I was sitting on a plane recently and had one of those brainwaves you can get in idle moments: all American taxpayers are shareholders now. Whether you’re holding the shares in a 401(k), IRA, or just paying taxes, you now own a chunk of any bank, insurance company or other firm that received TARP bailout money. You might think all those companies are garbage – as many people do – or you might be hopeful that the investment will pay dividends. Either way, you didn’t necessarily choose to buy these companies with bailout money – but nevertheless it’s happened.

Here’s the question I think will dominate us for the next decade: What does it mean to wear both hats, taxpayer and corporate shareholder, like it or not?

I’m no fan of American International Group (AIG), but I’ve been impatient with the recent kerfuffle over their executive bonuses. Nobody wants to hear about “bonuses”, like free Easter candy, getting handed out to AIG executives. But you have to wonder: Did we behave rationally as AIG shareholders – and we are ALL shareholders – in the process to wrest that bonus money back?

We loaned them money to keep them afloat, but then we got busy picketing their offices, demanding top executives spend time explaining themselves, doing everything we can to drag down their stock value. I’m glad we got some of that bonus money back, but I’m not sure that the energies devoted to that weren’t more about relieving a lot of our pent-up frustration as taxpayers, while ignoring our role as current, if reluctant, shareholders.

I don’t know how we should wear this new dual role, but it’s a fascinating question. Should we all get our companies insured through AIG? Should we switch our car insurance to AIG’s recently re-branded “21st Century Insurance” division for that? For that matter, should we ditch our old checking accounts and move them to Bank of America (BAC), or consider BAC first when a need arises for investing, private or other corporate banking services?

The whole thing reminds me of that famous corporate raider Carl Icahn. A true rabble-rouser, he bought his way onto the boards of dozens of companies – RJR Nabisco, TWA, Motorola, Time Warner, Viacom, Western Union, Marvel Comics, Texaco, the list goes on – and then he reformed what he bought from within. You couldn’t call it a bailout, per se, but it bears an uncanny resemblance to the “tough love” we’re applying to battered TARP companies today. They definitely need to be shaken up and even fundamentally restructured, but there’s a kernel of value there that drove the purchase in the first place.

I’m curious for your opinion. How should we analyze and appropriately play our new roles as taxpayers AND shareholders? Now that we have invested, how can we get the most out of that investment?

[image: Cowboy Hats by Nika on flickr]
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The dual role has always existed really, just in more subtle ways. It is arguably more prevalent now, but we are also more aware of the goings on at these companies now thanks to easier access to information.

As for AIG and the like and the criticism of their bonuses and various bailout monies received. Whether it was written into the original agreement or not, the act of accepting/taking any bailout monies subjects these companies to additional scrutiny by we the taxpayer/shareholder. In AIG's case, given they are the biggest example, how can a company justify paying bonuses which are presumably based on performance, when the company shows the losses they did? This is what is at the root of people's angst.

Now, in fairness to some of these executives, a good portion of their annual income comes from these bonuses and is based on a sliding scale. However, in these cases an executive will receive a bonus every year, it will just be less. Perhaps the anger over bonuses shoud turn into reform of how these executvies are paid?

It is all just a big numbers game and ultimately what is best for the company is the rule, which perhaps we should be applauding? Afterall, if a company scrapes through hard times because they are allowed to 'pay their executives less' via the sliding bonus scale, they are actually improving their bottom line are they not?

The one thing the bailouts have done is increase the number of 'investors' out there, but it has not raised those new investor's level of understanding at the same time. Ultimately this is our own responsibility, which if the bailout had been put to a vote as it should have, would have been better accomplished.

We the  shareholders of these companies need to sell our shares as soon as we possibly can.  Hopefully without a loss and then to get out of our investment.  I disdain central planning from Washington bureaucrats and politicians.  A good example  of this is Senator Dodd not  remembering the  AIG  executive pay  provision from his own banking committee.

Its the old story if I send one dollar to Washington how much of that original dollar do I get back from my investment ? 

In the end these bailouts will result in higher prices for all of us because it will be horribly managed and keep afloat companies that should have been broken up or disbanded.

The new dual role, or the wearing of two hats, won't change my economic decisions at all. I'll continue to vote with my dollars in the same way, to gain the best total utility. Good chance many other people feel, more or less, the same way.

Profit comes first when investing. That's the irony of a capitalistic economy. By constantly seeking profit, I'm not only serving myself, but also the economy as a whole. Being an indirect and unwilling participant in the bailouts of AIG and BAC makes no difference. Out of my control. However, should I be able to personally profit from the demise or restoration to good health of these companies, I'll certainly do it, just like with any other company.

And it's hard to beat corbin2's excellent observation:
"The dual role has always existed really, just in more subtle ways."

I'm with you, Corbinb2. I, too, would like to see this as an opportunity to boost financial literacy among all voters. Not only would it help us better evaluate how the government invests our tax dollars, but it'd also help us manage our personal finances more effectively.

TheMechanic and Pauly B, you guys gave me a lot to think about, too. You make a solid case for not adjusting consumer choices to favor these hobbled companies unduly.