Being also a poet of some accomplishment, I have on occasion used verse to express my political and economic views. The following is one such poem, with which I decry the maximization of the return on equity. I first encountered this goal when Stan O’Neal was brought in as the new President of Merrill Lynch, back in 2001, and I objected to it as a corporate goal then, as now, vociferously but not effectively. More recently, in preparing for an interview with Goldman Sachs, I was reading and viewing videos about that company’s history when I came upon a short video on Jon S. Corzine’s tenure as senior partner. In that segment, the only goal and accomplishment mentioned was showing earnings, or a return, of $50 billion, presumably difficult to “achieve” with their current corporate equity. So the current Governor of the State of New Jersey was, with O’Neal and several others, a member of the Return-on-Equity Gang which took over Wall Street during the 1990’s and 2000’s, milked it until it was dry and have more recently come, with campaign contribution receipts in hand, to not-so-humbly ask for bailouts. Curious thing that this same Jon S. Corzine, as Senator, spent his tenure there to hook the ROE Gang up with the Democratic Senatorial Campaign Committee. Yet, this is the same Jon S. Corzine who pleads ignorance of the collapse of the financial markets. If we are to believe Jon S. Corzine on this score, perhaps this poem may serve as an education to lift his veil of ignorance and bring him to contrition for the pivotal role he played in bringing us to our current calamity.

Return on Equity

An Economic Travesty in Three Way-To-Tear-Us-Aparts

Prologue

It sounds so reasonable and so benign

To get from equity the greatest return

But look with me behind this vague angelic mask

And you will see the devil in the details

Apart Once

When we take a trip in place or in money

When do we say that we have returned

When have we drawn the last benefit of our journey

When do we say it was worth it and close our books

Our answers question ourselves

Are you just so much impatient flesh

Or are you more, a soulful person

Are you a passing moment or a monument for the ages

So the flesh of decisions now

Reckon only the current return

Rendered with bright but fading paints

Obscuring the future profit and loss

The contestants knowing the judges

Trade their somber sober oils

For the brighter but riskier shades

The prize today is tomorrow an empty canvas

Apart Twice

Equity is the stable stone

On which each company is built

But it is also the value below the line

In the Return on Equity equation

Who cannot notice this easy way

To get more return for the equity

By reducing the equity itself

By skimping on the foundation

Who cares if the building comes crashing down

With its unsupported weight

Return on Equity has approved the plans

So that must have been the goal

Equity the much maligned and despised Overhead

Weep outside at the damage wrought

By relying on shaky outsourced deals

And spurning the stability of their faithful service

Intermission

Return on Equity allows only brief intermissions

Where you might not think of the long-term costs

Of its short-term take-I-mean-earnings

Or where that money might be going

Apart Thrice

What of that money in the vaunted return

We figure the company has received the cash

That it is now a swollen bundle

But shouldn’t it be handed over to the ones we have been serving

The investors should receive our sacrifice

To repay the moneyed trust they placed in us

We may have been reckless and bet the store

But it was, was it not, for their reward

What’s that you say Return on Equity

They saw no dividends but the stock price is up

Because the returns have been kept safely “retained”

Except for the bonuses for the executives

So the investor gets nothing unless he sells

The return to the no longer investor

The faithless are amply rewarded

The faithful must wait until they are not

Epilogue

After all of this brutal tearing apart

How can we put our economy back together

I suggest we bring this conclusion

By joining in reverse order as we showed here torn apart

First the investor faithful and true

Who stayed with his company through thick and thin

Should receive every day for shares owned when it began

A set percentage of the average volume-adjusted traded price as his dividend

Second that each publicly traded company

Shall report their equity at the open

And, until the close, the price shall be no more

Or less than by half that equity per every share

Third that the stated and lauded goal

Of every public company

Shall be stability and consistency

Steady in changing times

Then the investor will favor and be rewarded by

The surely growing company that finds its optimal size

While speculation and wild surmise

They will shun and let vain promises lie

Copyright © 2009 by C. P. Klapper