Corporations Hoarding Cash

    There have been a flood of news articles in the financial press about the amount of cash being held by American corporations.  A Business Week article (July 18, 2005 at 80) noted that tech companies alone in the United States held over $230 billion in cash or cash equivalents at the end of the first quarter of 2005.  Microsoft alone holds $38 billion and this is after they paid $35 billion in special dividends.  The Economist (July 9, 2005 at 61) noted that American corporations have turned into net savers.  Corporations in other developed countries are following suit.  The corporations are not using the money to invest in operations or research and development or even in acquisitions.  They are sitting on the cash and bemoning a lack of investment opportunities.  Of all the recent shameful developments in the business community -- the financial fraud, the excessive compensation of senior executives, the flat returns -- this is the best evidence of a lack of managerial accountability to shareholders.  The managers of these corporations should turn the money back over to their shareholders if they cannot invest the funds in profitable projects that create shareholder value.  Their failure to do so is painful and stark evidence that accountability to shareholders is less than what it should be.  Manager do not maximize shareholder value when they hoard cash.