So says Forbes magazine: http://www.forbes.com/sites/stevedenning/2011/11/28/maximizing-shareholder-value-the-dumbest-idea-in-the-world/
There are plenty of people here who know more about these things. What do you say?
The problem has always been how to determine if the business is doing well. Ideally stock prices are supposed to reflect this, but of course they can be gamed in various ways.
Problem is, so can all other measures of performance.
The football analogy does not work, because of course anyone can see who is the better football team - it's the one that wins the game and does so consistently. It isn't so easy to see who has the better company, because that involves lots of factors. selling the most widgets isn't a great measure, because a company could be selling all sorts of widgets and be losing money.
I was going to say "P/E" but then I realized the folly.
I think the trick is to remove all the jews from finance in order to clean it up a bit.
Minimizing shareholder value has been tried a lot.
The article is really about the expectations game being more important than delivering actual value, and I agree completely. Although at least right now, all those things are out the window and the only thing that actually brings shareholder value in anything is whatever the newest rumor coming out of Angels Merkel's office happens to be.
Also, Peter Drucker was awesome.
Yeah - the main thrust of the article isn't what the title says - that maximizing shareholder value is unimportant.
But rather, that maximizing shareholder value in the very short term, combined with executive pay being tied to those short term fluctuations, is a terrible idea. It's hard to disagree with that argument.
Quote from: Barrister on December 14, 2011, 04:12:29 PM
Yeah - the main thrust of the article isn't what the title says - that maximizing shareholder value is unimportant.
But rather, that maximizing shareholder value in the very short term, combined with executive pay being tied to those short term fluctuations, is a terrible idea. It's hard to disagree with that argument.
How dare you question capitalism.
Quote from: CountDeMoney on December 14, 2011, 07:14:44 PM
Quote from: Barrister on December 14, 2011, 04:12:29 PM
Yeah - the main thrust of the article isn't what the title says - that maximizing shareholder value is unimportant.
But rather, that maximizing shareholder value in the very short term, combined with executive pay being tied to those short term fluctuations, is a terrible idea. It's hard to disagree with that argument.
How dare you question capitalism.
I have a spare tent if you want one. :P
Recently saw an excellent 1950's William Holden film on this very topic, "Executive Suite".
Basically, after the death of a manufacturing company's CEO, in the fight to replace him, Holden portrays the innovative, hands-on director who believes in producing quality products the company and workers can be proud of, versus the bookkeeping number-cruncher who is only interested in maximizing investor profits by producing cheap crap.
Some things never change.
Quote from: Tonitrus on December 14, 2011, 07:26:13 PM
Recently saw an excellent 1950's William Holden film on this very topic, "Executive Suite".
Basically, after the death of a manufacturing company's CEO, in the fight to replace him, Holden portrays the innovative, hands-on director who believes in producing quality products the company and workers can be proud of, versus the bookkeeping number-cruncher who is only interested in maximizing investor profits by producing cheap crap.
Some things never change.
That sounds like a different topic.
Quote from: mongers on December 14, 2011, 07:23:42 PM
Quote from: CountDeMoney on December 14, 2011, 07:14:44 PM
Quote from: Barrister on December 14, 2011, 04:12:29 PM
Yeah - the main thrust of the article isn't what the title says - that maximizing shareholder value is unimportant.
But rather, that maximizing shareholder value in the very short term, combined with executive pay being tied to those short term fluctuations, is a terrible idea. It's hard to disagree with that argument.
How dare you question capitalism.
I have a spare tent if you want one. :P
Don't give me any shit, Lance. I'm up to my ass in a mega Fortune 500 M & A ass rape. Unlike some of the GOPtards around here watching from the upper deck, who like to pontificate on invisible hands and market equilibrium while they still have Greenspan's spooge stains on them, I'm down in the fucking huddle of Corporate Fucking America.
I AM maximized shareholder value.*
*most likely to be eventually eliminated, and contracted out to a concern in Mumbai, India.
maximizing shareholder value does not have to be short term. In fact, a majority of corporations aim for the long term, and there are performance measures (like EVA) that reward real wealth creation, not simply share price increase.
The agent theory isn't definite, there's still a lot of research to be done on this. But we know it's valid. Just like in physics researchers can understand there's "something there", but can't really define it.
