As the fabric of capitalism unravels, the emperor is not the only one with no clothes.

Some CEOs, corporate board members, accountants, lawyers, bankers – even the President and Vice President of the United States – seem willing to engage in a little larceny if sufficiently profitable.

But amidst all the bankruptcies, stock options, insider trading, multimillion-dollar loans, cooked books, outright theft and fraud, are some overlooked irrational billing practices.

They are the fees hapless investors must pay their money managers – trust officers, financial advisors and brokers.

Should they be paid for services? Of course. The question is, by what formula?

“You get what you measure.” Measure profit, you get profit – or know why not.

What do we measure when paying money managers?

No business owner I know pays a store, or apartment, manager on the basis of the capital value of that business or property. Gross sales income or profit maybe – but certainly not the number of sales. Not a percentage of the value of unsold inventory in the warehouse.

Money managers are supposed to turn assets into profits. That’s what a store, or apartment, manager does for an owner. Money managers are running a kind of business for their owners. Of course, preservation of principal is their highest responsibility. But their primary job, like any manager, is to turn the largest possible prudent profit.

Unlike other managers, however, money managers get paid – like the lawyers who profit from bankruptcy proceedings – regardless of how well the business does. Pay bears almost no relationship to their performance.

Even if clients make no profit, even if they experience erosion of principal, money managers continue to enjoy an almost undiminished, steady cash flow from an increasing number of ordinary American investors.

Trust officers pay themselves a percentage of the client’s total investment regardless of the officer’s competence or the client’s return. That’s like paying a store manager a percentage of the value of unsold inventory.

Brokers charge a fixed amount per transaction – buys and sells, coming and going – whether the investment turns a profit or not.

It’s not surprising money managers would want this sweet deal. Who wouldn’t? Especially when you consider their wretched performance. If doctors did as poorly 80 percent of us would be dead. What is surprising is that so many clients agree to it.

Occasionally there’s a story of someone who relies upon the financial advice of a kindergarten class, a chimpanzee’s pointing, or throwing darts at a newspaper’s stock page. It produces a higher return than they would get from most fund managers.

Mutual funds called “index funds” mirror a stock index, such as the S&P 500. They guarantee the investor will do as well as the index – no better, no worse. You don’t have to be a Harvard MBA even to manage such a fund, let alone invest in one.

Shouldn’t that be the benchmark? What kind of return can any old fool – or monkey – get with no financial advice? What the money managers ought to be paid for their services is a percentage of how much better than that they are able to do for you (greater gains in an up market, lesser losses coming down).

Give them 50 percent, even 90 percent, of those marginal improvements. Then pay would be keyed to their performance – like a sales person’s commission, or a store manager’s bonus for a good year.

Trying to bargain with money managers over such terms, given their anticompetitive agreements with each other not to bargain, is like trying to negotiate a rewrite of a clause in your car insurance policy.

While we’re trying to figure out what went wrong with capitalism’s accounting systems, let’s see if we can make the entry fees a little more rational for America’s investors as well.

Nicholas Johnson teaches at the University of Iowa College of Law, searches for a fairly paid money manager, and manages his Web site at www.nicholasjohnson.org