Brad DeLong writes that Ford, whose equity is valued by the stock market at $18 billion, is sitting on $23 billion in cash, and observes that if the managers were actually working for the shareholders, as they are legally supposed to, they would pay out most or all of that cash hoard in one monster special dividend. If $18 billion were paid out, the current stockholders would have cashed out their current equity in full and still own the company.
Question: Is this in fact possible, or do Ford’s debt covenants limit its capacity to shed its cash? If they don’t, the bond underwriters weren’t doing their jobs, since the debt of a cashless Ford would surely be junk.
None of that changes the basic validity of Dan Gross’s point that every dollar paid out in dividends by companies such as Ford and, especially, GM, which are likely to default on their pension obligations, is a dollar taken from workers who have earned it.