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.