Also keep in mind that finance is a very young science (1950s for the early works, when it branched out of economics), and corporate finance in itself only became interesting in the 1990s, with the advent of the personal computers. Before that, most finance works where on portfolio theories, not really corporate governance.
Quote from: viper37 on December 14, 2011, 10:14:20 PM
maximizing shareholder value does not have to be short term. In fact, a majority of corporations aim for the long term, and there are performance measures (like EVA) that reward real wealth creation, not simply share price increase.
The agent theory isn't definite, there's still a lot of research to be done on this. But we know it's valid. Just like in physics researchers can understand there's "something there", but can't really define it.
Also keep in mind that finance is a very young science (1950s for the early works, when it branched out of economics), and corporate finance in itself only became interesting in the 1990s, with the advent of the personal computers. Before that, most finance works where on portfolio theories, not really corporate governance.
That falls into the same FAIL bin as 'Social Sciences'.
Quote from: CountDeMoney on December 14, 2011, 10:11:23 PM
Unlike some of the GOPtards around here watching from the upper deck, who like to pontificate on invisible hands and market equilibrium while they still have Greenspan's spooge stains on them,
:lmfao: You sure have a way with words.
Quote from: mongers on December 14, 2011, 10:20:13 PM
That falls into the same FAIL bin as 'Social Sciences'.
Social sciences doesn't even try to rely on math models to predict the outcome of a given policy, or to explain any social movement. It's just based on feeling.
Quote from: viper37 on December 15, 2011, 11:08:42 AM
Quote from: mongers on December 14, 2011, 10:20:13 PM
That falls into the same FAIL bin as 'Social Sciences'.
Social sciences doesn't even try to rely on math models to predict the outcome of a given policy, or to explain any social movement. It's just based on feeling.
Sure it does. Political Science, a branch of the social sciences, is all about statistical analysis now.
Quote from: CountDeMoney on December 14, 2011, 10:11:23 PM
Don't give me any shit, Lance. I'm up to my ass in a mega Fortune 500 M & A ass rape. Unlike some of the GOPtards around here watching from the upper deck, who like to pontificate on invisible hands and market equilibrium while they still have Greenspan's spooge stains on them, I'm down in the fucking huddle of Corporate Fucking America.
I AM maximized shareholder value.*
*most likely to be eventually eliminated, and contracted out to a concern in Mumbai, India.
Dunno all the details, but from a shareholder's perspective, your merger looks like a great deal. Almost one-for-one stock swap, the buying company pays twice the dividend yours does, etc. Maybe a great example of what the thread is about. :P
A lot of times these things really do make a better combined company in the end though.
Quote from: MadImmortalMan on December 15, 2011, 11:56:14 AM
Dunno all the details, but from a shareholder's perspective, your merger looks like a great deal. Almost one-for-one stock swap, the buying company pays twice the dividend yours does, etc. Maybe a great example of what the thread is about. :P
A lot of times these things really do make a better combined company in the end though.
They've been successfully fined for price gouging in Illinois. They've decommissioned a nuclear power plant that had years left on its license to artificially reduce supply and increase prices.
They also contract everything out. 25% of our corporate workforce is going to be eliminated off the bat, with more reduced over the first 2 years, as those roles get contracted out both here and overseas.
They are precisely what the thread is about. But not exactly a great example.
So, yeah. The shortsighted "immediate gains" type of shareholder value that sacrifices the longer-term health of the company. That's too bad. And too common.
*checks*
Heehee, I own stock in one of these two companies... not the one Money works for. :menace:
Quote from: MadImmortalMan on December 15, 2011, 11:56:14 AM
Dunno all the details, but from a shareholder's perspective, your merger looks like a great deal. Almost one-for-one stock swap, the buying company pays twice the dividend yours does, etc. Maybe a great example of what the thread is about. :P
A lot of times these things really do make a better combined company in the end though.
My company has been on a buying spree lately. Everyone we acquire is like "wow your company is so ossum look at these amazing benefits". Then, they all get fired. :) It's cute watching the pattern repeat each time. :nelson:
OTOH, we have retained top talent from most of the acquisitions and found them something or other to do in the parent company.
Cal works for Mitt Romney.
Quote from: MadImmortalMan on December 15, 2011, 12:35:03 PM
Cal works for Mitt Romney.
