On Jan. 18, the people of Oxford County’s River Valley were rocked by the news that the 1,100 workers at the Rumford paper mill would no longer be employed by MeadWestvaco. Fortunately, it appears they will still be receiving paychecks.

Pulp and paper workers in Maine have become resilient to such news and what it might portend. In recent years, the Rumford mill has been an asset of Boise Cascade, then Mead and then the merged firm of MeadWestvaco. Now a $14 billion hedge fund called Cerberus Capital Management is buying the Maine mill along with four others and 900,000 acres of out-of-state forestland for $2.3 billion.

But there’s something different about this most recent acquisition, and it has made people understandably uneasy. The difference is the enigmatic nature of the buyer. We all understand publicly traded companies like MeadWestvaco. They have a brand. They have a Web site. They have quarterly conference calls with investors and analysts. They have a board of directors elected by the shareholders.

And they file regular reports with the Securities and Exchange Commission, reports that may be accessed online and contain a host of information not only about financial performance, but also a very helpful section called “Management Discussion and Analysis” that offers glimpses into a company’s strategic thinking.

To many, the SEC is just another in the alphabet soup of federal agencies whose relevance to us in western Maine is often obscure. However, in the wake of Enron, WorldCom and countless other corporate scandals, the arcane work of the SEC has gained more attention.

Rise of the hedge fund

Scandals in corporate America have hurt stock values, and people with money are looking for better places than the stock market to stash and grow their wealth. Enter a teeming mass of venture capital firms, private equity partnerships and hedge funds. Such funds outperformed the traditional stock market indices during the scandal-plagued years following the popping of the high-tech bubble. There are now 8,000 hedge funds, and money is streaming into them.

The term “hedge fund” has come to cover all manner of investment vehicles with scant regulation. They cater to institutional investors and rich people, typically those with more than $1 million to invest. Hedge fund managers are well-rewarded for handling money and making smart investments. Customary fees are two percent of managed money per year and 20 percent of any profits realized.

Because of a series of problems at such funds and because of the immense growth of this investment vehicle, the SEC decided to require registration of hedge funds on a 3-2 vote last October. Beginning a year from now, hedge funds will be required to file modest amounts of information with the SEC – who the managers are, the size of the fund, the number of investors.

However, these reports are no substitute for the overwhelming levels of disclosure, reporting and accountability of a publicly traded company. No “Management Discussion and Analysis” will have to be filed by firms like Cerberus. There are some good reasons for this: Competition in American industry is brutal. Should we force owners of capital to tell us their underlying thoughts about what they expect to do with the assets they buy? Do they really even know? What if their plans change?

All this points to a problem. People other than investors have been using the information in the public company reports mandated by the SEC. Reporters have used them to tease out industry trends. Communities learn about corporate strategy. Workers get hints about the security of their jobs.

Bruce Bryant is not only an active union member at the Rumford mill but also state senator for northern Oxford County. He puts his finger on the anxiety of his neighbors when he says, “Basically, we’ve been reduced down to a stock option. … People can buy us and sell us.”

Sure, this has always been true. But before Cerberus, one could better discern the Rumford mill owner’s intentions. Now, people just have to take Cerberus’s word for it and they aren’t saying much.

Ownership society?

President Bush is promoting an “Ownership Society,” rightly proclaiming the benefits of giving people control of and responsibility for their assets and their futures. Ownership responsibility demands more of people who own large assets that affect lots of people’s lives.

But the SEC is not well-established for encouraging responsible ownership. As the agency points out, its primary mission “is to protect investors and maintain the integrity of the securities markets.” This is important work, but protecting investors is not the same as reducing the unease and discomfort felt by people, like those in the River Valley, who feel tossed about by the forces of global capitalism.

We live in a dynamic world, and even the most creative use of federal government power will not give us the answers we crave. But is the best we can do a resigned humbling before the power of capital? I think not.

Richard A. Bennett, a former president of the Maine Senate, is a consultant in corporate governance. He lives in Norway, and may be contacted at rbennett@megalink.net.

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