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I think you are correct. The game has changed in a significant way. The only thing a C-corp executive can defend is increasing shareholder value. Everything

by dhimes 9y ago

I think you are correct. The game has changed in a significant way. The only thing a C-corp executive can defend is increasing shareholder value. Everything else she does must be a driver of this value. This represents a change in the way of thinking of the executive team. It used to be you could buy a share of a company like Google and be paid out (in dividends) a portion of profits. The stock, in and of itself, was valuable. Now that's no longer the case. The stock only makes you money if you can find some schmuck to give you more than you paid for it. So the primary pressure is not on the CEO to make more profits, but to make the stock price go up. Correlated we would hope, but not the same. My feeling is that this is what happened to Yahoo. It was, by all accounts, a decent company. But an activist investor got involved, started running negative PR on the CEO and it became "groupthink" that he was incompetent, and he was finally ousted. So the t->infinity result is that the drive is to increase stock prices. In the board room, the question is always, "how can we increase the price of our stock?" Anything that is not illegal is on the table. If you don't take those actions, the board will find somebody who will. That's why, when bad things happen, it's really a strawman argument to blame "greed" and "lack of ethics." Anything that shouldn't occur needs to be regulated against, or it will occur. Call it the many-worlds hypothesis of evil.

abandonliberty 9y ago
Hmm... I think your conclusion applies equally to boosting stock value and boosting stock returns/company value. The key difference being that boosting stock market value includes a PR component, in addition to any core value creation the company may do.
- dhimes 9y ago
  I see your point. The conclusion^h^h^h^h^h^h^h^h^h rant below stands somewhat apart from the rant above it.
solatic 9y ago
> In the board room, the question is always, "how can we increase the price of our stock?" Anything that is not illegal is on the table. If you don't take those actions, the board will find somebody who will. A rising tide floats all boats, though. The problem that the board has is the same problem that any large company has - when you can't familiarize yourself with everyone and every part of your business, you tend to replace them with abstractions, and when you replace them with abstractions, you tend to emotionally disengage from the faceless abstractions and make decisions affecting those abstractions without a real understanding of how it affects emotional change on the ground. This is why, let's call it activist management, is important. When management cares about its direct reports, and pushes their interests up the hierarchy, it leads to longer-term thinking. When people at the top of the hierarchy replace voice-listening with number-reading, they start to make shorter-term decisions.

by dhimes 9y ago

abandonliberty 9y ago

Hmm... I think your conclusion applies equally to boosting stock value and boosting stock returns/company value. The key difference being that boosting stock market value includes a PR component, in addition to any core value creation the company may do.

dhimes 9y ago
I see your point. The conclusion^h^h^h^h^h^h^h^h^h rant below stands somewhat apart from the rant above it.

solatic 9y ago

> In the board room, the question is always, "how can we increase the price of our stock?" Anything that is not illegal is on the table. If you don't take those actions, the board will find somebody who will. A rising tide floats all boats, though. The problem that the board has is the same problem that any large company has - when you can't familiarize yourself with everyone and every part of your business, you tend to replace them with abstractions, and when you replace them with abstractions, you tend to emotionally disengage from the faceless abstractions and make decisions affecting those abstractions without a real understanding of how it affects emotional change on the ground. This is why, let's call it activist management, is important. When management cares about its direct reports, and pushes their interests up the hierarchy, it leads to longer-term thinking. When people at the top of the hierarchy replace voice-listening with number-reading, they start to make shorter-term decisions.