QuoteThe World's Dumbest Idea (https://web.archive.org/web/20141206170332/https://www.gmo.com/America/CMSAttachmentDownload.aspx?target=JUBRxi51IIBoe1yul9uERnfCmQoglFl9k5qwJSfHx8w%2fWCnFLmEb2MC9GoFnZVlslR5NzCRY1ajgn503icBv67VQg%2fNVUMWsYvi3A2%2fL%2bS28A7Pthjp7LmOfLYQfHMJc)
When it comes to bad ideas, finance certainly offers up an embarrassment of riches – CAPM, Efficient Market
Hypothesis, Beta, VaR, portfolio insurance, tail risk hedging, smart beta, leverage, structured finance products, benchmarks, hedge funds, risk premia, and risk parity to name but a few. Whilst I have expressed my ire at these concepts and poured scorn upon many of these ideas over the years, they aren't the topic of this paper.
Rather in this essay I want to explore the problems that surround the concept of shareholder value and its maximization. I'm aware that expressing skepticism over this topic is a little like criticizing motherhood and apple pie. I grew up in the U.K. watching a wonderful comedian named Kenny Everett. Amongst his many comic creations was a U.S. Army general whose solution to those who "didn't like Apple Pie on Sundays, and didn't love their mothers" was "to round them up, put them in a field, and bomb the bastards," so it is with no small amount of trepidation that I embark on this critique.
Before you dismiss me as a raving "red under the bed," you might be surprised to know that I am not alone in questioning the mantra of shareholder value maximization. Indeed the title of this essay is taken from a direct quotation from none other than that stalwart of the capitalist system, Jack Welch. In an interview in the Financial Times from March 2009, Welch said "Shareholder value is the dumbest idea in the world."
Sorry, it's a PDF and rather long. It makes a couple points in detail that I thought I had observed to be true of the market: first, that companies that explicitly try to maximize shareholder value don't generally deliver better shareholder value than those that do not; second and related, that trying to maximize short-term gains actually hurts shareholders in the long run.
You're posting this on the wrong board, man. It's the wrong choir to preach.
BvS, both of those points are quite trite. The guy sounds in that one paragraph like he is setting up the world's biggest strawman, so I didn't bother reading on. Did he have any insights that were not blindingly obvious?
I don't believe it's the dumbest idea in the world.
I agree that the concept of companies operating solely to "Maximize Shareholder Value" is the world's dumbest idea, in that it's a massive strawman created by liberals/leftists and is not a reflection of how companies in the wild actually operate.
His first paragraph kind of discredits him. He seems to be incapable of appreciating the "all models are wrong, but some are useful" concept.
Quote from: OttoVonBismarck on December 07, 2014, 10:18:41 AM
I agree that the concept of companies operating solely to "Maximize Shareholder Value" is the world's dumbest idea, in that it's a massive strawman created by liberals/leftists and is not a reflection of how companies in the wild actually operate.
Yeah it probably is not solely to maximize shareholder values but to what extent is it true? I mean how massive is the strawman? Since companies are supposed to be beholden to the shareholders surely it is not entirely a fabricated idea? I mean those leftists have plenty of anecdotes they can haul out whenever they want to discuss this topic.
Quote from: OttoVonBismarck on December 07, 2014, 10:18:41 AM
I agree that the concept of companies operating solely to "Maximize Shareholder Value" is the world's dumbest idea, in that it's a massive strawman created by liberals/leftists and is not a reflection of how companies in the wild actually operate.
Well there are companies like IBM who seem to be burning bridges and risking serious long term issues just to appear a bit better on the next quarterly report thanks to cutting on wage costs.
I think the problem is that managers who are payed after such reports are not motivated to think long-term.
Quote from: Tamas on December 07, 2014, 03:01:57 PM
Quote from: OttoVonBismarck on December 07, 2014, 10:18:41 AM
I agree that the concept of companies operating solely to "Maximize Shareholder Value" is the world's dumbest idea, in that it's a massive strawman created by liberals/leftists and is not a reflection of how companies in the wild actually operate.
Well there are companies like IBM who seem to be burning bridges and risking serious long term issues just to appear a bit better on the next quarterly report thanks to cutting on wage costs.
I think the problem is that managers who are payed after such reports are not motivated to think long-term.
Right. So the contention is that it is not a reflection seems to be counterbalanced by plenty of anecdotes that it is a reflection. But hey I am no expert on corporate behavior. I can only go by what people tell me.
IBM also helped Hitlar!!!1111 wah wah wah
Quote from: grumbler on December 07, 2014, 10:12:52 AM
BvS, both of those points are quite trite. The guy sounds in that one paragraph like he is setting up the world's biggest strawman, so I didn't bother reading on. Did he have any insights that were not blindingly obvious?
What is blindingly obvious and how is this trite? I don't think so but I am aware I do not share your genius. Mind stating what is blindingly obvious and why his points are trite?
Quote from: The Brain on December 07, 2014, 03:07:10 PM
IBM also helped Hitlar!!!1111 wah wah wah
That is why if I boys get any IBM products I am going to wait until they are asleep and then burn them. Boy will they learn their lesson when their new server array gets torched.
Quote from: Valmy on December 07, 2014, 03:07:18 PM
Quote from: grumbler on December 07, 2014, 10:12:52 AM
BvS, both of those points are quite trite. The guy sounds in that one paragraph like he is setting up the world's biggest strawman, so I didn't bother reading on. Did he have any insights that were not blindingly obvious?
What is blindingly obvious and how is this trite? I don't think so but I am aware I do not share your genius. Mind stating what is blindingly obvious and why his points are trite?
It trite to observe that companies that "explicitly try to maximize shareholder value don't generally deliver better shareholder value than those that do not," both because there are very few companies that explicitly try to do this, and because making some goal explicit doesn't actually change anything. It is policies and decisions that matter, not explicitly-stated goals. It doesn't take genius to realize that.
It is trite to observe that companies which pursue short-term gain do so at the expense of long-term gain. Even subgeniuses can see this.
Hell, even you'd have probably seen both of these points if you had just put a peepsight in your belly button instead of making an asshat post on Languish.
Quote from: The Brain on December 07, 2014, 10:17:44 AM
I don't believe it's the dumbest idea in the world.
Yeah agreed, I have like a couple each week way worse the one than in the OP. :rolleyes:
Some of them sometimes involve women, those seem to be particularly bad ones. :D
I think the problem is not maximising shareholder value but maximising short-term shareholder value. Perhaps we need CRD-style regulations for all listed companies, not just financial institutions (it requires that a substantial portion of listed companies' CEOs' remunration to be deferred over a period of 5 years and based on performance over such period).
The companies that do not maximize shareholder value, whether by share value increase or higher return, shall lose their market share to those who do.
It is simple economic Darwinism.
Quote from: Siege on December 07, 2014, 05:15:29 PM
The companies that do not maximize shareholder value, whether by share value increase or higher return, shall lose their market share to those who do.
It is simple economic Darwinism.
Not necessarily. Consumers purchase on the basis of price and quality, not return on equity. It's theoretically very possible for a company to produce a world class product at a reasonable price (or a commodity product at an awesome price) and transfer most or all of the profit to its employees.
