As the Bible story goes, the lowly but courageous David found the weak spot on the forehead of the mighty Goliath and 'slew him dead'. Will the individual investor vs. the corporate giants be so lucky?
Probably not. First of all there is no single forehead to aim for. The corporate scandals of late have many legs and, arguably, less than one functioning head. So where does the slingshot aim? The finger of blame has pointed to all but the rank and file of the corporate team. Is it the responsibility for this mess to be directed at the executive level and their need to make the numbers look good? Or the accounting firms doing double duty as auditors and consultants? Maybe its the elastic accounting rules that allow the creative accounting to tell a false story' Or the investment banking houses that make selling greed a fine art' Yes, yes, yes, and yes.
The small investor, who dutifully obeyed the party line and invested in what s/he knew so well, is now holding the bag. And that bag is not full of riches. On the contrary, it is full of unfulfilled promises and a retirement that is now not going to happen. Some 401K investors took that American corporate malarkey to heart and put their full faith in the same corporation that issued their paychecks. They voted for that rosy future by investing all they could in the stock of the company they worked for. They soon found that the years of service and dedication to the company that employed them was irrelevant to the smoke and mirrors game played by senior level management in order to look good to the financial press. In many cases they were let go to improve the bottom line and/or their benefits were dramatically cut to save expenses. But while all that was happening, senior level management was served well for those efforts when it came time to issue or exercise their most coveted benefit, stock options. Those benefits somehow survived the reduction of employee benefits. As a matter of fact, they never even reported them on the income statement of the company. Nor did they have to. So the top dogs had the incentive to continue the practice of making the financial statements look good.
But what about the men and women who invested for their future in a company that now has a stock price of less than $10, when they bought it at $100 plus? Will they ever recover any of those losses? Statistically, no. For every 'class action' suit to recover losses of this type, the average claimant gets 6 on the dollar. That won't make much difference for the hundreds of thousands of dollars lost per person in the recent scandals.
Where we will see the effect of these conspiracies is in the corporate culture of America, and specifically, in the relationship between the employees and their employer. As the merger mania clearly becomes an experiment that failed, American workers will demand more for their former invisibility on the corporate balance sheet. No longer will employees invest their money primarily in the stock of the companies they work for when making their investment decisions for their 401K plans. No longer will employees have much loyalty to their employers. And benefits and their employer's promises to keep them will be the new bargaining chip. Migration from employer to employer will be the norm. Long-term employment history with one employer will be looked at as a detriment in hiring. It's a sad state of affairs, but one that corporate America has brought upon itself.