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"Meanwhile real performance was declining. From 1933 to 1976, real compound annual return on the S&P 500 was 7.5 percent. Since 1976, Martin writes, the total r
by acslater00 15y ago
"Meanwhile real performance was declining. From 1933 to 1976, real compound annual return on the S&P 500 was 7.5 percent. Since 1976, Martin writes, the total real return on the S&P 500 was 6.5 percent (compound annual)."
Hmm...where have I seen those numbers before. Oh right! He's measuring his control period from the bottom of the great depression. Sounds legitimate to me!
This is so hacky it makes me laugh. You can argue that a focus on short-term shareholder value is bad for various reasons, but a focus on long-term shareholder value is incontrovertibly good for shareholders, long-term. In practice, it is also basically equivalent to the author's other view of focusing on "customers", whatever the hell that means. Or focusing on "real performance" metrics like profit, as though you can do one without doing the other.
If CEO pay is tied to long-term stock performance, the problem of gaming the short term earning expectations goes away. Full stop.
My new years resolution is to not click on link-bait anymore.
- adamtmca 15y agoThis guy was on the CBC a few months ago and I was basically screaming at my radio. One choice portion of the show was when the interviewer (who was lapping it up) asked what would be a good alternative to the stock market. He proposed bonds. He even went so far as to say that bonds would reduce the amount of volatility we see in the economy by reducing the impact of the "expectations market". Yes. Replacing equity financing with debt sounds like a reasonable solution to reducing volatility. What an absolute fraud.
- maigret 15y agoBut ultimately stocks have to pay a dividend. I agree that a bond-only system would lead to a lot of junk bonds, but mainly because lot of stocks are also junk. In any case, some bonds belong to a balanced portfolio. Too much people have too much of stock in their portfolio (also too much real estate, but that's another topic).
- sitkack 15y agoAt least is spawned a discussion here, but the lead is so full of flawed reasoning by analogy that it made me sick as a rainbow.
- kevin_morrill 15y agoYes, I found this silly in all the same ways. In the one talk I've seen Jack Welch give he said himself the only form of job security is customers. The article's author is attacking a straw man. He slams Welch's management of the GE as short sighted, but the only facts in support are the deterioration under Immelt's management. Ultimately, in the long term customers and shareholders have aligned interests in most all cases.