The principle problem I have with this whole Shareholder Value (tm) discussion, which I've mentioned before, is that the people doing the church lady bitching should put their money where their mouths are. If you don't care about how much your money earns, that's great, more power to you. Start up a company that overpays and never fires anyone, or alternatively find an investment fund that only puts your money in "socially responsible" companies.
But socially responsible companies suck!
Quote from: Admiral Yi on December 07, 2014, 05:47:55 PM
The principle problem I have with this whole Shareholder Value (tm) discussion, which I've mentioned before, is that the people doing the church lady bitching should put their money where their mouths are. If you don't care about how much your money earns, that's great, more power to you. Start up a company that overpays and never fires anyone, or alternatively find an investment fund that only puts your money in "socially responsible" companies.
Lulz, how Romneytacular. Don't like America's business model? Borrow money from your parents and go start your own company.
Quote from: Valmy on December 07, 2014, 03:08:16 PM
Quote from: The Brain on December 07, 2014, 03:07:10 PM
IBM also helped Hitlar!!!1111 wah wah wah
That is why if I boys get any IBM products I am going to wait until they are asleep and then burn them. Boy will they learn their lesson when their new server array gets torched.
:lol: :thumbsup:
Quote from: Admiral Yi on December 07, 2014, 05:47:55 PM
Quote from: Siege on December 07, 2014, 05:15:29 PM
The companies that do not maximize shareholder value, whether by share value increase or higher return, shall lose their market share to those who do.
It is simple economic Darwinism.
Not necessarily. Consumers purchase on the basis of price and quality, not return on equity. It's theoretically very possible for a company to produce a world class product at a reasonable price (or a commodity product at an awesome price) and transfer most or all of the profit to its employees.
The principle problem I have with this whole Shareholder Value (tm) discussion, which I've mentioned before, is that the people doing the church lady bitching should put their money where their mouths are. If you don't care about how much your money earns, that's great, more power to you. Start up a company that overpays and never fires anyone, or alternatively find an investment fund that only puts your money in "socially responsible" companies.
The problem with your problem is that you ignore the issue of individually rational decisions amounting to irrational social outcome. Not every problem can be solved with an alternative business model.
Quote from: Tamas on December 07, 2014, 03:01:57 PM
Well there are companies like IBM who seem to be burning bridges and risking serious long term issues just to appear a bit better on the next quarterly report thanks to cutting on wage costs.
I think the problem is that managers who are payed after such reports are not motivated to think long-term.
Sort of. I think it's got to do to a large extent with the almighty bonus. I have seen horrible business decisions made because someone had 'x' on their goals list so 'x' had to be achieved no matter the risk in order to guarantee the massive bonus that person thinks they are entitled to.
Quote from: DGuller on December 07, 2014, 07:51:22 PM
The problem with your problem is that you ignore the issue of individually rational decisions amounting to irrational social outcome. Not every problem can be solved with an alternative business model.
We weren't talking about every problem, we were talking about very specific problems. And the very specific problems we were talking about can be ameliorated by people acting in accordance with their self proclaimed principles.
Quote from: Caliga on December 07, 2014, 07:55:28 PM
Quote from: Tamas on December 07, 2014, 03:01:57 PM
Well there are companies like IBM who seem to be burning bridges and risking serious long term issues just to appear a bit better on the next quarterly report thanks to cutting on wage costs.
I think the problem is that managers who are payed after such reports are not motivated to think long-term.
Sort of. I think it's got to do to a large extent with the almighty bonus. I have seen horrible business decisions made because someone had 'x' on their goals list so 'x' had to be achieved no matter the risk in order to guarantee the massive bonus that person thinks they are entitled to.
I agree. I've come to believe that quantifying the goals is often a disastrous mistake, unless you're running a factory or something. What eventually happens is that only quantifiable goals get the love, and intangible assets get destroyed in the pursuit of tangible numbers.
If maximising shareholder value should not be the top priority, then what should be?
Quote from: Martinus on December 07, 2014, 04:38:26 PM
I think the problem is not maximising shareholder value but maximising short-term shareholder value. Perhaps we need CRD-style regulations for all listed companies, not just financial institutions (it requires that a substantial portion of listed companies' CEOs' remunration to be deferred over a period of 5 years and based on performance over such period).
Human and short term are synonymous Martinus. Human maggots shouldn't be allowed a free rein in anything other their their private lives, which they can spend, or expand, or wreck, however they see fit. Anything else that transcend their narrow, limited an egotistical existences should be heavily regulated.
A corporation is nothing more than a fulcrum for those who control it; multiplying their strengths and/or their weaknesses. Therefore, granting those entities anything beyond limited latitude is a recipe for disaster. The implosion of 2008 should be evocative enough to illustrate my point...
G.
Quote from: Grallon on December 07, 2014, 09:53:49 PM
should be heavily regulated.
By...other humans? :hmm:
Quote from: garbon on December 07, 2014, 10:05:41 PM
By...other humans? :hmm:
By other humans not directly involved in the... proceeds. Yes... most definitely.
Believe or not garbon, we humans *are* capable of thinking outside the box. But only, and solely, if we're not emotionally or otherwise directly involved/invested in whatever is under current scrutiny.
G.
Regulations will kill us all, and our economy, and hand over our collective head to China in a platter.
Quote from: Siege on December 07, 2014, 10:15:20 PM
Regulations will kill us all, and our economy, and hand over our collective head to China in a platter.
You overvalue your collective heads. China only wants your money :contract:
And our white women.
Quote from: Monoriu on December 07, 2014, 10:18:49 PM
Quote from: Siege on December 07, 2014, 10:15:20 PM
Regulations will kill us all, and our economy, and hand over our collective head to China in a platter.
You overvalue your collective heads. China only wants your money :contract:
You are wrong.
They want power, and like all primitive cultures, the prestige of power.
They want recognition of being the greatest power, and they want the world to speak Chinese and consume their culture.
Of course, they don't recognize the reason the world speaks englese is the end of a long process in which the British enjoyed a large technological advantage that China just doesn't have.
The only good news is that Chinese population is growing old and that will eventually turn down their aggressiveness.
We just need to survive the next 30 years or so. Then they will be old weak, senile and lame people just like Europe.
While America still have a 2.5 pop grow.
Quote from: Admiral Yi on December 07, 2014, 10:33:30 PM
And our white women.
Too bad they usually just get the white men.
Quote from: Siege on December 07, 2014, 10:15:20 PM
Regulations will kill us all, and our economy, and hand over our collective head to China in a platter.
Yeah no government interference in the Chinese Economy.
Quote from: Monoriu on December 07, 2014, 09:07:17 PM
If maximising shareholder value should not be the top priority, then what should be?
There ya go, Mono. Explain it to them.
Another solution would be to nationalise and centralise auditing. Because what the big four allow companies to get away with is a disgrace.
Quote from: DGuller on December 07, 2014, 09:04:58 PM
Quote from: Caliga on December 07, 2014, 07:55:28 PM
Quote from: Tamas on December 07, 2014, 03:01:57 PM
Well there are companies like IBM who seem to be burning bridges and risking serious long term issues just to appear a bit better on the next quarterly report thanks to cutting on wage costs.
