We certainly should report on the obscene profits of corporations, venture capitalists, banks, brokerage firms, etc. But how would we ever get accurate reports? As I recall when the collection of income taxes first became law in the early days of the 20th century, business men, and men of wealth were horrified that anyone should know their net worth, and least of all the government. We would still need guesstimates since most corporations and even some government agencies use "creative accounting" to brag or hide their assets. It is obvious to all of us on this forum that trump is not the only autocrat to adjust his wealth statements depending on whether he is submitting tax returns or applying for loans (hooray for the NY Attorney General)
The entire conceptual structure of capitalist economics is a theological shambles, and intentionally so. This is the Pied Pier's score sheet sung to prove that the rich are deserving, the process is self-organized and fair, that everyone has a place and a share, and that pie will be apportioned on Earth as in heaven to come. Utter, fraudulent, malarkey, built on absurdly counterfactual propositions, cherry picked numbers, and, to say it squarely, rigged calculations. Oh sure, there are economic methods of reckoning from statistics and inference that are valid. RR and others make use of them. And yes, there are individuals and pockets of meaningful argument regarding economic actualities---all entirely blacked out from mainstream media, and seldom even referenced in visible public debates, even then in the most fragmentary formats. 'Consensus economics' in PUBLIC debate simply makes disappear economic facts such as externalized costs, veiled price and supply cartelization, overt and tacit oligopoly exclusion of alternative products and producers, rampant regulatory capture or evasion, the unequal and manipulated access to financing, systemic wage suppression, pervasive rent seeking apart from natural profits, perverse incentives for innovation away from optimal development and path, and that all is just for starters.
This is not to talk of 'leftist economics' as opposed to 'mainstream economics.' Every factor as just noted has been studied extensively at the academic level for generations by those of widely varying political orientation. However, those who make BIG money, and who have bought the media and political systems in the world's increasingly captured democracies, have every incentive to both a) exclude all such considerations from policy debate even before policy implementation, and b) to simply lie by misfocusing all permissible debate on economics into peripheral and zero sum forced choice decision boxes, created by the political and economic system entirely to keep debate far, far away from the actual facts and structures of the matter, and who actually benefits from those. The public in America and 'the West' is economically illiterate in the main, and not least because the media and most of the only two political parties permitted never allows the real issues of the political economy to be substantively, accurately, comprehensively discussed in a public forum at all.
The conceptual miasma of capitalist partial and partially faked (mis)reference precludes any effective study of economic phenomena, let alone even minimally fair and rational reasoning from data and outcomes. We are left with fragmentary, gross, distortions, produced both intentionally and unintentionally by layers of degreed lackeys, as numerous and malodorous as for some stupendous onion of obscurationism, yielding conceptual lacustrine dead zones such as the current public discussion of 'inflation' without effective description and analysis of what is really involved in that, just as RR says in this post. I have to wonder whether or not the public even wants to understand 'the System' around them as opposed to having it continue to dispense food pellets when they continue to depress their designated servile levers in it all. Then again, theology is almost impossible to discuss effectively and rationally in a public forum, and the economics of today is as pervasive and behavior modifying a secular theology as ever there was. Humbug indeed; "bah, humbug" if one prefers.
I am going to have to lie down! I have learned too much about our rigged system. Of course I actually do know that corporate profits are causing our stress.
I always wonder about the Pentagon’s secret consumption. Where , how much, what’s it for...???? No paper trail there either.
I was thinking as I read this newsletter that tRump was not the only one who used “creative” accounting. It’s not that companies should not be profitable, it’s that the size of the profits should not be so obscenely large. You can bet people are being taken advantage of if profits are so astronomical. Thank you, Professor Reich for calling this out.
Fay, I suspect the reason there is so much creative accounting going on is that there is and has been so little oversight. Corporations have within them people who know everything about the finances of the corporation, supposedly the CFO. Perhaps those are the people who should be called to task along with the owner and CEO. It could be done and would be if the working people of this country knew just how much they are being scammed every day, and it is not the Democrats, or even ordinary Republicans who are doing the scamming. No one likes to be taken advantage of. We are going to need some reliable media to help to get the word out and there are not many media not already controlled by the rich corporations. We have a big job, but I believe it can be done.
True, but there are so many pieces of paper with George Washington depicted on it, that if you have some in your possession, they are your to use. so having your picture on a piece of paper, if it isn't recognized by a government is as useless as Monopoly money.
Exactly. It ain't valuable because it's yours, it's valuable because it's the Full Faith and Credit of the People of the United States. And that's why it has George and Ben and Andrew and Sacagawea on it, not some guy.
And that means, among other things, it is ours to regulate, including when used in political advertisements. -- best luck to US, b.rad
Thank you, Brad, I totally agree with your sentiments. We absolutely need to regulate political advertisements. More money is spent NOW, on political campaigning - which has morphed into a 365(6) day per year activity. That money could more usefully spent, say on safe bridges, repaired highways, education, child welfare. Instead this money is spent to elect fraudulent legislators who expand corporate welfare at the expense of the majority of taxpayers.
I haven't been an active investor for many years, but when I was it was easy to track profits. I assume that every financial institution tracks it. I used to follow Value Line (Graham and Dodd)/ WSJ/ Barrons.
