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The trend changed partly due to the 80s cult of shareholder value worship enthused by Milton Friedman / Reagan that permanently altered the social contract of c

The trend changed partly due to the 80s cult of shareholder value worship enthused by Milton Friedman / Reagan that permanently altered the social contract of corporations. If the only responsibility of corporations is shareholders, then long-term growth and investment is difficult to justify given market tendencies to be so short-term focused over time.

eru 6y ago
Shareholder value capitalism was only ever an aspiration. In practice companies have always been run for the benefit of corporate insiders. Not the widows and orphans who might own a few stocks.
- scott_s 6y ago
  These days, those corporate insiders have a lot of their wealth tied up their company's stock. So while it's a terrible way to think about running a company, a lot of companies are run that way because it benefits the people running them.
  - eru 6y ago
    > These days, those corporate insiders have a lot of their wealth tied up their company's stock. Yes, that helps a bit to align incentives. In practice, it's only a start. (It's especially interesting because investors these days tend to be broadly diversified and typically own shares in all the companies in an industry. Managers are typically highly concentrated.)
    - scott_s 6y ago
      I think you're coming to the opposite conclusion I implied. Because corporate insiders' wealth is tied up in company stock, they are incentivized to optimize for the value of the stock, which may be counter to the long-term health of the company.
      - eru 6y ago
        > [...], they are incentivized to optimize for the value of the stock, which may be counter to the long-term health of the company. That would imply that shareholders are idiots. And especially that all hedgefunds are idiots as well. Otherwise you'd expect a lot of short-selling once the stock price exceeds the long term health, wouldn't you?
        scott_s 6y ago
        If everyone was rational and had full information, yes. But it can take a while for outsiders to catch on, and people are not fully rational. For two high profile examples, look at GE and Boeing. They had a reckoning, but it took a long time.
        eru 6y ago
        We don't need everyone to be fully rational. Especially not when short selling is safe and easy to do. With proper shortselling, a single entity can benefit from muckracking. Of course, short selling is the first thing that gets banned at the drop of a hat. To give a timeless example: https://www.google.com/search?q=france+bans+short+selling https://www.google.com/search?q=france+bans+short+selling You are right that it can take a while in practice. We should make it easier for the reckoning to come.

eru 6y ago

Shareholder value capitalism was only ever an aspiration. In practice companies have always been run for the benefit of corporate insiders. Not the widows and orphans who might own a few stocks.

scott_s 6y ago
These days, those corporate insiders have a lot of their wealth tied up their company's stock. So while it's a terrible way to think about running a company, a lot of companies are run that way because it benefits the people running them.
- eru 6y ago
  > These days, those corporate insiders have a lot of their wealth tied up their company's stock. Yes, that helps a bit to align incentives. In practice, it's only a start. (It's especially interesting because investors these days tend to be broadly diversified and typically own shares in all the companies in an industry. Managers are typically highly concentrated.)
  - scott_s 6y ago
    I think you're coming to the opposite conclusion I implied. Because corporate insiders' wealth is tied up in company stock, they are incentivized to optimize for the value of the stock, which may be counter to the long-term health of the company.
    - eru 6y ago
      > [...], they are incentivized to optimize for the value of the stock, which may be counter to the long-term health of the company. That would imply that shareholders are idiots. And especially that all hedgefunds are idiots as well. Otherwise you'd expect a lot of short-selling once the stock price exceeds the long term health, wouldn't you?
      - scott_s 6y ago
        If everyone was rational and had full information, yes. But it can take a while for outsiders to catch on, and people are not fully rational. For two high profile examples, look at GE and Boeing. They had a reckoning, but it took a long time.
        eru 6y ago
        We don't need everyone to be fully rational. Especially not when short selling is safe and easy to do. With proper shortselling, a single entity can benefit from muckracking. Of course, short selling is the first thing that gets banned at the drop of a hat. To give a timeless example: https://www.google.com/search?q=france+bans+short+selling https://www.google.com/search?q=france+bans+short+selling You are right that it can take a while in practice. We should make it easier for the reckoning to come.