I think the problem is that managers who are payed after such reports are not motivated to think long-term.
Sort of. I think it's got to do to a large extent with the almighty bonus. I have seen horrible business decisions made because someone had 'x' on their goals list so 'x' had to be achieved no matter the risk in order to guarantee the massive bonus that person thinks they are entitled to.
I agree. I've come to believe that quantifying the goals is often a disastrous mistake, unless you're running a factory or something. What eventually happens is that only quantifiable goals get the love, and intangible assets get destroyed in the pursuit of tangible numbers.
Yeah. The Economist covered this paper too:
QuoteNo value
Dec 3rd 2014, 13:02 BY BUTTONWOOD
Timekeeper
DO companies exist merely to generate economic returns to their owners? The concept of "shareholder value" suggests this should be their primary focus. But in a hard-hitting note, James Montier of GMO, the fund management group, suggests this is "The World's Dumbest Idea".
As Mr Montier argues, the shareholder value concept arose in part as a way to get round the agent-principal problem - that executives will run firms for their own benefit, rather than for that of their owners. The idea goes back to Adam Smith who wrote that
being the managers rather of other people's money than of their own, it cannot well be expected that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own......Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company.
In the 1980s, the worry was that executives were too focused on their own perks (jets, pensions etc) and on empire-building. From this arose the idea that executive pay should be linked to the share price, in the form of options. And what has been the result? Mr Montier defines the era of "managerialism" as from 1940-1990 and the sharehoder value era as the period since then. (One could argue with this timing, although he claims the results are robust as to the timing of the cross-over.) Real returns were slightly higher in the era of managerialism and much higher if one focuses on earnings growth rather than valuation. (A share price increase can either be the result of earnings growth, or the market placing a higher value on a given level of earnings. Such higher valuations can be transitory.)
So shareholder returns haven't gone up in the era of "shareholder value". CEO pay has, though. Hard to believe but CEOs got by in the 1970s on $1m or so; their total remuneration has grown eightfold in real terms since then. The focus on the share price has led to an unhealthy concentration on meeting the short term earnings per share target; surveys have shown that executives will reject a project with a positive rate of return if it damages the ability to meet the next quarter's eps. Money has been returned to shareholders (in the form of buy-backs) while business investment has declined; as a proportion of GDP, it is still lower than at any time in the 1947-2007 period.
CEOs can be forgiven for pursuing a "get rich quick" strategy; since the 1970s, the average tenure of a CEO has fallen from almost 12 years to six. Why would they care about long-term value? And while buy-backs may return money to those shareholders who take advantage of them, they may damage long-term investors; the peak for buy-backs was in early 2008, just when the market was about to crash. As Warren Buffett has said, this was the equivalent of buying dollar bills for $1.10.
So the whole concept should really be renamed "CEO value"; they have been the main beneficiaries. And all this has led to growing inequality; two-thirds of those in the top 0.1% of earners have been executives or those working in finance. And that trend, which has spilled out to the rest of the developed world, is leading to the growing anger of voters and the resistance to globalisation which may eventually cause even more damage to business and investors.
I think it is linked to the whole super-manager idea of Piketty's. In general I don't think we should care about remuneration beyond having a minimum wage, but I think if pay structures are also having effects like historically low levels of investment and of real pay for workers then that's a concern. Ironically insisting executives have 'skin in the game' is probably one of the problems.
Well as I said earlier, they should have a skin in a game, it's just a question of how you define the game. Making their bonuses dependent on long term performance is one idea. Taking auditing out of the hands of private consultancies (so there is less chance to get away with massaging the numbers so that you meet short term targets) is another.
QuoteIronically insisting executives have 'skin in the game' is probably one of the problems.
Why not; Taleb argues that if it's a function in so many other professions, why not the captains of industry? Why should they get a pass on the damage done?
Though I've done it before, I am going to post this again for these types of threads. Some ideas are never that new. :sleep:
https://www.youtube.com/watch?v=vcEOsGvT0qA
Quote from: Tonitrus on December 08, 2014, 03:33:55 AM
Though I've done it before, I am going to post this again for these types of threads. Some ideas are never that new. :sleep:
https://www.youtube.com/watch?v=vcEOsGvT0qA
Yeah, that's what I was saying upthread. I'd argue that this is not a business problem, though; it is a bureaucracy problem. The further the top-level decision-makers get from those producing the product, the more their decisions are based on factors other than what is best for their organization (i.e. "bureaucratic imperatives"). It is often most visible in business, but is probably even more powerful in government and the military.
Quote from: Siege on December 07, 2014, 05:15:29 PM
It is simple economic Darwinism.
Companies pass on genetic mutations to their offspring?
I knew some people believe companies are people but this is getting a bit ridiculous dont you think.
Quote from: Sheilbh on December 08, 2014, 02:24:30 AM
I think it is linked to the whole super-manager idea of Piketty's. In general I don't think we should care about remuneration beyond having a minimum wage, but I think if pay structures are also having effects like historically low levels of investment and of real pay for workers then that's a concern. Ironically insisting executives have 'skin in the game' is probably one of the problems.
It depends who "we" are. If we as shareholders dont care then we get over paid executives that dont return any value for the premium - which comes right out of our pockets.
If we as political group don't properly regulated properly around the manner in which managerial perks and remuneration are taxed then we get the very odd result of low income earners paying more in tax than high income earners with the undesireable effects that come with that.
Quote from: CountDeMoney on December 08, 2014, 02:35:27 AM
QuoteIronically insisting executives have 'skin in the game' is probably one of the problems.
Why not; Taleb argues that if it's a function in so many other professions, why not the captains of industry? Why should they get a pass on the damage done?
Because while there is the perception they have "skin" in the game the really dont. Bad year? Just dont exercise your options until you get another spike in share value. Stock options were created by the managerial elite for the managerial elite to allow quick profit taking.
Quote from: Tonitrus on December 08, 2014, 03:33:55 AM
Though I've done it before, I am going to post this again for these types of threads. Some ideas are never that new. :sleep:
https://www.youtube.com/watch?v=vcEOsGvT0qA
Your Barbara Stanwyk boner still hasn't gone down, that's all. :P
Quote from: Martinus on December 07, 2014, 04:38:26 PM
I think the problem is not maximising shareholder value but maximising short-term shareholder value.
This.
Quote from: crazy canuck on December 08, 2014, 09:22:33 AM
Quote from: CountDeMoney on December 08, 2014, 02:35:27 AM
QuoteIronically insisting executives have 'skin in the game' is probably one of the problems.
Why not; Taleb argues that if it's a function in so many other professions, why not the captains of industry? Why should they get a pass on the damage done?
Because while there is the perception they have "skin" in the game the really dont. Bad year? Just dont exercise your options until you get another spike in share value. Stock options were created by the managerial elite for the managerial elite to allow quick profit taking.
