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Corporate Governance – portrayed in the individual cultural and legal framework, from the standpoint of equity capital.

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Buhlmann's Corner


Financial Market - a fable for our time

Last week, caught by the rain, I moved from my seat on a bench in a Bavarian beer garden to one in the back of the bar - and who should I meet but Financial Market. And just because it was raining, we chatted a bit.

He wondered if I couldn’t ask out loud, out there under the chestnut trees, whether and why Société Générale could no longer cover Jérôme Kerviel’s current account. “Actually, I’d like to join you for a bit. Would that be OK?” I replied. “Sure! just go to the kitchen and see if you can get a few accounts set up. Then slip into the basement and look for the appropriate shareholders. Have I already told you that in the stock market assets are only moved about and redistributed? Don’t forget that some people there plan and invest long-term. But what happens in the period until the end of the long term does not interest them. Even the managers’ behaviour doesn’t matter a whit to them. They don’t sell or buy, don’t vote in general meetings, but at best buy placebos to keep the watchdogs happy.” I should pay particular attention to these people, Financial Market told me; they were very important, because they held the shares that were to be destroyed. For a small fee he could then make them worthless. And there were earnings on both sides of the trade - first selling and then buying.

“Why do they let you do that?” I asked. “It’s obvious,” he said. “After all, the managers like the rental fee right away, and by the time things are sold everything looks different anyway. And you know, the shares don’t belong to anyone directly.” “What?” I said, surprised. “Don’t they belong to all the boys and girls in the basement?” “Yes, yes ...” he hastily assured me. “Well, perhaps they don’t actually belong to them, but they are trustees. And anyway, they often come by to chat with me. But most of them also have nice offices on the street. And even some politician or another drops in sometimes.”

Somehow Financial Market felt the last remark to have been important. Before he sent me out on the road to ask questions there about the Société Générale, I wanted to clarify two other things. “Do the final beneficiaries, i.e. the Ergo, Parmalat and Santander pensioners or the mothers and fathers that pay their monthly pennies into the German DEKA, the French Eichhorn or all of the superannuation schemes, actually know that with their savings stocks can be bought, and then taken to you in the basement of the bar to to be destroyed for a fee?” “Yeah, yeah,” he said very quickly. “Aren’t they all part of the financial market? Don’t they each benefit?”

Now that I’ve finally met someone who has understood all that and knows the responsibilities exactly, I can look in the mirror in the morning again and calmly wash my hands.