5 ms·

If you had your savings in this company as a shareholder, and if you knew that the company could survive and maybe prosper (unlikely in case of LS) by reducing

by sinatra 11y ago

If you had your savings in this company as a shareholder, and if you knew that the company could survive and maybe prosper (unlikely in case of LS) by reducing its cost of customer service by outsourcing it, then would you not support this move? This is not very different from when you decided to buy a decent quality product made in China when you could have bought a slightly better quality product made in USA for 2X or 3X the price. I'm obviously guessing here to be more dramatic, but the point is true in general. Cost has always been a major factor in many decisions we make as individuals or organizations. And for a company (which has fiduciary duty to its shareholders), cost is definitely a more important factor than being able to hire Americans.

JonFish85 11y ago
If you have savings in this company as a shareholder, you're going to lose your savings. The only people who will make money at this point are the VCs, who by law can't have their "savings" invested in the company. If you're not a VC holding shares at the company you're going to be wiped out via dilution or multipliers in the event of an exit, and god forbid they raise MORE money, because the terms on that deal are going to be pretty rough. Even if the company manages to turn itself around, older existing shares will probably be wiped out just due to dilution in retaining its executives and share-backed loans, or, again, if it has to raise more money, terms on new money.
- sinatra 11y ago
  Whether a shareholder will get any returns in Living Social is not what I'm talking about. As a company, their job is to do whatever they legally can to protect (and grow) a shareholder's investment. If hiring Americans goes against that, then they should not hire Americans.
  - JonFish85 11y ago
    I was just responding to the first part of your post, specifically around a shareholder had their savings invested in the company. Management has a legal responsibility to do what's best for the company, yes, but that often is at odds with an investor who got in before the company turned sour.
  - st3v3r 11y ago
    If hiring Americans goes against that, maybe they shouldn't be in business.
    - davidw 11y ago
      Thus causing even fewer Americans to have jobs. Perfect demonstration of why protectionism is such a terrible idea.
      - st3v3r 11y ago
        Or, allowing someone who is better at it to take their place, giving more Americans jobs.
    - deleted 11y ago
      [deleted]
acdha 11y ago
There's no legal concept of that oft-asserted “fiduciary duty to maximize shareholder profits” and for a very good reason: it's almost never clear what the correct decision is until afterwards. In this case, what are the odds that an overseas call center would cost more than anticipated (often the case), lower the quality of service and thus the company's reputation, or actually be enough to stop the downwards spiral rather than just signaling that you're in a low value-add commodity business?
- sinatra 11y ago
  > what are the odds that an overseas call center would cost more than anticipated (often the case), lower the quality of service and thus the company's reputation, or actually be enough to stop the downwards spiral rather than just signaling that you're in a low value-add commodity business? I would imagine that a company as large as LS would have used some analysis and external/internal data to estimate the overall costs of such a move (which would include the cost of lower quality of service etc). And they must have still found the move cost-effective. It's slightly insulting to LS employees to think that they would know less about the cost-effectiveness of this move than us. Moreover, this move seems drastic. When you're making such drastic moves, you're likely doing so to be able to survive. In such cases, lower quality of customer service and poor signals etc take a back seat.
  - acdha 11y ago
    The argument isn't that LS management knows less but rather that they're trying to balance multiple demands. An investor's interests end when they cash out, so it's very common for CEOs to face pressure to make decisions which are likely to be profitable in the short-term, but unless they're planning to leave at the same time rhey have to consider the risks to long-term sustainability. Things like customer support and R&D are classic targets for that because they tend to involve many jobs which don't directly generate revenue, and the negative effects often aren't visible for years but the savings show up in the next quarterly report.
- swampthing 11y ago
  Sorry, this is not getting at the core of your assertion, but what do you mean by: > There's no legal concept of the oft-asserted “fiduciary duty" ... I can assure you that "fiduciary duty" is very much a legal concept.

by sinatra 11y ago

JonFish85 11y ago

If you have savings in this company as a shareholder, you're going to lose your savings. The only people who will make money at this point are the VCs, who by law can't have their "savings" invested in the company. If you're not a VC holding shares at the company you're going to be wiped out via dilution or multipliers in the event of an exit, and god forbid they raise MORE money, because the terms on that deal are going to be pretty rough. Even if the company manages to turn itself around, older existing shares will probably be wiped out just due to dilution in retaining its executives and share-backed loans, or, again, if it has to raise more money, terms on new money.

sinatra 11y ago
Whether a shareholder will get any returns in Living Social is not what I'm talking about. As a company, their job is to do whatever they legally can to protect (and grow) a shareholder's investment. If hiring Americans goes against that, then they should not hire Americans.
- JonFish85 11y ago
  I was just responding to the first part of your post, specifically around a shareholder had their savings invested in the company. Management has a legal responsibility to do what's best for the company, yes, but that often is at odds with an investor who got in before the company turned sour.
- st3v3r 11y ago
  If hiring Americans goes against that, maybe they shouldn't be in business.
  - davidw 11y ago
    Thus causing even fewer Americans to have jobs. Perfect demonstration of why protectionism is such a terrible idea.
    - st3v3r 11y ago
      Or, allowing someone who is better at it to take their place, giving more Americans jobs.
  - deleted 11y ago
    [deleted]

acdha 11y ago

There's no legal concept of that oft-asserted “fiduciary duty to maximize shareholder profits” and for a very good reason: it's almost never clear what the correct decision is until afterwards. In this case, what are the odds that an overseas call center would cost more than anticipated (often the case), lower the quality of service and thus the company's reputation, or actually be enough to stop the downwards spiral rather than just signaling that you're in a low value-add commodity business?

sinatra 11y ago
> what are the odds that an overseas call center would cost more than anticipated (often the case), lower the quality of service and thus the company's reputation, or actually be enough to stop the downwards spiral rather than just signaling that you're in a low value-add commodity business? I would imagine that a company as large as LS would have used some analysis and external/internal data to estimate the overall costs of such a move (which would include the cost of lower quality of service etc). And they must have still found the move cost-effective. It's slightly insulting to LS employees to think that they would know less about the cost-effectiveness of this move than us. Moreover, this move seems drastic. When you're making such drastic moves, you're likely doing so to be able to survive. In such cases, lower quality of customer service and poor signals etc take a back seat.
- acdha 11y ago
  The argument isn't that LS management knows less but rather that they're trying to balance multiple demands. An investor's interests end when they cash out, so it's very common for CEOs to face pressure to make decisions which are likely to be profitable in the short-term, but unless they're planning to leave at the same time rhey have to consider the risks to long-term sustainability. Things like customer support and R&D are classic targets for that because they tend to involve many jobs which don't directly generate revenue, and the negative effects often aren't visible for years but the savings show up in the next quarterly report.
swampthing 11y ago
Sorry, this is not getting at the core of your assertion, but what do you mean by: > There's no legal concept of the oft-asserted “fiduciary duty" ... I can assure you that "fiduciary duty" is very much a legal concept.