Thank you, Sheilbh. :mellow: :P
Quote from: Tonitrus on December 08, 2014, 03:33:55 AM
Though I've done it before, I am going to post this again for these types of threads. Some ideas are never that new. :sleep:
https://www.youtube.com/watch?v=vcEOsGvT0qA
:cheers:
Quote from: grumbler on December 08, 2014, 09:02:41 AM
Quote from: Tonitrus on December 08, 2014, 03:33:55 AM
Though I've done it before, I am going to post this again for these types of threads. Some ideas are never that new. :sleep:
https://www.youtube.com/watch?v=vcEOsGvT0qA
Yeah, that's what I was saying upthread. I'd argue that this is not a business problem, though; it is a bureaucracy problem. The further the top-level decision-makers get from those producing the product, the more their decisions are based on factors other than what is best for their organization (i.e. "bureaucratic imperatives"). It is often most visible in business, but is probably even more powerful in government and the military.
It might be a bureaucratic problem in the public sector but in the private sector managers think more about their stock option grants and other bonuses which are calculated on short term metrics and may be very different from what is best in the long term interest of the company.
Quote from: Grallon on December 07, 2014, 09:53:49 PM
Quote from: Martinus on December 07, 2014, 04:38:26 PM
I think the problem is not maximising shareholder value but maximising short-term shareholder value. Perhaps we need CRD-style regulations for all listed companies, not just financial institutions (it requires that a substantial portion of listed companies' CEOs' remunration to be deferred over a period of 5 years and based on performance over such period).
Human and short term are synonymous Martinus. Human maggots shouldn't be allowed a free rein in anything other their their private lives, which they can spend, or expand, or wreck, however they see fit. Anything else that transcend their narrow, limited an egotistical existences should be heavily regulated.
A corporation is nothing more than a fulcrum for those who control it; multiplying their strengths and/or their weaknesses. Therefore, granting those entities anything beyond limited latitude is a recipe for disaster. The implosion of 2008 should be evocative enough to illustrate my point...
Why not regulate their personal lives too? This all sounds awfully convenient for you.
Quote from: crazy canuck on December 08, 2014, 09:32:25 AM
Quote from: grumbler on December 08, 2014, 09:02:41 AM
Yeah, that's what I was saying upthread. I'd argue that this is not a business problem, though; it is a bureaucracy problem. The further the top-level decision-makers get from those producing the product, the more their decisions are based on factors other than what is best for their organization (i.e. "bureaucratic imperatives"). It is often most visible in business, but is probably even more powerful in government and the military.
It might be a bureaucratic problem in the public sector but in the private sector managers think more about their stock option grants and other bonuses which are calculated on short term metrics and may be very different from what is best in the long term interest of the company.
It is a bureaucratic problem in the private sector because private sector managers often think more about their stock option grants and other bonuses which are calculated on short term metrics and may be different from what is best for the long term interests of the company. This is an example of a "bureaucratic imperative," which I mentioned in the post you responded to. And, as I said, this is nothing new or unique to the private sector.
Quote from: CountDeMoney on December 08, 2014, 09:26:56 AM
Thank you, Sheilbh. :mellow: :P
What CC said. Plus executives used to receive a salary and a cash bonus often tied to strategic targets set by the board, as well as all the great perks and benefits. Now lots of their pay and especially the bonuses are share-based and are linked to earnings per share or a metric like that. So the metric they're judged on and the remuneration they receive are tied to shareholder value - according to VM's paper around two-thirds of executive pay is now options or share-based.
Quote from: Sheilbh on December 08, 2014, 10:57:58 AM
Quote from: CountDeMoney on December 08, 2014, 09:26:56 AM
Thank you, Sheilbh. :mellow: :P
What CC said. Plus executives used to receive a salary and a cash bonus often tied to strategic targets set by the board, as well as all the great perks and benefits. Now lots of their pay and especially the bonuses are share-based and are linked to earnings per share or a metric like that. So the metric they're judged on and the remuneration they receive are tied to shareholder value - according to VM's paper around two-thirds of executive pay is now options or share-based.
Then why did you write "Ironically insisting executives have 'skin in the game' is probably one of the problems"? :mellow:
So re you fer it, or agin' it?
Against it. Don't tie their rewards to shareholder value (which didn't really happen prior to the 80s) and you'll get them focusing a lot less on shareholder value.
Quote from: Sheilbh on December 08, 2014, 11:33:50 AM
Against it. Don't tie their rewards to shareholder value (which didn't really happen prior to the 80s) and you'll get them focusing a lot less on shareholder value.
:yes:
And then they might focus a lot more on the business itself which in turn will benefit shareholders.
Quote from: grumbler on December 08, 2014, 10:56:57 AM
Quote from: crazy canuck on December 08, 2014, 09:32:25 AM
Quote from: grumbler on December 08, 2014, 09:02:41 AM
Yeah, that's what I was saying upthread. I'd argue that this is not a business problem, though; it is a bureaucracy problem. The further the top-level decision-makers get from those producing the product, the more their decisions are based on factors other than what is best for their organization (i.e. "bureaucratic imperatives"). It is often most visible in business, but is probably even more powerful in government and the military.
It might be a bureaucratic problem in the public sector but in the private sector managers think more about their stock option grants and other bonuses which are calculated on short term metrics and may be very different from what is best in the long term interest of the company.
It is a bureaucratic problem in the private sector because private sector managers often think more about their stock option grants and other bonuses which are calculated on short term metrics and may be different from what is best for the long term interests of the company. This is an example of a "bureaucratic imperative," which I mentioned in the post you responded to. And, as I said, this is nothing new or unique to the private sector.
While there may be some similarity between bureaucratic imperatives and executives enriching themselves you miss the point badly if you treat them as being the same.
Quote from: Valmy on December 07, 2014, 02:55:30 PMYeah it probably is not solely to maximize shareholder values but to what extent is it true? I mean how massive is the strawman? Since companies are supposed to be beholden to the shareholders surely it is not entirely a fabricated idea? I mean those leftists have plenty of anecdotes they can haul out whenever they want to discuss this topic.
I think it's largely all derived from one or two business writers in the 80s and caught steam from there. Actual CEOs largely will say this is not their goal in running their companies. So I would say it's mostly a strawman.
I think that what the shareholders want collectively is a factor in corporate behavior, but I think that the ownership scheme for large publicly traded corporations that have a diffuse ownership base (i.e. not Wal-Mart or Ford in which a founding family has a huge chunk of voting shares such that outside investors cannot actually prevail in any up or down vote) means that what the shareholders want is not easily or effectively translated into how the corporation behaves. I would instead say an amalgamation of what upper management, larger institutional investors, the board of directors and a few other stakeholders influence how corporations behavior, and they all largely behave differently.
When used as a derisive the concept of "maximizing shareholder value" is largely read to mean a corporation is a slave to its total return (combination of share price increase and dividends) to investors, often in a short term manner.
Corporations all seem to have different strategies. Some really want to maximize market share, even when it means lower profits and thus lower return. Some want to minimize volatility at the cost of losing greater profit potential. AEP (major electric power utility) for example has said it will not build more power plants in "rate deregulated" states. Even though deregulation may offer the potential for greater profits, AEP wants to be a rate regulated utility, which means essentially guaranteed profits (and no direct competition) but at more controlled rates. AEP has said it intends to start moving in to other rate regulated businesses like pipelines and transmission in States where energy deregulation has already happened or appears likely to happen.
