Should there be an automatic administrative
bankruptcy/reorganization process for major corporations based on
their [lack of] IRS taxable earnings?
From the recent news about Ford, General Motors, Lucent, IBM,
Delphi, and too many others, it is depressingly clear their
corporate officers and executives are on a boat trip together
down d' river in Egypt [Denial] rather than objectively and
realistically facing the [critical] situation.
Ordinarily, bankruptcies/reorganizations are merely
"inconvenient" to other than those directly involved, however
these companies individually, and particularly in the aggregate,
are so large, and their stock so widely held in individual IRA
mutual funds and governmental pension funds, as to represent a
serious risk to the overall economy. Additionally, much of their
major debt is their pension obligations, a large share of which
are very likely to become the responsibility of the American
taxpayers through the PBGC, and the rest simply lost to their
current and future retirees.
A review of the media indicates these corporations have the
following things in common:
(1) The officers and directors are grossly overpaid, both
directly in money and "perks" such as "gross ups," stock options,
deferred compensation, extraordinary pension/retirement benefits
(generally set up as trust funds and thus shielded from the
normal bankruptcy process), personal use of corporate amenities
such as jets, and company paid memberships.
(2) They are losing several million dollars a day, some as high
as a billion dollars a quarter, of [cash] working capital, even
as their reported "operating" and EBIDTA earnings increase.
(3) "Paper earnings" generation, generally involving
manipulation of the pension fund assumptions.
(4) White and blue collar wages generally much higher than
comparable jobs in their community, particularly when benefits
such as medical insurance are considered.
(5) Dated, obsolescent and obsolete product lines.
(6) Over-reliance on governmental subsidies, tax
abatements/exemptions, special property valuations/assessments,
tax increment financing districts, and training programs.
Given the potential and likely damage bankruptcy that bankruptcy
of one or more of these organizations will cause [the domino
theory appears to apply in this case] I suggest that the courts
should be mandated to administratively reorganize any corporation
which does not report a taxable [IRS] income [not SEC operating
earnings] in any three of five consecutive years with
unemployment below 6.0 percent.
Among other actions the counts could be mandated to limit total
annual individual executive compensation to not more than that of
the President of the United States, freeze all corporate bank
accounts both domestic and overseas, order a forensic audit of
all financial transactions and contracts, and revoke all special
executive compensation trust funds on the grounds of fraud.
White and blue-collar wages/benefits should be reduced to those
prevailing in the community. Operations of the corporation could
continue under the supervision of a court appointed trustee,
while an evaluation was made of the long-term viability, which
should be concluded within 180 days. In this particular case, it
is doubtful that any of the organizations will be found viable in
the long term as presently constituted, therefore their
components will have to be spun-off or liquidated in an orderly
manner, with as much return to the legitimate creditors as
possible, with the pension plans at the top of the list.
The alternative is a series of Enrons, where the husks have been
drained of all assets, where the executives got the gold mine,
and the legitimate creditors/taxpayers get the shaft.
- posted 16 years ago