Thursday, June 10, 2010

Evil Shareholders

Being a shareholder gets a bad rap when it comes to populist politics sometimes. Whenever a company runs into trouble, the public and politicians demand that the shareholders be punished. Why? The average shareholder is just mom and dad who have a pension or own a mutual fund. All they wanted was a place to store their savings to gain a return on their investment. They might not even know they own part of the company if they invest through an institution.

So, unless you've been living in a cave, BP/Transocean had an oil rig disaster that exploded back in April and has been spewing oil into the gulf since. Numerous attempts have been made to fix the leak, but there has only been limited success. It is quite a tragedy for those who lost their lives, the animals, and the businesses affected by it. So,

So who are these shareholders anyway? They must be real bastards to invest in an oil company, right? Well as it would turn out, there are quite a few U.S. pension funds who now have a capital loss of 40% since $90 billion in market capitalization has been wiped out. Things haven't been helped much with Obama repeatedly beating the drum with his oil bashing and his other highly professional comments such as "whose ass to kick."

But, if the company can handle both the costs and the dividend, then it is not a politician's business to say what a company should do with its stakeholder's money.

As an update, BP bowed to political pressure and cut its dividend for year and set up a $20 billion fund.

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