I don't think there is any one set "goal" of all CEOs of say, Fortune 500 companies. Instead there are diverse types of investors who invest in these companies and lots of different managers and directors who have different goals in mind for their businesses.
Quote from: crazy canuck on December 08, 2014, 11:58:33 AM
While there may be some similarity between bureaucratic imperatives and executives enriching themselves you miss the point badly if you treat them as being the same.
While there may be some similarities between intellectual arguments and arguments by assertion, you miss the point badly if you think that arguments by assertion are persuasive.
Quote from: Sheilbh on December 08, 2014, 11:33:50 AM
Against it. Don't tie their rewards to shareholder value (which didn't really happen prior to the 80s) and you'll get them focusing a lot less on shareholder value.
We agree on something economy-related with Sheilbh :o
Quote from: grumbler on December 08, 2014, 12:26:04 PM
Quote from: crazy canuck on December 08, 2014, 11:58:33 AM
While there may be some similarity between bureaucratic imperatives and executives enriching themselves you miss the point badly if you treat them as being the same.
While there may be some similarities between intellectual arguments and arguments by assertion, you miss the point badly if you think that arguments by assertion are persuasive.
Your rabbit hole is never far away is it Grumbles.
You should take what you think are clever linguistic tricks and go elsewhere. The adults are talking.
Quote from: Tamas on December 08, 2014, 12:31:09 PM
We agree on something economy-related with Sheilbh :o
:o
I think chances are we agree on more than we suspect. But that'd make for less fun conversations :lol: :hug:
Probably. :cheers:
Quote from: OttoVonBismarck on December 08, 2014, 12:24:07 PM
Quote from: Valmy on December 07, 2014, 02:55:30 PMYeah it probably is not solely to maximize shareholder values but to what extent is it true? I mean how massive is the strawman? Since companies are supposed to be beholden to the shareholders surely it is not entirely a fabricated idea? I mean those leftists have plenty of anecdotes they can haul out whenever they want to discuss this topic.
I think it's largely all derived from one or two business writers in the 80s and caught steam from there. Actual CEOs largely will say this is not their goal in running their companies. So I would say it's mostly a strawman.
I think that what the shareholders want collectively is a factor in corporate behavior, but I think that the ownership scheme for large publicly traded corporations that have a diffuse ownership base (i.e. not Wal-Mart or Ford in which a founding family has a huge chunk of voting shares such that outside investors cannot actually prevail in any up or down vote) means that what the shareholders want is not easily or effectively translated into how the corporation behaves. I would instead say an amalgamation of what upper management, larger institutional investors, the board of directors and a few other stakeholders influence how corporations behavior, and they all largely behave differently.
When used as a derisive the concept of "maximizing shareholder value" is largely read to mean a corporation is a slave to its total return (combination of share price increase and dividends) to investors, often in a short term manner.
Corporations all seem to have different strategies. Some really want to maximize market share, even when it means lower profits and thus lower return. Some want to minimize volatility at the cost of losing greater profit potential. AEP (major electric power utility) for example has said it will not build more power plants in "rate deregulated" states. Even though deregulation may offer the potential for greater profits, AEP wants to be a rate regulated utility, which means essentially guaranteed profits (and no direct competition) but at more controlled rates. AEP has said it intends to start moving in to other rate regulated businesses like pipelines and transmission in States where energy deregulation has already happened or appears likely to happen.
I don't think there is any one set "goal" of all CEOs of say, Fortune 500 companies. Instead there are diverse types of investors who invest in these companies and lots of different managers and directors who have different goals in mind for their businesses.
I agree that the change came in the 80s but I think it is more significant then you think.
In the late 80s and even into the early 90s there was a significant debate about the legal obligations executives and officers of a company might owe to shareholders as opposed to the company itself. This played out on a number of issues but the mantra that eventually prevailed was that the main interest was that of the shareholders. That view is what set lose the frenzy of stock options which were seen to "tie" executives to the interests of the common shareholder. But, of course, for the reasons we have already discussed, it was an illusion which lead to dramatic enrichment of the managers who set and received those benefits.
To add to what Otto is saying, I think that the big change in corporations over the last three decades isn't in CEO compensation, but in the makeups of the boards of directors. More and more, as the share of individual stock owners declined in the face of institutional stockholders (esp 410k and other retirement funds) there has been a shift in board membership from the big stockholders to the professional boardies, often CEOs themselves, who are more acceptable to the institutional stakeholders because the professional boardies don't own much (if any) investment in the corporation and thus don't have conflicts of interest with the institutional stakeholders.
I think this change in the makeup of the people the CEOs work for has changed the behavior of CEOs.
The problem for both large publicly owned corporations and indeed large organisation in general, is that there is a dissonance between the owners and the managers which is caused by a large dilution of control of the entity into many different owners (and types of owners) which means that the owners have very little individual control over the managers unless they act as a collective, which entails various compromises and deals which end up satisfying nobody.
Quote from: PJL on December 08, 2014, 01:41:01 PM
The problem for both large publicly owned corporations and indeed large organisation in general, is that there is a dissonance between the owners and the managers which is caused by a large dilution of control of the entity into many different owners (and types of owners) which means that the owners have very little individual control over the managers unless they act as a collective, which entails various compromises and deals which end up satisfying nobody.
But that has always been true. It doesn't explain the change which occurred in the late 80s through the 90s.
Also, this view, and the view of Otto's, to some extent, reflects an importance given to the shareholder as "owner" rather than merely as an investor. The shareholder does not own the corporation. Shareholders only own the rights which are attached to the particular shares they have purchased. And in the case of a common share those rights are limited.
I would argue where things really went wrong was too much emphasis on the rights of the shareholder and not enough on the duties owed to the corporation itself.
The paper that VM posted actually talks about the change of goals with the example of IBM. In the late sixties they had three (respect for employees, customer service, excellence), in the early nineties their measures of success were shareholder value and customer satisfaction, in 2010 the primary aim was to double earning per share in five years.
Quote from: crazy canuck on December 08, 2014, 02:03:36 PM
I would argue where things really went wrong was too much emphasis on the rights of the shareholder and not enough on the duties owed to the corporation itself.
Thing is, the days of gray-haired widows and local businessmen being shareholders are long gone, and have been replaced by the financial mega-institutions and fund groups: these are the majority of shareholders now. And they don't give a shit about duties owed to the corporation.
Quote from: Sheilbh on December 08, 2014, 02:08:25 PM
The paper that VM posted actually talks about the change of goals with the example of IBM. In the late sixties they had three (respect for employees, customer service, excellence), in the early nineties their measures of success were shareholder value and customer satisfaction, in 2010 the primary aim was to double earning per share in five years.
Some recent reading on IBM:
QuoteFor Palmisano, managing IBM was all about generating investment returns for the big shareholders. "If you're a small, young company and you're driving revenue without a lot of earnings, you've got a completely different model... The Berkshire Hathaways, the Neuberger Bermans, the Capital Worlds are looking at a longer-term cycle for their investment returns."
