The Wall Street Journal has noted that New York Attorney General Eliot Spitzer’s investigation into kickbacks and other improper incentives in the insurance industry is widening and moving toward the area of employee-benefits.

Since there are real problems with the proper exercise of fiduciary responsibility for 401(k) plans, there could be long-term implications for capital flows, especially in the equity market.

The misuse of stock buybacks and options has been possible because of uncertain responsibilities of the multiple fiduciaries between the worker-investor in 401(k) and similar tax deferred retirement plans and corporate managers

(See: The Agency Problem).

With legislative initiatives regarding excessive executive compensation on one end and with Mr. Spitzer stirring up the question of fiduciary responsibility of investment intermediaries on the other, light might eventually be shed on how long-term investors have been defrauded by stock buyback/options schemes.

(See: The Great Misleading.)

This entry was posted on Sunday, October 24th, 2004 at 8:24 pm and is filed under Insurance Executives. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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