SEC: A public company must file an annual report on Form 10-K following the end of each fiscal year. The first Form 10-K is due 90 days after the end of the first fiscal year in which the issuer becomes subject to the periodic reporting requirements of the 1934 Act.
As Robert writes, with companies alternatively bragging about and hiding profits by playing games with depreciation, overseas tax havens, etc., how can those investor reports be trusted? It does seem, though, that if corporations are bragging to investors, and if those reports were used to compile a widely publicized corporate profits report, then the results should show a lot of profit. But that'd cause corporations to have to tone down bragging. Obviously, the corporate powerful don't want that if their stock prices and bonuses are calculated on those exaggerated profits. The Democrats, however, have spent time in power, so why haven't they widely emphasized official reports on those inflated profits? Heavens, could our entire government of stock-trading politicians be owned by those conniving corporations, so that the situation is probably even worse than we think? It can't be impossible to gage true corporate profits in retail. Packaged quantities of goods are becoming much smaller while prices are skyrocketing. Being on a non-profit board and doing some grant writing, I don't notice any comparable increase in overall corporate charitable giving. At work, cost cutting was the mantra, except where it affected executives. Where else is the money going except to corporate bottom lines and executive compensation? That compensation is supposed to be based on merit. It's increasing wildly. So clearly, the public should conclude that profits are doing the same. When wages and retirement benefits (note, latter included in attempt to unite former and current/old and young workers) are declining, why are we accepting that? Answer: Not all of us are. Citizen Trumpers think they're joining insurrections against their declining financial and social positions. But they're too ignorant or Kool-Aid infused to see they're not fighting on their own behalf; they've become the perpetrators' armies. Where is the forceful "just say no" from the rest of us?
MO, you are asking some really good questions about why we the people are not realizing that the CEO's compensation mirrors the corporation's profits, why Democrats and others haven't been working to correct profit reporting, and more. I don't think working-class Republicans understand they are being used. Their anger about having to struggle for everything they have, is being redirected toward the people who are not the cause. Their frustration at not attaining "the American dream" makes them susceptible to the corporations who don't want them or anyone else to know what is really going on. Those corporations finance the campaigns of incompetent but easily manipulatable candidates in those Republican areas and elsewhere knowing those poor folks will vote for the "R" no matter who it is even to their own detriment. It is a cynical attack on the American people by corporations that are led by greedy child-men who never learned to share and keep repeating the toddler mantra "mine! mine!"
You may have heard of actor/lawyer Ben Stein. He was one of my professors in law school. I'll never forget him telling the class that SEC was so underfunded that its enforcement was a joke.
And having those profit stats quoted and folded into the economic snapshot monthly alongside the inflation, wage and price stats would be helpful. Each day I hear what the DOW, S&P, & Russell are doing, but that is a poor, simplistic, and misleading indicator of where were are economically
Yes, Daniel, but with 'creative accounting' the Form 10-K is subject to intense scrutiny. Since the Congress has reduced the staff of the IRS, they lack sufficient auditors to examine all, so the auditors pick the low hanging fruit, The middle class who lack the funds to purchase CPAs capable of 'creative accounting'. I first became aware of this when I was on the negotiating team for a County Union. I had worked in the fiscal department, prior to moving to eligibility and training departments. Since I was able to build financial sheets on the computer I saw how the CAO fudged the numbers, so when negotiating, the County was broke, but when speaking publicly the County was in great shape. An Act of Congress is only as good as the enforcement of it.
The statute of limitations may have passed, but in a public company you might have been eligible for an award from the SEC whistleblower program had you turned him or her in.
When my brother and I were lawyers, when our clients were audited by accounting firms (not IRS) we has to list contingent liabilities of our clients.
This is the grist for stock analysis. As I said, at one time, I followed Graham and Dodd, Buffett. They do analysis of practically every company.
I should have turned him in you are correct. But at the time it was too much effort (lame excuse in hindsight) to gather all the evidence necessary and I was fighting him through the union on other matters.
Hey Daniel, good information. Who checks to see that what is filed is accurate? Then there are the private corporations. They need to be held accountable too.
Wow Daniel, thanks for this nugget about the SEC and the link. ??? No excuse for the government to be ignoring profits, the FED's policy exists to benefit the plutocratic class. Period.
Investors & analysts watch corporate profits like hawks. Profits are reported quarterly. Stock prices fluctuate if companies miss the analysts' quarterly profit/share expectations by pennies. So, it would be easy for a knowledgeable person with enough time to report this.
Kay Ann Tekle ; Bottom line ; They have several times more than anyone would ever need, which harms the common good, because they don't pay a proportionally fair tax. Meanwhile, those of us (most of the human beings) must pay much more into the treasury than those with generational wealth. Money is power/speech; and they have most of it.
Oh, worry not! CEOs know EXACTLY whether and how much profits are being made! After all they reap bonus upon bonus whenever the corporation of which they are chief exec, shows profits--whether the profits be from higher prices or cutting overhead or gutting, then abandoning less profitable smaller companies that they have "eaten".