Palmisano treated the large shareholders as real owners. "We decided to treat our large shareholders with total transparency, as best we could within regulations. We would meet with them. We'd have a couple of them come in every quarter and talk with the entire senior management team... Fidelity, Capital, BlackRock, T. Rowe, Wellington, Neuberger Berman—the big guys. They would each bring four or five portfolio managers.... They could spend as much time as they wanted with the businesses. The meetings went on for hours."
Palmisano found that the big shareholders supported his primary focus on earnings per share, ahead of growing the business. "Basically, the shareholders were just asking us to be friendly with capital allocation. They wanted more margin expansion and cash generation than top-line growth, because they knew that if we generated cash, we'd give it back to them in the form of a share buyback or a dividend, not a crazy large acquisition that no one else could see value in." And so Palmisano became very friendly.
http://www.forbes.com/sites/stevedenning/2014/05/30/why-ibm-is-in-decline/
Quote"At the end of the day," said Rometty in an interview with CNBC last week, "this is about returning value to shareholders." Yet to many observers, the single-minded focus on returning value to shareholders is precisely what is killing IBM–and destroying real shareholder value.
IBM's focus on boosting the share price has been built on a foundation of declining revenues, capability-crippling offshoring, fading technical competence, sagging staff morale, massive debt-financed share buybacks, pervasive non-standard accounting practices, tax-reduction gadgets, a debt-equity ratio of nearly 174 percent, a broken business model and a flawed forward strategy. Those Potemkin-style tactics can only work for so long, before the business reality becomes evident to all. With IBM's stock down more than 10 percent over the last week, that day may have already arrived.
http://www.forbes.com/sites/stevedenning/2014/10/26/ibms-potemkin-prosperity/
My wife worked for IBM for almost three years (2010-2013). During that time I think the belt tightening/short sighted focus got worse and worse each year. By the end she was told that she'd be taking on 1 1/2 additional people's roles, and the promised option to switch positions at the end of three years wasn't there anymore. She couldn't get out of there fast enough.
Quote from: Sheilbh on December 08, 2014, 11:33:50 AM
Against it. Don't tie their rewards to shareholder value (which didn't really happen prior to the 80s) and you'll get them focusing a lot less on shareholder value.
Or grant them stock options that don't vest for ten years. Or a ladder of them going out way into the future.
Quote from: MadImmortalMan on December 08, 2014, 03:02:39 PM
Quote from: Sheilbh on December 08, 2014, 11:33:50 AM
Against it. Don't tie their rewards to shareholder value (which didn't really happen prior to the 80s) and you'll get them focusing a lot less on shareholder value.
Or grant them stock options that don't vest for ten years. Or a ladder of them going out way into the future.
Or just make them purchase shares like everyone else. Their job is to run the company not to become speculators in the company. Judge them on how well they run the company not on how well the market reacts to the company at a given snapshot in time.
Quote from: Baron von Schtinkenbutt on December 07, 2014, 10:04:26 AM
Sorry, it's a PDF and rather long. It makes a couple points in detail that I thought I had observed to be true of the market: first, that companies that explicitly try to maximize shareholder value don't generally deliver better shareholder value than those that do not; second and related, that trying to maximize short-term gains actually hurts shareholders in the long run.
the author has confused many things.
- First off, efficient market hypothesis has nothing to do with corporate responsibility. It's about how well the information flows in the market. It's about how the information is reflected in the stock prices.
- Second, comparing IBM to J&J on the sole basis of shareholder's return and the fluctuation in earnings while ignoring that they evolve in two different industries, each with their own set of problems... that's stupid.
- Third, maximizing shareholder's value is a general concept that has nothing to do with a specific time horizon, short or long. Nothing is implied there, only that you should seek to increase the shareholder's value, meaning you should refrain from chosing projects that don't generate enough value, i.e., project with a negative net present value (though it's not the only measure used to evaluate a project). Wich kinda makes sense. A corporation with no profits goes nowhere.
- Fourth, while I'm not too strong on social responsibility, it could also be a way to maximize shareholder's value. If a project can garner social acceptability, you will reduce your marketing costs to increase your consumer base as your company as a better rep.
- Fifth, empirical research has been unable to demonstrate a link between consistant increase in shareholder value and short term profit gains. Wich means your author's entire theory is bullocks.
- And on a general level, all that does is to observe a situation and deduce the cause without any kind of analysis.
Not exactly pertinent to the discussion, but I attended recently a training course/workshop on accounting, run by a professor of the Edinburgh University and it was brilliant. He also hated the big four and the managerial class with passion. :P
Why people worry so much about what corporations do with their money?
Economic darwinism. A corporation that does not balance short term earnings with long term will fail, and if it doesn't then it is ok.
I want the US to have the most effective corporations, the ones that advance the technology the fastest and farthest, not the most ineffective corporations, controlled by the gubmint.
Whenever politicians are in charge, we all lose.
Quote from: Siege on December 09, 2014, 03:18:58 PM
Why people worry so much about what corporations do with their money?
Economic darwinism. A corporation that does not balance short term earnings with long term will fail, and if it doesn't then it is ok.
I want the US to have the most effective corporations, the ones that advance the technology the fastest and farthest, not the most ineffective corporations, controlled by the gubmint.
Whenever politicians are in charge, we all lose.
Many of us work for corporations and would rather not be ground into the mud and/or lose our jobs.
Quote from: garbon on December 09, 2014, 03:21:30 PM
Quote from: Siege on December 09, 2014, 03:18:58 PM
Why people worry so much about what corporations do with their money?
Economic darwinism. A corporation that does not balance short term earnings with long term will fail, and if it doesn't then it is ok.
I want the US to have the most effective corporations, the ones that advance the technology the fastest and farthest, not the most ineffective corporations, controlled by the gubmint.
Whenever politicians are in charge, we all lose.
Many of us work for corporations and would rather not be ground into the mud and/or lose our jobs.
Of course Siegy doesn't need to worry about that, sucking at the gubmint teat as hard as he does.
Quote from: Siege on December 09, 2014, 03:18:58 PM
Why people worry so much about what corporations do with their money?
Economic darwinism. A corporation that does not balance short term earnings with long term will fail, and if it doesn't then it is ok.
I want the US to have the most effective corporations, the ones that advance the technology the fastest and farthest, not the most ineffective corporations, controlled by the gubmint.
Whenever politicians are in charge, we all lose.
Because we all have a stake in corporate performance to one degree or another. Either as direct or indirect employees, direct or indirect investors, or just as participants in an economy whose fortunes are largely shaped by the performance of corporate America. When corporations largely lost billions in the financial crisis and the economy tanked, it even affected government employees. We had pay freezes, positions budgeted for were removed and there was a hiring freeze, resulting in less people available to do increasing workload. Even the military has seen cuts to manpower levels, ships, and various retention and recruitment incentives.
I love how Siegy argues about deregulation and corporate Darwinism while working a cushion government job.
Nothing says cushion like getting shot at every day.
Quote from: Admiral Yi on December 09, 2014, 03:51:45 PM
Nothing says cushion like getting shot at every day.
Only because it lets him indulge his sociopathic tendencies it does not make it less cushion.
Quote from: Martinus on December 09, 2014, 03:49:49 PM
I love how Siegy argues about deregulation and corporate Darwinism while working a cushion government job.
