Top positive review
An excellent examination of Cronyism and De Facto White Collar Theft in the Financial Sectors (with Solutions!!)
Reviewed in the United States on October 30, 2011
Bogle, in his book, makes an excellent case that shareholders and investors in the financial sector have been taken for a ride by those in positions of fiduciary responsibility (i.e., primarily high level corporate officers and fund managers). Bogle separates his book into four sections, one examining shenanigans at the individual corporate level (mostly involving corporate governance), the second involving shenanigans by the mutual fund industry, the third involving those by other sectors of the investment industry and the fourth, most refreshingly, proscribing a set of reforms to mitigate against the problems discussed in the previous three chapters.
Bogle, in the first three chapters, does an excellent job at overviewing and elaborating on the so many ways that high-level corporate officers and fund managers have been robbing their shareholders and investors blind. These include packing corporate boards with dependent cronies that serve as de facto "yes men" in setting up their own outrageously high (at least independently of performance, which seems to bear no resemblance to performance) pay and bonuses, setting up "off book" accounts intermingled with corporate funds and then using personal funds to engage in non-market price transactions with their own companies (which, of course, always benefit them at the expense of the company), for example. It should be stressed, though, that Bogle not only examines commonly known scams such as the two above mentioned, but a whole slew. Many of these are not very well known to even many astute investors. Of course this does not bean he lists them all. The reason for this it that the book was written in 2002, immediately after the high-tech bubble of the late 1990s burst. Hence some shenanigans that came to light since then, for example the practice of "back dating", go unmentioned.
In the final section of the book Bogle provides an extensive list of solutions to these many problems. Many have been already proposed by others such as Warren Buffet. Example includes providing shareholders with a greater voice, in terms of voting, with regard to officer remuneration. Another is to establish de facto independent pay boards that determine officer remuneration. A third is to separate the audit and consulting functions performed by auditing firms.
The sad fact of the matter is that since this book was published about 10 years just about the only reform that Bogle has mentioned, despite the self-evident merits of the reforms he discusses, has been the portion of Sarbanes-Oxley that breaks out auditing firm's audit and consulting functions. Bogle concludes, in the final paragraphs of his book that the reforms he lays out will, eventually, be passed in his opinion because they are beneficial to share and mutual fund owners and are essential to keeping the investing public's faith in the financial markets. Unfortunately he also states, quite explicitly, that these reforms may take a very, very long time to pass. This is not very reassuring to those investors who have lost money in the past and will continue to lose money as a result of these shenanigans.