TL, I suspect you are right about the CEO knowing at least most of what the corporation is earning and how much profit it is making. The problem, who is going to hold them accountable for making public the truth about those earnings and profits? It seems the one thing we can count on, they have no one's interests at heart except their own. I hear that is the way it should be, but I don't agree. If one is in business, the "customers" should be the major consideration, not how much money the mostly white men in charge should be able to accumulate, and how much cheating in product or service the corporation can get away with. That is why regulation in any society is essential despite what Libertarians say. They can be Libertarians because there are regulations.
Kay, you are probably right about the CEOs not knowing about all the profits, but I bet they would if they faced stiff personal penalties for not reporting accurately the corporation's profits.
Probably not, Kay Ann, since they personally have so much wealth, their only problem is "where do I buy something to please me next, not how much s left in the "bank"
We know what capital statistics says about the total market capitalization of public corporations. Last I checked it was about $ 44 trillion dollars. Every nickel of that money was free money for these corporations. So, accounting for corporate profits with a new capital statistics model would offer needed insight to check inflation. The public needs to wake up and demand their rights be accounted for fairly.
Willard, I totally agree with you that the people are owed the truth about profits and that we need to wake up and demand corporations be held accountable for a lot of the inflation we are facing. COVID had some impact as did the problems with supply chains, etc., but the corporations didn't stop raking in the profits even while the world suffered and continues to suffer. That needs to be corrected.
We need to GOTV now. When the masses understand this COMMON SENSE math and come out enmasse to vote we shall have more control of this wonderland land of promise.
Companies are audited. The public does not get to see audit reports, which contain matters like contingent liabilities.
I heard Sarbanes Oxley/ Dodd Frank Whistleblower cases. Section 806 of the Sarbanes-Oxley Act protects whistleblowers at covered employers who report to their supervisor or the government conduct that they reasonably believe constitutes wire fraud, mail fraud, bank fraud, securities fraud, or a violation of any rule or regulation of the SEC, or any provision of Federal law
From personal experience, having been crushed by speculators, the most important factor for me is short interest, which is reported by several services..
I love the way you think Daniel. I emigrated to America in 1970 because I knew that I could earn enough money, as a single woman, to save to buy a Morgan. My favourite all time car in which one can place an engine of choice!
I could never afford this on British wages as an RN. I used to say that in England I could only afford to buy new clothes OR take a holiday abroad, OR buy a car and never never ever thought I could buy a car BUT in the wonderful USA, with its fair prices and a little more income , I COLLD HAVE IT ALL AND I DID. I received a good public education in the U.K. to become a professional and the USA benefitted. When we offer give the masses a fairer income it helps the economy and everyone benefits. I believe that GREED must be curbed so that prices can be reined in to serve them.
It is because of fair wages and fair prices that we emigrate to America.
Daniel, I am disturbed that this information is not readily known and that our media pretty much seem to ignore it. Are there worthy penalties for corporations that don't follow the law, ones that have been reported by whistle-blowers?
Hey Keith, my dad used to also say "what you don't know won't hurt you." He knew that wasn't true just like we know that not-knowing is truly harmful to our economy right now. I am concerned that on Friday when last month's stats come out, the Fed is going to whine that they will have to raise interest rates again! Who gets hurt? Not the corporations who are making considerable contributions to keeping inflation high. It will be our whole nation and right before the election, those who don't know will vote for ignorant Republican candidates because they have been brainwashed to believe it is Democrats who cause every economic downturn even though there is a lot of evidence to the contrary. Yep, what you don't know really can hurt you a lot!
"because corporations notoriously shift some profits to nations with lower tax rates, depreciate assets like crazy, low-ball profits when reporting to the IRS and exaggerate them when communicating with Wall Street, and use every accounting gimmick imaginable." Sounds like Donald Trump. Hence my suspicion of capitalism--at least as it is practiced.
I don't think that profits is the only measure for inflation. Yesterday, OPEC announced that they are restricting output, which I think is a principal cause.
California is suing Amazon for price fixing, price gouging. I think it is also a national security issue. Putin must love OPEC.
Daniel, oil has been the bane of our existence for decades, 5 decades at least. I remember the oil war of 1974. It was terrible, mostly because we weren't prepared for it and most people drove gas-guzling vehicles because gas was so cheap. We shrank our cars but under Reagan, the cars grew again in size and mass and the gas-guzzling continued with little caution until reality hit and producing gas was seen for the expensive, destructive deadly activity it is. The countries with the most oil, except perhaps us and Norway, have appalling dictatorships that we compromise our morals to deal with so we can slurp up their oil cheap. The oil corporations are not exactly hurting (well, except, perhaps Russia's right now, but they will recover soon, as winter comes on). We chose to do nothing after 1974 smoothed out and now are paying the price for our stupidity, the real stupid thing was electing Ronald Reagan and his crew who had no vision despite their slogan "morning in America." Well, now we are facing the late afternoon after that terrible morning that has led us to many of the day's problems.
AND of course, these negative reports will come out right before our upcoming elections, and voters will never hear any pushback on how much the "BIG-BUCKS-BOYS" are raking in on PROFITS! Please Robert, is it possible for you (or other more capable than me contributors) to find such info for us to use for pushback? We who nag voters to 'vote, vote, vote' need help getting voters to the polls ! Voters respond to 'reasons' and we who man our local party HQ's need '{POSITIVE' voter motivators' NOW more than ever. So often people feel they & their votes don't count, that nobody cares or listens so 'why bother'. As a long time (I'm 87) 'activist', think you're WONDERFUL, so am asking for myself and others who keep trying to motivate where and however we can. MY SINCERE THANKS FOR ALL YOU DO!!!