I wish. He's awesome. :cool:
I just got back from the Christmas party... oddly there were a bunch of Newport Beach merger victims there, some of whom have end dates in January. What's the point of flying them out here for a Christmas party when they're due to be laid off? :hmm: Well, they seemed to be having a good time at least.
Quote from: Caliga on December 15, 2011, 12:33:14 PM
Quote from: MadImmortalMan on December 15, 2011, 11:56:14 AM
Dunno all the details, but from a shareholder's perspective, your merger looks like a great deal. Almost one-for-one stock swap, the buying company pays twice the dividend yours does, etc. Maybe a great example of what the thread is about. :P
A lot of times these things really do make a better combined company in the end though.
My company has been on a buying spree lately. Everyone we acquire is like "wow your company is so ossum look at these amazing benefits". Then, they all get fired. :) It's cute watching the pattern repeat each time. :nelson:
:grr:
Quote from: MadImmortalMan on December 15, 2011, 12:30:36 PM
So, yeah. The shortsighted "immediate gains" type of shareholder value that sacrifices the longer-term health of the company. That's too bad. And too common.
They are not destroyers of companies. They are liberators of them!
Quote from: Caliga on December 15, 2011, 12:37:24 PM
I just got back from the Christmas party... oddly there were a bunch of Newport Beach merger victims there, some of whom have end dates in January. What's the point of flying them out here for a Christmas party when they're due to be laid off? :hmm: Well, they seemed to be having a good time at least.
you don't want to know what they did in the kitchen while no one was looking :lol:
Quote from: Caliga on December 15, 2011, 12:31:29 PM
*checks*
Heehee, I own stock in one of these two companies... not the one Money works for. :menace:
Of course you don't*; ours has been driven into the ground and suppressed on purpose for years. There's a reason the CEO made Forbes' Top 5 Worst CEOs For The Buck" this year.
*Then again, neither do I.
Whoops, no, wait, I own stock in Entergy (ETR). :blush:
You sure about that?
Yes, I double checked which is what prompted me to write that post. My position is up 13.92% since I bought it in August. :cool:
That was actually aimed at someone else, but the quote function keeps acting up on me. Unfortunately I don't remember who it was aimed at.
Quote from: viper37 on December 15, 2011, 11:08:42 AM
Social sciences doesn't even try to rely on math models to predict the outcome of a given policy, or to explain any social movement. It's just based on feeling.
That's false.
Quote from: fahdiz on December 16, 2011, 02:01:58 AM
Quote from: viper37 on December 15, 2011, 11:08:42 AM
Social sciences doesn't even try to rely on math models to predict the outcome of a given policy, or to explain any social movement. It's just based on feeling.
That's false.
Tell us how you really feel.
Quote from: fahdiz on December 16, 2011, 02:01:58 AM
Quote from: viper37 on December 15, 2011, 11:08:42 AM
Social sciences doesn't even try to rely on math models to predict the outcome of a given policy, or to explain any social movement. It's just based on feeling.
That's false.
That's who that "are you sure about that" was aimed at. Thanks.
Quote from: fahdiz on December 16, 2011, 02:01:58 AM
Quote from: viper37 on December 15, 2011, 11:08:42 AM
Social sciences doesn't even try to rely on math models to predict the outcome of a given policy, or to explain any social movement. It's just based on feeling.
That's false.
Yeah, viper sorta swung and missed on that one. Kinda like saying chemistry isn't based on science.
Chemistry appeals to women because it resembles cooking.
Quote from: CountDeMoney on December 16, 2011, 09:02:08 AM
Quote from: fahdiz on December 16, 2011, 02:01:58 AM
Quote from: viper37 on December 15, 2011, 11:08:42 AM
Social sciences doesn't even try to rely on math models to predict the outcome of a given policy, or to explain any social movement. It's just based on feeling.
That's false.
Yeah, viper sorta swung and missed on that one. Kinda like saying chemistry isn't based on science.
It's a well documented fact, at least here, that social science refrain from using mathematical models, and that is one their weakness.
I may have generalized, but it is a problem in this field. While finance&economy have fields (econometry, financial engineering) specifically for this, you won't find an equivalent in social science. They don't even require math beyond high school (no calculus, no stats) to be accepted in a social science field of study. That they eventually learn to do a simple linear regression, I understand, but we're very far from finance&economy in there.