Much like Freidman himself, though at least he acknowledged it.
BTW Marty, it's "cushy."
Quote from: viper37 on December 08, 2014, 03:33:09 PM
- Third, maximizing shareholder's value is a general concept that has nothing to do with a specific time horizon, short or long. Nothing is implied there, only that you should seek to increase the shareholder's value, meaning you should refrain from chosing projects that don't generate enough value, i.e., project with a negative net present value (though it's not the only measure used to evaluate a project). Wich kinda makes sense. A corporation with no profits goes nowhere.
www.amazon.com
Corporations, at least publically traded ones, do in fact have a responsibility to their shareholders. Those are the owners of the company. At some point in the companies past, the company tradedd ownership rights to human beings in return for capital, with the presumption that they would use that capital to increase the value of those shares.
If this is a model you object to, simply don't make the deal. Don't sell your company off to investors in return for capital, and you can do whatever you like and worry not about shareholders.
You won't get the capital of course, but why should someone give you capital except with the expectation that you would in fact do what is promised, ie, increase it's value?
Now, I suppose one can argue that the people who run the companies intentions in regards to shareholder value can and ought to be included in the valuation - ie, if you want to buy some Facebook or Amazon stock, you should know that those people who run those companies don't give a shit about your shareholder value in the direct sense, so you should consider that in how much you are willing to pay. And in fact...the valuation appears to be that this makes that stock MORE valuable.
It seems to me in fact, that those who demand and pressure those who run companies to consider short term valuation over long term health are in fact demanding that the company be run in a predatory manner that cannot possibly have long term beneficial outcomes in most cases.
A truely resposnive market ought to in fact respond to that by de-valuing those stocks. But I suspect our market is opaque enough that that doesn't happen nearly as often or consistently as it should.
The "opacity" problem is compounded by vague accounting standards and the fact that the big four run both audit and consulting companies, with audit being more important in terms of public interest, but paying much much less than consulting. Sure, they cannot act for the same company on both audit and consulting at the same time but given that there are only four of them, this is by far insufficient to ensure lack of conflict of interest situations (and of course they are still being paid for the audit work by the very company they are supposed to investigate).
Not to mention, if, say, Deloitte auditors start making waves by challenging financial reports of a large multinational, other large multinationals will take notice as well.
It is quite telling that, apparently, of all the big scandals taking place in recent decades (Enron, LIBOR, etc.), none was discovered by auditors - they were all revealed by whistleblowers.
Personally, I think audit should be effectively nationalised, with auditors being given positions (and structure) not unlike that of judges (rather than being private practicioners the way they are now), and being paid by the government, not by the companies they are supposed to audit.
How in the world were the auditors supposed to know about LIBOR? :huh:
Quote from: frunk on December 08, 2014, 02:52:14 PM
My wife worked for IBM for almost three years (2010-2013). During that time I think the belt tightening/short sighted focus got worse and worse each year. By the end she was told that she'd be taking on 1 1/2 additional people's roles, and the promised option to switch positions at the end of three years wasn't there anymore. She couldn't get out of there fast enough.
Hey I was distant colleagues with your wife then for almost 3 years! :)
The thing with IBM and I imagine with most companies of similar size is that they are slow to turn. Yes, a lot of bad things were happening due to bad direction, but there were some pretty logical intentions behind a good number of changes. But then those got mingled in the web of the overhead and the understandably increasingly undermotivated workforce, and the end results were, well, mixed at best.
No company as large as IBM can possibly function well. It's basically a government agency once it gets to that size. Another example of a completely dysfunctional behemoth is AT&T, who both my brother and I interact with for work (in totally different capacities).
Quote from: Berkut on December 10, 2014, 03:00:11 AM
Corporations, at least publically traded ones, do in fact have a responsibility to their shareholders. Those are the owners of the company. At some point in the companies past, the company tradedd ownership rights to human beings in return for capital, with the presumption that they would use that capital to increase the value of those shares.
No one is arguing that corporations don't have some responsibilities to their shareholders. But what has been lost in many discussions around this topic are the duties that are also owed to the company itself. The mantra of maximizing shareholder value is a good illustration of the problem as it usually results in short term decisions to boost quarterly results. ie there can be a conflict between the short term interests of shareholders and the long term interest of the company.
I am not sure what you mean by "the company traded ownership rights to human beings in return for capital". The company didn't trade any rights. The trade off being made is that the first shareholders made the decision that they wished to create a company (rather then become direct owners) and obtain the protection of limited liability. In return for that limited liability the shareholders gave up control of running the company to the management who were hired by the company to run the company's affairs. The duties of that management team are to the company. Somehow those very basic principles have been lost.
The choice to incorporate isn't necessarily driven by the chance to increase share value. The primary reason has always been to create a vehicle for business investment that limits the liability of the investor to the amount invested.
To be clear the only thing a shareholder owns is whatever rights the shares they own give them (not all shares have the same rights). In most instances the rights of a shareholder are limited and certainly do not equate to "owning the company" which implies the power to make the company do their bidding. They own shares in the company and that is a subtle but very important distinction.
QuoteIt seems to me in fact, that those who demand and pressure those who run companies to consider short term valuation over long term health are in fact demanding that the company be run in a predatory manner that cannot possibly have long term beneficial outcomes in most cases.
A truely resposnive market ought to in fact respond to that by de-valuing those stocks. But I suspect our market is opaque enough that that doesn't happen nearly as often or consistently as it should.
You are assuming that all shareholders are long term investors in the company and so all shareholders would punish the management of a company that makes short term decisions for short term profit. But of course not all shareholders are long term investors. Rather stocks are traded on the basis of what company is likely to go up or down in a particular time frame. Therefore the pressure on management (both by the market and their own short term self interest) is to act with an eye to short term results. ie the market is responding exactly as one would expect.
Quote from: Berkut on December 10, 2014, 02:53:46 AM
Quote from: viper37 on December 08, 2014, 03:33:09 PM
- Third, maximizing shareholder's value is a general concept that has nothing to do with a specific time horizon, short or long. Nothing is implied there, only that you should seek to increase the shareholder's value, meaning you should refrain from chosing projects that don't generate enough value, i.e., project with a negative net present value (though it's not the only measure used to evaluate a project). Wich kinda makes sense. A corporation with no profits goes nowhere.
www.amazon.com
We had this discussion elsewhere. Amazon's business is pretty cash generative. It's not that the company isn't pursuing profits, it is just that in doing so it has a large appetite for more risky investments and is prepared to take a longer time horizon then others. Similar to Google in that respect.
Google's doing all kinds of wacky stuff and experimentation. They're running it like a VC firm.
Hardly; the black pajamas got you confused.
Point being that companies that are not pursuing profits right now are in fact going somewhere.
Some local-but-national stuff. (http://arstechnica.com/tech-policy/2014/12/amazon-com-warehouse-employees-hosed-by-supreme-court/)
Quote
Amazon.com warehouse employees hosed by Supreme Court
Retailer said to make workers undergo unpaid, 25-minute daily security screening.