To me, Dr Reich, you seem to be describing >exactly< the same business practices ol' Tweety's getting busted in NY for - lowballing for IRS and exaggerating for Wall Street. Are all the corporations hiding behind the old "we're under audit" excuse, too?
I have long felt that wages are really a form of profit. The return on investment of labor is what makes profit happen. So if a company has a net profit of zero, meaning the owners only make money from their labor, not their investment, then the company is still profitable if they are able to pay all employees, including their own non-investment compensation. Profit described this way makes a lot of smaller companies, not owned by wall street, look a lot better. Non-labor profits are, in many ways, a sign of abuse. Generally they go to investors (and I am one sort of since I have a retirement account) without any skin in the game. Unfortunately they are often a result of externalizing costs (pollution, failure to clean up after an extraction process like mining) or under-paying labor, which are basically different forms of abuse. While the size of the investment profit is sometimes publicized, certainly when it gets outlandish like Jamie Dimond or Elon Musk, it is not connected with the abuse that underlies its mass. So how do you get other people to recognize this as a problem without being branded as a Marxist, Socialist, Communist or some form of radical fringe?
Wayne, I, too, think of employee compensatin as part of a corporation's profits even though it counts as expenses. It seems that when reports come out from a particular corporation, if there are lay-offs, the stock goes up and if wages or salaries increase, the stock price goes down. That is appalling! Workers are the ones who produce the corporation's profits. It isn't the CEO or CFO unless there is cheating involved. We the people need to rethink how we permit corporatins to work in our society. Letting those greedy mostly white men determine what has value and how much cheating and lying is acceptable is a mistake we need to correct. I am not sure how to begin the correction, but we need to get it started. We got a board now that investigates crimes against consumers. We now need an agency that investigates corporate profits vs. wages vs. CEO compensation and recommends tax payment corrections.
Kay, it has been 77 years since Mussolini's death. That is long enough that most of that generation who bore his fascism are gone and those who are left are not seen by the current generations as worthy of listening to. For some reason, there is an attraction of a lot of people to mostly men, but now a few women too, who want to get in on the autocracy game to be able to order others around and wreck countries while getting rich on kickbacks and other financial benefits. Italy has a tradition of this so does not have to invent something new. They even have the symbols and the films of Mussolini's nonsense that led to a lot of deaths and destruction. I hope Italy has learned something in the past 77 years, but I suspect not. Those who voted for the fascist party think they will be in charge, not realizing that fascists use people; they don't respect them. All you have to do is look at Russia, trying to grab back some mythical time when Russia was truly great. Their Czars ruled a lot of people and extracted whatever they could get from the peasant class which was most of the people. There were a crowd of aristocrats described in Tolstoy's writings but most of the people were ignored until they were needed to fight, to produce food, or perform some other service for those in charge. Who wants that kind of life? Not the Ukrainians! Not me! We'll see about the Italians.
They just need to be educated by public owned newspapers and TV stations and listen to people like Bernie Sanders and all the leaders he supports who are currently running for offices all over the country and who are NOT supported by unethical people with deep pockets!
"The return on investment of labor is what makes profit happen." Not necessarily. Share price is based mainly on buyers' expectations. "Growth" investors often rely on other factors...like changes in law, war, etc.
Information about corporate profits is readily available, reported by larger publicly traded companies quarterly. Investors rely on that information, even place bets beforehand about what the number will be. What we need is an index that compiles all that data and translates it into a form that is easily understandable by the laity. Robert Reich is on the right road for this. Ordinary working people need to see apples-to-apples comparison of increases in corporate margins, maybe gross margins, with reported retail price inflation. A complex task because the data are so large. But easily doable with today's computing power. And I like that the incentive to report maximum allowable profits to investors acts as a counterbalance to corporate incentive to underreport profits for inflation measurement.
We certainly should report on the obscene profits of corporations, venture capitalists, banks, brokerage firms, etc. But how would we ever get accurate reports? As I recall when the collection of income taxes first became law in the early days of the 20th century, business men, and men of wealth were horrified that anyone should know their net worth, and least of all the government. We would still need guesstimates since most corporations and even some government agencies use "creative accounting" to brag or hide their assets. It is obvious to all of us on this forum that trump is not the only autocrat to adjust his wealth statements depending on whether he is submitting tax returns or applying for loans (hooray for the NY Attorney General)
The entire conceptual structure of capitalist economics is a theological shambles, and intentionally so. This is the Pied Pier's score sheet sung to prove that the rich are deserving, the process is self-organized and fair, that everyone has a place and a share, and that pie will be apportioned on Earth as in heaven to come. Utter, fraudulent, malarkey, built on absurdly counterfactual propositions, cherry picked numbers, and, to say it squarely, rigged calculations. Oh sure, there are economic methods of reckoning from statistics and inference that are valid. RR and others make use of them. And yes, there are individuals and pockets of meaningful argument regarding economic actualities---all entirely blacked out from mainstream media, and seldom even referenced in visible public debates, even then in the most fragmentary formats. 'Consensus economics' in PUBLIC debate simply makes disappear economic facts such as externalized costs, veiled price and supply cartelization, overt and tacit oligopoly exclusion of alternative products and producers, rampant regulatory capture or evasion, the unequal and manipulated access to financing, systemic wage suppression, pervasive rent seeking apart from natural profits, perverse incentives for innovation away from optimal development and path, and that all is just for starters.
