good
people can do horrible things.