Quote from: viper37 on December 16, 2011, 10:36:49 AM
Quote from: CountDeMoney on December 16, 2011, 09:02:08 AM
Quote from: fahdiz on December 16, 2011, 02:01:58 AM
Quote from: viper37 on December 15, 2011, 11:08:42 AM
Social sciences doesn't even try to rely on math models to predict the outcome of a given policy, or to explain any social movement. It's just based on feeling.
That's false.
Yeah, viper sorta swung and missed on that one. Kinda like saying chemistry isn't based on science.
It's a well documented fact, at least here, that social science refrain from using mathematical models, and that is one their weakness.
I may have generalized, but it is a problem in this field. While finance&economy have fields (econometry, financial engineering) specifically for this, you won't find an equivalent in social science. They don't even require math beyond high school (no calculus, no stats) to be accepted in a social science field of study. That they eventually learn to do a simple linear regression, I understand, but we're very far from finance&economy in there.
Because God knows what a great job financial engineering and econometrics are doing for us with all their mathematical modeling.
Quote from: Capetan Mihali on December 16, 2011, 10:52:56 AM
Because God knows what a great job financial engineering and econometrics are doing for us with all their mathematical modeling.
it ain't a guarantee of success. It ain't good or bad. It's a truth, simple. Physics uses lots of maths, doesn't mean they never make mistakes and know everything.
Quote from: viper37 on December 16, 2011, 10:36:49 AM
It's a well documented fact, at least here, that social science refrain from using mathematical models, and that is one their weakness.
I may have generalized, but it is a problem in this field. While finance&economy have fields (econometry, financial engineering) specifically for this, you won't find an equivalent in social science. They don't even require math beyond high school (no calculus, no stats) to be accepted in a social science field of study. That they eventually learn to do a simple linear regression, I understand, but we're very far from finance&economy in there.
Hey Viper, check this out: http://www.journals.elsevier.com/mathematical-social-sciences/
(first hit on google, by the way)
Oh and... economics is a social science :)
Quote from: viper37 on December 16, 2011, 10:36:49 AM
Quote from: CountDeMoney on December 16, 2011, 09:02:08 AM
Quote from: fahdiz on December 16, 2011, 02:01:58 AM
Quote from: viper37 on December 15, 2011, 11:08:42 AM
Social sciences doesn't even try to rely on math models to predict the outcome of a given policy, or to explain any social movement. It's just based on feeling.
That's false.
Yeah, viper sorta swung and missed on that one. Kinda like saying chemistry isn't based on science.
It's a well documented fact, at least here, that social science refrain from using mathematical models, and that is one their weakness.
I may have generalized, but it is a problem in this field. While finance&economy have fields (econometry, financial engineering) specifically for this, you won't find an equivalent in social science. They don't even require math beyond high school (no calculus, no stats) to be accepted in a social science field of study. That they eventually learn to do a simple linear regression, I understand, but we're very far from finance&economy in there.
Well, then there's a whole world of opportunity for me in the social sciences.
Quote from: viper37 on December 16, 2011, 10:36:49 AM
It's a well documented fact, at least here, that social science refrain from using mathematical models, and that is one their weakness.
I may have generalized, but it is a problem in this field. While finance&economy have fields (econometry, financial engineering) specifically for this, you won't find an equivalent in social science. They don't even require math beyond high school (no calculus, no stats) to be accepted in a social science field of study. That they eventually learn to do a simple linear regression, I understand, but we're very far from finance&economy in there.
I don't know where "here" is to you (I presume it is a university), but I also note that you completely fail to provide any evidence for what you believe is "widely known" there.
I also don't think you know what social sciences are, nor how they are performed anywhere but wherever "here" is, to you.
"They don't even require math beyond high school (no calculus, no stats) to be accepted in a social science field of study" is like saying that medicine doesn't use mathematical models because not every doctor is required to have taken calculus and stats to get accepted to medial school. I trust that you do know that some studies of medicine do use mathematical models, all doctors not being qualified to do the math notwithstanding?
Quote from: viper37 on December 16, 2011, 10:36:49 AM
Quote from: CountDeMoney on December 16, 2011, 09:02:08 AM
Quote from: fahdiz on December 16, 2011, 02:01:58 AM
Quote from: viper37 on December 15, 2011, 11:08:42 AM
Social sciences doesn't even try to rely on math models to predict the outcome of a given policy, or to explain any social movement. It's just based on feeling.