This is not to talk of 'leftist economics' as opposed to 'mainstream economics.' Every factor as just noted has been studied extensively at the academic level for generations by those of widely varying political orientation. However, those who make BIG money, and who have bought the media and political systems in the world's increasingly captured democracies, have every incentive to both a) exclude all such considerations from policy debate even before policy implementation, and b) to simply lie by misfocusing all permissible debate on economics into peripheral and zero sum forced choice decision boxes, created by the political and economic system entirely to keep debate far, far away from the actual facts and structures of the matter, and who actually benefits from those. The public in America and 'the West' is economically illiterate in the main, and not least because the media and most of the only two political parties permitted never allows the real issues of the political economy to be substantively, accurately, comprehensively discussed in a public forum at all.
The conceptual miasma of capitalist partial and partially faked (mis)reference precludes any effective study of economic phenomena, let alone even minimally fair and rational reasoning from data and outcomes. We are left with fragmentary, gross, distortions, produced both intentionally and unintentionally by layers of degreed lackeys, as numerous and malodorous as for some stupendous onion of obscurationism, yielding conceptual lacustrine dead zones such as the current public discussion of 'inflation' without effective description and analysis of what is really involved in that, just as RR says in this post. I have to wonder whether or not the public even wants to understand 'the System' around them as opposed to having it continue to dispense food pellets when they continue to depress their designated servile levers in it all. Then again, theology is almost impossible to discuss effectively and rationally in a public forum, and the economics of today is as pervasive and behavior modifying a secular theology as ever there was. Humbug indeed; "bah, humbug" if one prefers.
I am going to have to lie down! I have learned too much about our rigged system. Of course I actually do know that corporate profits are causing our stress.
I always wonder about the Pentagon’s secret consumption. Where , how much, what’s it for...???? No paper trail there either.
🙈🙉🙊
I was thinking as I read this newsletter that tRump was not the only one who used “creative” accounting. It’s not that companies should not be profitable, it’s that the size of the profits should not be so obscenely large. You can bet people are being taken advantage of if profits are so astronomical. Thank you, Professor Reich for calling this out.
Fay, I suspect the reason there is so much creative accounting going on is that there is and has been so little oversight. Corporations have within them people who know everything about the finances of the corporation, supposedly the CFO. Perhaps those are the people who should be called to task along with the owner and CEO. It could be done and would be if the working people of this country knew just how much they are being scammed every day, and it is not the Democrats, or even ordinary Republicans who are doing the scamming. No one likes to be taken advantage of. We are going to need some reliable media to help to get the word out and there are not many media not already controlled by the rich corporations. We have a big job, but I believe it can be done.
People say, 'That's my money.' OK, but it doesn't have your picture on it -- b.rad
True, but there are so many pieces of paper with George Washington depicted on it, that if you have some in your possession, they are your to use. so having your picture on a piece of paper, if it isn't recognized by a government is as useless as Monopoly money.
Exactly. It ain't valuable because it's yours, it's valuable because it's the Full Faith and Credit of the People of the United States. And that's why it has George and Ben and Andrew and Sacagawea on it, not some guy.
And that means, among other things, it is ours to regulate, including when used in political advertisements. -- best luck to US, b.rad
Thank you, Brad, I totally agree with your sentiments. We absolutely need to regulate political advertisements. More money is spent NOW, on political campaigning - which has morphed into a 365(6) day per year activity. That money could more usefully spent, say on safe bridges, repaired highways, education, child welfare. Instead this money is spent to elect fraudulent legislators who expand corporate welfare at the expense of the majority of taxpayers.
I haven't been an active investor for many years, but when I was it was easy to track profits. I assume that every financial institution tracks it. I used to follow Value Line (Graham and Dodd)/ WSJ/ Barrons.
SEC: A public company must file an annual report on Form 10-K following the end of each fiscal year. The first Form 10-K is due 90 days after the end of the first fiscal year in which the issuer becomes subject to the periodic reporting requirements of the 1934 Act.
E.G. This is Value Line. Tracks every traded company. https://simplywall.st/stocks/us/diversified-financials/nasdaq-valu/value-line
As Robert writes, with companies alternatively bragging about and hiding profits by playing games with depreciation, overseas tax havens, etc., how can those investor reports be trusted? It does seem, though, that if corporations are bragging to investors, and if those reports were used to compile a widely publicized corporate profits report, then the results should show a lot of profit. But that'd cause corporations to have to tone down bragging. Obviously, the corporate powerful don't want that if their stock prices and bonuses are calculated on those exaggerated profits. The Democrats, however, have spent time in power, so why haven't they widely emphasized official reports on those inflated profits? Heavens, could our entire government of stock-trading politicians be owned by those conniving corporations, so that the situation is probably even worse than we think? It can't be impossible to gage true corporate profits in retail. Packaged quantities of goods are becoming much smaller while prices are skyrocketing. Being on a non-profit board and doing some grant writing, I don't notice any comparable increase in overall corporate charitable giving. At work, cost cutting was the mantra, except where it affected executives. Where else is the money going except to corporate bottom lines and executive compensation? That compensation is supposed to be based on merit. It's increasing wildly. So clearly, the public should conclude that profits are doing the same. When wages and retirement benefits (note, latter included in attempt to unite former and current/old and young workers) are declining, why are we accepting that? Answer: Not all of us are. Citizen Trumpers think they're joining insurrections against their declining financial and social positions. But they're too ignorant or Kool-Aid infused to see they're not fighting on their own behalf; they've become the perpetrators' armies. Where is the forceful "just say no" from the rest of us?
