TEPCO: Fun with Crony Capitalism and Institutionalized Moral Hazard

Sorry, but I can't resist asking: Feel Sorry for Tokyo Electric Power Co? (A cross-post from http://bit.ly/feNIgN) (Note; tongue firmly in cheek: see my straight post earlier: Institutionalized moral hazard: Fun with Nuclear Power in Japan, or, prepare for a glowing twilight, with scattered fallout in the morning – TT's Lost in Tokyo http://bit.ly/hvvWHU)

Well, maybe they weren't WISE to build a row of nuclear power plants on a coastline known for earthquakes and a history of prior massive tsunamis, but surely the earthquake and tsunami are not TEPCO's fault, right? And it's not THEIR fault that:

– their founding shareholders took advantage of limited liability incorporation laws that free shareholders from any concern about personal liability (and, as TEPCO's shares are fully paid-up, from any future cash calls by management) that would otherwise exist for private enterprises (http://mises.org/Community/blogs/tokyotom/search.aspx?q=limited+liability);

– the Japanese government allowed them to qualify as a 'public, listed company' and thus widely raise capital from the public, under regulations that have the effect of insulating managers from shareholders and creating barriers to entry);

– the Japanese government licensed TEPCO as a public utility, effectively granting it a monopoly in the greater Tokyo area,

– the Japanese government ensured that TEPCO could raise the long-term capital necessary to fund the nuclear power plants, by authorizing to set rates guaranteeing TEPCO's returns on its investments by government, by licensing the power plants themselves and approving their location, suppliers and safety, and by giving TEPCO express liability caps for damages that radiation releases may cause others if an act of nature occurs?

And surely none of the concatenation of these acts of government, the construction of the plants and the earthquake or tsunami is the PERSONAL responsibility of any of TEPCO's emploees, managers or executives, right? (Much less of the poor shareholders!)

After all, having a corporation means that we get to embark on mega-projects that pose mega-risks, all without any real people being personally responsible! How else, without these layers of protection for personal responsibility provided by government, would progress ever be made?

Thus, we can see clearly that this was all nothing more than a simple ACCIDENT, in which TEPCO – whoever the heck we consider that to mean – is the BIGGEST VICTIM – both of the earthquake/tsunamis and of Japanese silly government and citizens and customers who now clamor for TEPCO to pour more BILLIONS down a money hole! Outrageous – all of these snivelling people should just go away, and lump it, so that TEPCO can more easily figure out what it should do next. Cleanups are for governments and the smaller victims.

Such a wonderful system, allowing such marvelous works! Though unfortunate calculations might be made, the system allows us to quickly move ahead, as if nothing had happened. Naturally, TEPCO might require further assistance from government and government-protected banks, so that TEPCO can build more engineering marvels.

The Board Director Training Institute (BDTI) is a "public interest" nonprofit in Japan dedicated to training about directorship, corporate governance, and related management techniques. It is certified by the Japanese government to conduct these activities as a regulated nonprofit. Read a summary about BDTI here, and see a menu of its services for both corporations and investors here.

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