Politics makes fools of us all. From pushing Part D to blocking Plan B, from trying to free drug reimportation to restricting sales of OTC decongestants, our politicians have demonstrated an uncanny ability to pick the most wrong path, expertly avoiding gridlock only long enough to promote policies that will cause the most confusion and inconvenience at the highest price.

This past month, they’ve managed to avoid inflicting themselves on the Pharma industry by grandstanding against the oil industry. It’s a seasonal occurrence: “driving season” coincides with increased gasoline prices and Congress calls for an investigation. At no point does Congress consider its own complicity in this issue (if you think it’s a coincidence that we’re forcing ethanol blends in our gas and putting high tariffs on foreign sources of ethanol, then you probably don’t know anything about Iowa’s electoral history in presidential elections), and never looks beyond the numbers at the gas station.

As columnist and economics professor Brad De Long recently put it, “Democrats are (because of the environmentalist wing of the party) generally in favor of higher gasoline taxes and higher gasoline prices-except when gasoline prices are high. Republicans are in favor of letting oil markets ‘work’-except when gasoline prices are high.”

So now we get the idiocy of a proposed “windfall tax,” because “oil companies are making too much money.” We’ve had the requisite photo-ops of senators and representatives standing in front of a gas station (while their aides keep the SUVs idling nearby), and soon we’ll have the requisite investigation to determine that the laws of supply and demand are working just fine. Meanwhile, the gas station down the street from my home has been open for only one of the past seven days, because those ethanol regulations have created a shortage in properly blended gasoline.

I bring this up because it contrasts with the recent mini-revolt at Pfizer. At the company’s annual shareholders meeting in April, two proxy advising companies called for the removal of board members as a response to the retirement package that awaits chairman and chief executive officer Hank McKinnell in 2008. In one of those unfathomable (to the rest of us) lottery moments, Mr. McKinnell will get to pick between a $6.5 million annual pension or a lump sum of $83 million. Since Pfizer’s stock hasn’t done well in recent years, some shareholders don’t think he should be so rewarded. For some reason, the AFL-CIO decided to protest outside the meeting, to make themselves feel relevant.

Of course, Mr. McKinnell didn’t get to this point by letting a PowerBall machine in the local 7-11 randomly pick numbers; he shepherded Pfizer to the point at which its revenues are more than 50% higher than that of its closest competitor.

Now, those of you who have been reading this column for a while (or my Top Companies reports every summer) know that I’m not a fan of Pfizer’s “biggest is best” strategy. To quickly recap: I don’t believe R&D is scalable (after a certain point), and I don’t believe that a large buy-in strategy is workable in the long-term.

But, you know what? That’s why I don’t invest in Pfizer’s stock! I’m not trained in high finance, but I look at the acquisitions, the pipeline, the generic attrition, and I figure that’s not a stock to put my money in. And, you know what else? Other people disagree with me! They may find value in other aspects of Pfizer, or maybe they’re just more optimistic about the company’s ability to develop and market new products. Maybe they’re smarter than I am. Maybe some of them are dumber, and just invest in whatever the “biggest” company is in any field.

That’s how the market works. People buy shares, or they sell them (well, they occasionally short them, which gets Biovail really mad). At the end of the day, the stock price is what it is.

If the shareholders have a gripe with management, they can take it up at shareholders meetings. Obviously, a single shareholder isn’t going to make any impact; it’s the large-block holders (think state pension groups) that can start to cause trouble. But it was the shareholders that raised the protest against Mr. McKinnell’s pension package, not Congress.

Gil Roth
Editor
gil@rodpub.com