MO, you are asking some really good questions about why we the people are not realizing that the CEO's compensation mirrors the corporation's profits, why Democrats and others haven't been working to correct profit reporting, and more. I don't think working-class Republicans understand they are being used. Their anger about having to struggle for everything they have, is being redirected toward the people who are not the cause. Their frustration at not attaining "the American dream" makes them susceptible to the corporations who don't want them or anyone else to know what is really going on. Those corporations finance the campaigns of incompetent but easily manipulatable candidates in those Republican areas and elsewhere knowing those poor folks will vote for the "R" no matter who it is even to their own detriment. It is a cynical attack on the American people by corporations that are led by greedy child-men who never learned to share and keep repeating the toddler mantra "mine! mine!"
Because they are subject to accounting standards.
https://sarbanes-oxley-101.com/
https://en.wikipedia.org/wiki/Accounting_Standards_Codification
The SEC is on the job.
You may have heard of actor/lawyer Ben Stein. He was one of my professors in law school. I'll never forget him telling the class that SEC was so underfunded that its enforcement was a joke.
He's a right wing nut.
Using their investor reports, with their glowing profit admissions, for the Statistics of Profit Measure, seems like a good place to start.
And having those profit stats quoted and folded into the economic snapshot monthly alongside the inflation, wage and price stats would be helpful. Each day I hear what the DOW, S&P, & Russell are doing, but that is a poor, simplistic, and misleading indicator of where were are economically
Daniel Solomon: Your input to this forum is always valuable. Thank you!
Yes, Daniel, but with 'creative accounting' the Form 10-K is subject to intense scrutiny. Since the Congress has reduced the staff of the IRS, they lack sufficient auditors to examine all, so the auditors pick the low hanging fruit, The middle class who lack the funds to purchase CPAs capable of 'creative accounting'. I first became aware of this when I was on the negotiating team for a County Union. I had worked in the fiscal department, prior to moving to eligibility and training departments. Since I was able to build financial sheets on the computer I saw how the CAO fudged the numbers, so when negotiating, the County was broke, but when speaking publicly the County was in great shape. An Act of Congress is only as good as the enforcement of it.
The statute of limitations may have passed, but in a public company you might have been eligible for an award from the SEC whistleblower program had you turned him or her in.
When my brother and I were lawyers, when our clients were audited by accounting firms (not IRS) we has to list contingent liabilities of our clients.
This is the grist for stock analysis. As I said, at one time, I followed Graham and Dodd, Buffett. They do analysis of practically every company.
I should have turned him in you are correct. But at the time it was too much effort (lame excuse in hindsight) to gather all the evidence necessary and I was fighting him through the union on other matters.
Hey Daniel, good information. Who checks to see that what is filed is accurate? Then there are the private corporations. They need to be held accountable too.
Wow Daniel, thanks for this nugget about the SEC and the link. ??? No excuse for the government to be ignoring profits, the FED's policy exists to benefit the plutocratic class. Period.
Investors & analysts watch corporate profits like hawks. Profits are reported quarterly. Stock prices fluctuate if companies miss the analysts' quarterly profit/share expectations by pennies. So, it would be easy for a knowledgeable person with enough time to report this.
There's a distinction between mutual companies and others but all public companies are tracked.
Yes, that is reported to and tracked by the state in which the company resides. A lot of info on insurance companies can be found in the Best guide.
Kay Ann Tekle ; Bottom line ; They have several times more than anyone would ever need, which harms the common good, because they don't pay a proportionally fair tax. Meanwhile, those of us (most of the human beings) must pay much more into the treasury than those with generational wealth. Money is power/speech; and they have most of it.
Oh, worry not! CEOs know EXACTLY whether and how much profits are being made! After all they reap bonus upon bonus whenever the corporation of which they are chief exec, shows profits--whether the profits be from higher prices or cutting overhead or gutting, then abandoning less profitable smaller companies that they have "eaten".
TL, I suspect you are right about the CEO knowing at least most of what the corporation is earning and how much profit it is making. The problem, who is going to hold them accountable for making public the truth about those earnings and profits? It seems the one thing we can count on, they have no one's interests at heart except their own. I hear that is the way it should be, but I don't agree. If one is in business, the "customers" should be the major consideration, not how much money the mostly white men in charge should be able to accumulate, and how much cheating in product or service the corporation can get away with. That is why regulation in any society is essential despite what Libertarians say. They can be Libertarians because there are regulations.
I suspect they don’t care as long as their multi-million dollar salaries and bonuses are paid out.