That's false.
Yeah, viper sorta swung and missed on that one. Kinda like saying chemistry isn't based on science.
It's a well documented fact, at least here, that social science refrain from using mathematical models, and that is one their weakness.
I may have generalized, but it is a problem in this field. While finance&economy have fields (econometry, financial engineering) specifically for this, you won't find an equivalent in social science. They don't even require math beyond high school (no calculus, no stats) to be accepted in a social science field of study. That they eventually learn to do a simple linear regression, I understand, but we're very far from finance&economy in there.
:huh:
I was required to take stats in order to get my degree in psychology.
Math doesn't make science.
Quote from: grumbler on December 16, 2011, 12:35:36 PM
Quote from: viper37 on December 16, 2011, 10:36:49 AM
It's a well documented fact, at least here, that social science refrain from using mathematical models, and that is one their weakness.
I may have generalized, but it is a problem in this field. While finance&economy have fields (econometry, financial engineering) specifically for this, you won't find an equivalent in social science. They don't even require math beyond high school (no calculus, no stats) to be accepted in a social science field of study. That they eventually learn to do a simple linear regression, I understand, but we're very far from finance&economy in there.
I don't know where "here" is to you (I presume it is a university), but I also note that you completely fail to provide any evidence for what you believe is "widely known" there.
I also don't think you know what social sciences are, nor how they are performed anywhere but wherever "here" is, to you.
"They don't even require math beyond high school (no calculus, no stats) to be accepted in a social science field of study" is like saying that medicine doesn't use mathematical models because not every doctor is required to have taken calculus and stats to get accepted to medial school. I trust that you do know that some studies of medicine do use mathematical models, all doctors not being qualified to do the math notwithstanding?
Speaking of doctors and math, doctors are notoriously terrible at math, including relatively basic probabilistic math that they really should know. Give them a classic question about applying a test with 5% error rate, that tests for disease 2% of people have, and many will answer that 95% of those tested positive actually have the disease (instead of the actual answer of 28%).
Quote from: The Brain on December 16, 2011, 12:41:04 PM
Math doesn't make science.
It can make bullshit look like science, though.
Quote from: The Brain on December 16, 2011, 12:41:04 PM
Math doesn't make science.
Econometrics makes science because it provides a way of disproving theories.
We don't need econometrics for that.
I can see plenty of people rummaging though garbage bins these days looking for food. That is proof enough for me to believe economists are the modern equivalent of augurs.
Some economists are pretty keen. Paul Krugman. :wub:
I should start ripping the guts out of pigeons to decide my stock trades. :P
Quote from: MadImmortalMan on December 16, 2011, 01:47:20 PM
I should start ripping the guts out of pigeons to decide my stock trades. :P
I prefer to consult the sacred chickens.
Quote from: MadImmortalMan on December 16, 2011, 01:47:20 PM
I should start ripping the guts out of pigeons to decide my stock trades. :P
Heh the old ways are best. :D
Reminds me of our firm's Xmas party: some woman I have no interest in struck up a conversation with me, asking if I believed in astrology and what was my sign?
I was momentarily dumbfounded by the tackiness of the come-on, but I struck back that, while I did not believe in astrology, I did believe in
hepatomancy. When asked "what is that?" I provided a detailed description, which had the desired effect - she went away. :D
Quote from: Iormlund on December 16, 2011, 01:45:38 PM
We don't need econometrics for that.
I can see plenty of people rummaging though garbage bins these days looking for food. That is proof enough for me to believe economists are the modern equivalent of augurs.
How else can you disprove a social science theory?
It's social science. It doesn't need disproving.
Ah.
Quote from: viper37 on December 16, 2011, 10:36:49 AM
It's a well documented fact, at least here, that social science refrain from using mathematical models, and that is one their weakness.
I may have generalized, but it is a problem in this field. While finance&economy have fields (econometry, financial engineering) specifically for this, you won't find an equivalent in social science. They don't even require math beyond high school (no calculus, no stats) to be accepted in a social science field of study. That they eventually learn to do a simple linear regression, I understand, but we're very far from finance&economy in there.
Please provide the documents.
Quote from: Iormlund on December 16, 2011, 04:18:09 PM
It's social science. It doesn't need disproving.
Indeed.