The battle for the soul of capitalism : how the financial system undermined social ideals, damaged trust in the markets, robbed investors of trillions--and what to do about it

There is no one better qualified to tell us about the failures of the American financial system and the grotesque abuses that have taken place in recent years than John Bogle, who as founder and former chief executive of the Vanguard mutual funds group has seen firsthand the innermost workings of the financial industry. A zealous advocate for the small investor for more than fifty years, Bogle has championed the restoration of integrity in industry practices. As an astute observer and commentator, he knows that a trustworthy business and financial complex is essential to America’s continuing leadership in the world and to social and economic progress at home. This book tells not just a story about what went wrong but, more important, the story of why we lost our way and of how we can right our course. Bogle argues for a return to a governance structure in which owners’ capital that has been put at risk is used in their interests rather than in the interests of corporate and financial managers. Given that ownership is now consolidated in the hands of relatively few large mutual and pension funds, the specific reforms Bogle details in this book are essential as well as practical. Every investor, analyst, Wall-Streeter, policy maker, and businessperson should read this deeply informed book. The legendary founder of Vanguard “presents an insider’s view of what’s wrong with corporate America and what can be done to improve it” (Burton G. Malkiel, author of A Random Walk Down Wall Street ). New York Times -bestselling author of Enough and The Little Book of Common Sense Investing John Bogle has seen firsthand the innermost workings—and grotesque abuses—of the financial industry, and is renowned as an advocate for the small investor and for the restoration of integrity to the system. He knows that a trustworthy business and financial complex is essential to America’s continuing leadership in the world and to social and economic progress at home. In this book he reveals what went wrong and how we lost our way—and more importantly, how we can right our course. He argues for a return to a governance structure in which owners’ capital that has been put at risk is used in their interests rather than in the interests of corporate and financial managers. Given that ownership is now consolidated in the hands of relatively few large mutual and pension funds, the specific reforms Bogle details in this book are essential as well as practical—and should be considered by every investor, analyst, Wall Streeter, policy maker, and businessperson. “Deserves attention in the precincts of power.”— Publishers Weekly There is no one better qualified to tell us about the failures of the American financial system and the grotesque abuses that have taken place in recent years than John Bogle, who as founder and former chief executive of the Vanguard mutual funds group has seen firsthand the innermost workings of the financial industry. A zealous advocate for the small investor for more than fifty years, Bogle has championed the restoration of integrity in industry practices. As an astute observer and commentator, he knows that a trustworthy business and financial complex is essential to America's continuing leadership in the world and to social and economic progress at home. This book tells not just a story about what went wrong but, more important, the story of why America lost its way and of how it can right its course. Bogle argues for a return to a governance structure in which owners' capital that has been put at risk is used in their interests rather than in the interests of corporate and financial managers. Given that ownership is now consolidated in the hands of relatively few large mutual and pension funds, the specific reforms Bogle details in this book are essential as well as practical. Every investor, analyst, Wall-Streeter, policy maker and businessperson, should read this deeply informed book CONTENTS 7 FOREWORD 9 ACKNOWLEDGMENTS 11 INTRODUCTION. Capitalism and American Society 15 PART I:CORPORATE AMERICA 30 CHAPTER I. What Went Wrong in Corporate America? “A Pathological Mutation” 30 CHAPTER 2. Why Did Corporate America Go Wrong? “Somebody’s Gotta Keep an Eye on These Geniuses” 56 PART TWO. Investment America 98 CHAPTER 4. What Went Wrong in Investment America? King Kong, or Mighty Joe Young? 98 CHAPTER 5. Why Did Investment America Go Wrong? The Momentary Precision of Stock Prices Versus the Eternal Importance of Intrinsic Values 119 CHAPTER 6. How to Fix Investment America “Capitalism Without Owners Will Fail” 144 PART THREE. Mutual Fund America 168 CHAPTER 7. What Went Wrong in Mutual Fund America? The Triumph of Salesmanship over Stewardship 168 CHAPTER 8. Why Did Mutual Fund America Go Wrong? “Losing Our Way” 196 CHAPTER 9. How to Fix Mutual Fund America “Organized, Operated, and Managed” for Shareholders 218 PART FOUR.Conclusion 244 CHAPTER 10. American Capitalism in the Twenty-first Century “To Begin the World Anew” 244 NOTES 270 INDEX 280 What Went Wrong In Corporate America? : A Pathological Mutation -- Why Did Corporate America Go Wrong? : Somebody's Gotta Keep An Eye On These Geniuses -- How To Return Corporate America To Its Owners : Owners Of The World, Unite! -- What Went Wrong In Investment America? : King Kong, Or Mighty Joe Young? -- Why Did Investment America Go Wrong? : The Momentary Precision Of Stock Prices Versus The Eternal Importance Of Intrinsic Values -- How To Fix Investment America : Capitalism Without Owners Will Fail -- What Went Wrong In Mutual Fund America? : The Triumph Of Salesmanship Over Stewardship -- Why Did Mutual Fund America Go Wrong : Losing Our Way -- How To Fix Mutual Fund America : Organized, Operated, And Managed For Shareholders -- American Capitalism In The Twenty-first Century : To Begin The World Anew. John C. Bogle. Includes Bibliographical References (p. [243]-251) And Index. Bogle, founder of Vanguard and developer of the first index mutual fund, believes that corporate America has gone "profoundly wrong ... stressing form over substance, prestige over virtue, money over achievement." Bogle's solutions include increased board oversight, the return to long-term investing, increased emphasis on cash dividends, and valuation based on the capacity of assets to generate cash flow, which creates wealth for investors. He even suggests increasing taxation of short-term gains to discourage the quick sale of securities