Kay, you are probably right about the CEOs not knowing about all the profits, but I bet they would if they faced stiff personal penalties for not reporting accurately the corporation's profits.
Probably not, Kay Ann, since they personally have so much wealth, their only problem is "where do I buy something to please me next, not how much s left in the "bank"
They do not care.
All they care about is their big compensation and being treated like royalty.
We know what capital statistics says about the total market capitalization of public corporations. Last I checked it was about $ 44 trillion dollars. Every nickel of that money was free money for these corporations. So, accounting for corporate profits with a new capital statistics model would offer needed insight to check inflation. The public needs to wake up and demand their rights be accounted for fairly.
Willard, I totally agree with you that the people are owed the truth about profits and that we need to wake up and demand corporations be held accountable for a lot of the inflation we are facing. COVID had some impact as did the problems with supply chains, etc., but the corporations didn't stop raking in the profits even while the world suffered and continues to suffer. That needs to be corrected.
We need to GOTV now. When the masses understand this COMMON SENSE math and come out enmasse to vote we shall have more control of this wonderland land of promise.
My father used to say, “what you don’t know won’t hurt you “. In this case what the average middle class down Americans don’t know really hurts!
Companies are audited. The public does not get to see audit reports, which contain matters like contingent liabilities.
I heard Sarbanes Oxley/ Dodd Frank Whistleblower cases. Section 806 of the Sarbanes-Oxley Act protects whistleblowers at covered employers who report to their supervisor or the government conduct that they reasonably believe constitutes wire fraud, mail fraud, bank fraud, securities fraud, or a violation of any rule or regulation of the SEC, or any provision of Federal law
Most of the cases involve reporting matters like profits. The SEC also has a whistleblower program. https://www.sec.gov/whistleblower/retaliation#:~:text=Protections%20Against%20Retaliation,-The%20Dodd%2DFrank&text=This%20generally%20means%20that%20employers,violated%20the%20federal%20securities%20laws.
From personal experience, having been crushed by speculators, the most important factor for me is short interest, which is reported by several services..
I love the way you think Daniel. I emigrated to America in 1970 because I knew that I could earn enough money, as a single woman, to save to buy a Morgan. My favourite all time car in which one can place an engine of choice!
I could never afford this on British wages as an RN. I used to say that in England I could only afford to buy new clothes OR take a holiday abroad, OR buy a car and never never ever thought I could buy a car BUT in the wonderful USA, with its fair prices and a little more income , I COLLD HAVE IT ALL AND I DID. I received a good public education in the U.K. to become a professional and the USA benefitted. When we offer give the masses a fairer income it helps the economy and everyone benefits. I believe that GREED must be curbed so that prices can be reined in to serve them.
It is because of fair wages and fair prices that we emigrate to America.
Pooling family money also helps tremendously.
Daniel, I am disturbed that this information is not readily known and that our media pretty much seem to ignore it. Are there worthy penalties for corporations that don't follow the law, ones that have been reported by whistle-blowers?
Dear Ruth,
The mainstream media is controlled by the same corporations. It’s all about the Benjamins!
Hey Keith, my dad used to also say "what you don't know won't hurt you." He knew that wasn't true just like we know that not-knowing is truly harmful to our economy right now. I am concerned that on Friday when last month's stats come out, the Fed is going to whine that they will have to raise interest rates again! Who gets hurt? Not the corporations who are making considerable contributions to keeping inflation high. It will be our whole nation and right before the election, those who don't know will vote for ignorant Republican candidates because they have been brainwashed to believe it is Democrats who cause every economic downturn even though there is a lot of evidence to the contrary. Yep, what you don't know really can hurt you a lot!
"because corporations notoriously shift some profits to nations with lower tax rates, depreciate assets like crazy, low-ball profits when reporting to the IRS and exaggerate them when communicating with Wall Street, and use every accounting gimmick imaginable." Sounds like Donald Trump. Hence my suspicion of capitalism--at least as it is practiced.
I don't think that profits is the only measure for inflation. Yesterday, OPEC announced that they are restricting output, which I think is a principal cause.
California is suing Amazon for price fixing, price gouging. I think it is also a national security issue. Putin must love OPEC.
Daniel, oil has been the bane of our existence for decades, 5 decades at least. I remember the oil war of 1974. It was terrible, mostly because we weren't prepared for it and most people drove gas-guzling vehicles because gas was so cheap. We shrank our cars but under Reagan, the cars grew again in size and mass and the gas-guzzling continued with little caution until reality hit and producing gas was seen for the expensive, destructive deadly activity it is. The countries with the most oil, except perhaps us and Norway, have appalling dictatorships that we compromise our morals to deal with so we can slurp up their oil cheap. The oil corporations are not exactly hurting (well, except, perhaps Russia's right now, but they will recover soon, as winter comes on). We chose to do nothing after 1974 smoothed out and now are paying the price for our stupidity, the real stupid thing was electing Ronald Reagan and his crew who had no vision despite their slogan "morning in America." Well, now we are facing the late afternoon after that terrible morning that has led us to many of the day's problems.
Even though Norway has oil, they are switching rapidly to EVs.
"Morning in America"! Ha! It became Mourning in America.
I agree that it's not the only factor, but I agree with Reich that it is an important one.
Boy you hit this squarely on the nose.
