Class, American Shareholders

But the latest epidemic of scandal-allegations of managerial misbehavior, shady accounting, or tax maneuvers at major firms like AOL, Enron, Global Crossing, Sprint, Tyco, and WorldCom-is a stark reminder that Graham’s earlier warnings about the need for eternal vigilance are more vital than ever. Let’s bring them back and discuss them in light of today’s events.

THEORY VERSUS PRACTICE Graham begins his original (1949) discussion of “The Investor as Business Owner” by pointing out that, in theory, “the stockholders as a class are king. Acting as a majority they can hire and fire managements and bend them completely to their will.” But, in practice, says Graham, 497the shareholders are a complete washout. As a class they show neither intelligence nor alertness. They vote in sheeplike fashion for whatever the management recommends and no matter how poor the management’s record of accomplishment may be. …The only way to inspire the average American shareholder to take any independently intelligent action would be by exploding a firecracker under him. . . .

We cannot resist pointing out the paradoxical fact that Jesus seems to have been a more practical businessman than are American shareholders.