(https://languish.org/forums/proxy.php?request=http%3A%2F%2Fcdn.arstechnica.net%2Fwp-content%2Fuploads%2F2014%2F12%2Famazon.jpg&hash=0372aff04d17c0fc9daf7abf9d3a70bcd1302702)
Warehouse workers for Amazon.com can be forced to spend as much as 25 minutes off the clock to undergo security screenings at the end of their shift, the Supreme Court declared Monday.
The justices ruled [PDF] 9-0 against the workers at two Integrity Staffing Solutions warehouses in Nevada, locations where Amazon merchandise is shipped and processed. According to the class-action, workers at the Amazon contract facility claimed they were not paid for the nearly half-hour screening process in which they had to pass through metal detectors and remove their belts, wallets, keys and other metal objects.
Hundreds of millions of dollars were at stake, and the decision bolsters employers such as Apple, too, legal filings in the case said. Amazon disputed the allegations and said the screening process took only 90 seconds.
Mark Thierman, an attorney for the workers, said the decision renders his clients "short-changed a half hour per day."
Writing for the majority, Justice Clarence Thomas said that, for the workers to be paid for their time spent in the screening, the security check must be "an intrinsic element" of their duties.
The workers claimed they were entitled to backpay overtime and had won their claim in the lower courts, which found the security check was an integral facet of their work.
Steal everything not nailed down.
"Waiting up to 25 minutes to go home off the clock" = "Other duties as assigned"
Yours in Christ,
The Management
But the point is, my blu-rays are cheaper.
"And you're done."
I've hired people who worked in that distribution center before and they all said it was a highly unpleasant place to work. They like to hire kids fresh out of college who haven't worked anywhere else before and have nothing to compare it to for the professional roles. (So they don't realize it's a bad place to work.) And the warehouse workers, well you get the idea. This time of year they have sent buses to the homeless shelter on 4th St, to pick up homeless people to do day labor for them for dick pay. I don't know if they are doing it again this year but it's happened before.
I'm really surprised the USSC ruled unanimously. The labor law involved must be written badly and in such a way that they could not do anything.
I don't want the homeless handling my package!
I dunno, I thought you were. You do it all the time! :P
Quote from: Ideologue on December 10, 2014, 11:16:03 PM
I dunno, I thought you were. You do it all the time! :P
You appreciating capitalism and how it works for your advantage based on the suffering of others? :P
OK, maybe not all the time.
Funnily enough, Amazon opened their "fulfilment centres" (whenever I hear that expression, I can't help imagining some sort of hedonistic holodecks) in Poland earlier this year and at the time it was all hyped as great for local economies and whatnot.
Half year on, people are already quitting, saying this is a shittier job than they could imagine. They have pedometers measuring how fast they are moving around the warehouse and if the computer thinks they are too slow, it texts them to work faster. :lol:
Quote from: Martinus on December 11, 2014, 01:47:20 AM
Funnily enough, Amazon opened their "fulfilment centres" (whenever I hear that expression, I can't help imagining some sort of hedonistic holodecks) in Poland earlier this year and at the time it was all hyped as great for local economies and whatnot.
Half year on, people are already quitting, saying this is a shittier job than they could imagine. They have pedometers measuring how fast they are moving around the warehouse and if the computer thinks they are too slow, it texts them to work faster. :lol:
:huh: Would you rather have your supervisor tell you to work faster?
The latest Economist has a very good piece on auditors. I will try to post it here when I get home but it raises most of the points I did earlier in this thread.
My impression of auditors is that they're like mall security guards. They're not going to be of much use against a sophisticated heist or a terrorist attack, but they still maintain basic everyday order.
They give people a false sense of security and also give corps some cover against investigators/regulators.
Auditors are like anyone else - there are good ones and bad ones and lots in between. The "brand name" isn't always a guarantee of quality because the organization is pretty loose, and you can have individual locations or practices that are weak even in an overall strong outfit.
The audit function initially wasn't really designed to catch fraud; that has changed somewhat but realistically there may be limits to what an auditor can do to catch a skilled and determined fraudster.
All of our audits were simply designed to prove--nay, attest!--that we did what we said we'd do to maintain the absolute minimum level of compliance necessary. Corporate America's good at self-policing that way, nyuk nyuk.
Quote from: CountDeMoney on December 15, 2014, 04:53:27 PM
All of our audits were simply designed to prove--nay, attest!--that we did what we said we'd do to maintain the absolute minimum level of compliance necessary. Corporate America's good at self-policing that way, nyuk nyuk.
I am very confident that if "all of our audits", which presumably covers every audit ever run in every single company you have ever worked at, ever did more than that, you would say exactly the same thing.
I've never heard a single anecdote from you about any company you've worked for where it wasn't an exact, carbon-copy caricature, of the perfect stereotype of the Evil Capitalist Corporation. It is amazing how totally consistent every single company you have ever worked for has been...
Quote from: Berkut on December 15, 2014, 05:02:25 PM
Quote from: CountDeMoney on December 15, 2014, 04:53:27 PM
All of our audits were simply designed to prove--nay, attest!--that we did what we said we'd do to maintain the absolute minimum level of compliance necessary. Corporate America's good at self-policing that way, nyuk nyuk.
I am very confident that if "all of our audits", which presumably covers every audit ever run in every single company you have ever worked at, ever did more than that, you would say exactly the same thing.
No, "all of our audits" were "all of our audits" at the one place I ever had to deal with regulatory controls. Your confidence: is low.
QuoteI've never heard a single anecdote from you about any company you've worked for where it wasn't an exact, carbon-copy caricature, of the perfect stereotype of the Evil Capitalist Corporation. It is amazing how totally consistent every single company you have ever worked for has been...
I dunno, hospitals seemed to be pretty hardcore about their regulatory and compliance adherence under HIPAA and Joint Commission, unlike some of the optional "the bare minimum will do just fine" aspects of the energy sector.
But go fuck yourself anyway, Jeff. Better yet, go fuck yourself sideways, you curmudgeonly cocksucker. Go ahead and carbon copy that, and staple it to your fucking forehead.
I don't need to staple it anywhere, you will surely remind us at least another ten times this year how exactly equally terrible all corporations are, and how they all act in the exact same, completely stereotypical manner.
Shareholder value!
Nah, now my new trope is to tell you to go fuck yourself. Sideways.
I think I hit a nerve. I apologize if anything I've said has offended you Seedy - you know I have nothing but the utmost respect for you and your un-nuanced opinions.
Quote from: CountDeMoney on December 15, 2014, 05:29:41 PM
Nah, now my new trope is to tell you to go fuck yourself. Sideways.
Quote from: Martinus on December 11, 2014, 01:47:20 AM
Funnily enough, Amazon opened their "fulfilment centres" (whenever I hear that expression, I can't help imagining some sort of hedonistic holodecks) in Poland earlier this year and at the time it was all hyped as great for local economies and whatnot.
Half year on, people are already quitting, saying this is a shittier job than they could imagine. They have pedometers measuring how fast they are moving around the warehouse and if the computer thinks they are too slow, it texts them to work faster. :lol:
That is an... odd use for people who keep an eye out for child molesters. Having the Polish equivalent of Chris Hanson stand around with a radar gun and a bullhorn as a warehouse productivity enhancer is something that wouldn't have occurred to me.