Boy, did I need this tutorial to understand what information we are not getting. How money hides its power.
And power hides money...
AND of course, these negative reports will come out right before our upcoming elections, and voters will never hear any pushback on how much the "BIG-BUCKS-BOYS" are raking in on PROFITS! Please Robert, is it possible for you (or other more capable than me contributors) to find such info for us to use for pushback? We who nag voters to 'vote, vote, vote' need help getting voters to the polls ! Voters respond to 'reasons' and we who man our local party HQ's need '{POSITIVE' voter motivators' NOW more than ever. So often people feel they & their votes don't count, that nobody cares or listens so 'why bother'. As a long time (I'm 87) 'activist', think you're WONDERFUL, so am asking for myself and others who keep trying to motivate where and however we can. MY SINCERE THANKS FOR ALL YOU DO!!!
To me, Dr Reich, you seem to be describing >exactly< the same business practices ol' Tweety's getting busted in NY for - lowballing for IRS and exaggerating for Wall Street. Are all the corporations hiding behind the old "we're under audit" excuse, too?
I have long felt that wages are really a form of profit. The return on investment of labor is what makes profit happen. So if a company has a net profit of zero, meaning the owners only make money from their labor, not their investment, then the company is still profitable if they are able to pay all employees, including their own non-investment compensation. Profit described this way makes a lot of smaller companies, not owned by wall street, look a lot better. Non-labor profits are, in many ways, a sign of abuse. Generally they go to investors (and I am one sort of since I have a retirement account) without any skin in the game. Unfortunately they are often a result of externalizing costs (pollution, failure to clean up after an extraction process like mining) or under-paying labor, which are basically different forms of abuse. While the size of the investment profit is sometimes publicized, certainly when it gets outlandish like Jamie Dimond or Elon Musk, it is not connected with the abuse that underlies its mass. So how do you get other people to recognize this as a problem without being branded as a Marxist, Socialist, Communist or some form of radical fringe?
this reminds me of Wallyworld....the employees are paid only enough that they can only afford to buy things from Wallyworld. It really is infuriating.
Wayne, I, too, think of employee compensatin as part of a corporation's profits even though it counts as expenses. It seems that when reports come out from a particular corporation, if there are lay-offs, the stock goes up and if wages or salaries increase, the stock price goes down. That is appalling! Workers are the ones who produce the corporation's profits. It isn't the CEO or CFO unless there is cheating involved. We the people need to rethink how we permit corporatins to work in our society. Letting those greedy mostly white men determine what has value and how much cheating and lying is acceptable is a mistake we need to correct. I am not sure how to begin the correction, but we need to get it started. We got a board now that investigates crimes against consumers. We now need an agency that investigates corporate profits vs. wages vs. CEO compensation and recommends tax payment corrections.
Kay, it has been 77 years since Mussolini's death. That is long enough that most of that generation who bore his fascism are gone and those who are left are not seen by the current generations as worthy of listening to. For some reason, there is an attraction of a lot of people to mostly men, but now a few women too, who want to get in on the autocracy game to be able to order others around and wreck countries while getting rich on kickbacks and other financial benefits. Italy has a tradition of this so does not have to invent something new. They even have the symbols and the films of Mussolini's nonsense that led to a lot of deaths and destruction. I hope Italy has learned something in the past 77 years, but I suspect not. Those who voted for the fascist party think they will be in charge, not realizing that fascists use people; they don't respect them. All you have to do is look at Russia, trying to grab back some mythical time when Russia was truly great. Their Czars ruled a lot of people and extracted whatever they could get from the peasant class which was most of the people. There were a crowd of aristocrats described in Tolstoy's writings but most of the people were ignored until they were needed to fight, to produce food, or perform some other service for those in charge. Who wants that kind of life? Not the Ukrainians! Not me! We'll see about the Italians.
They just need to be educated by public owned newspapers and TV stations and listen to people like Bernie Sanders and all the leaders he supports who are currently running for offices all over the country and who are NOT supported by unethical people with deep pockets!
"The return on investment of labor is what makes profit happen." Not necessarily. Share price is based mainly on buyers' expectations. "Growth" investors often rely on other factors...like changes in law, war, etc.
Excellent article.
That power (and the fact that all of our politicians and/or policymakers) also profit means things are unlikely to change.
This information should be headlines in our newspapers and news media. it will never be as long as the wealthy own these media.
Look no further than‘ Citizens United’ !
There may be ‘ Freedom of Speech’ but the more $ you got the louder your voice.
It's insane that we must bail out hedge fund operators!
Information about corporate profits is readily available, reported by larger publicly traded companies quarterly. Investors rely on that information, even place bets beforehand about what the number will be. What we need is an index that compiles all that data and translates it into a form that is easily understandable by the laity. Robert Reich is on the right road for this. Ordinary working people need to see apples-to-apples comparison of increases in corporate margins, maybe gross margins, with reported retail price inflation. A complex task because the data are so large. But easily doable with today's computing power. And I like that the incentive to report maximum allowable profits to investors acts as a counterbalance to corporate incentive to underreport profits for inflation measurement.
It is difficult to get a man to understand something, when his salary depends on his not understanding it.
― Upton Sinclair, I, Candidate for Governor: And How I Got Licked