The World's Dumbest Idea: Maximizing Shareholder Value

Started by Baron von Schtinkenbutt, December 07, 2014, 10:04:26 AM

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Siege

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.


"All men are created equal, then some become infantry."

"Those who beat their swords into plowshares will plow for those who don't."

"Laissez faire et laissez passer, le monde va de lui même!"


Admiral Yi

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. 

PDH

I have come to believe that the whole world is an enigma, a harmless enigma that is made terrible by our own mad attempt to interpret it as though it had an underlying truth.
-Umberto Eco

-------
"I'm pretty sure my level of depression has nothing to do with how much of a fucking asshole you are."

-CdM

CountDeMoney

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.

garbon

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:
"I've never been quite sure what the point of a eunuch is, if truth be told. It seems to me they're only men with the useful bits cut off."
I drank because I wanted to drown my sorrows, but now the damned things have learned to swim.

DGuller

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.

Caliga

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.
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Admiral Yi

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.

DGuller

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.

Monoriu

If maximising shareholder value should not be the top priority, then what should be?

Grallon

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.
"Clearly, a civilization that feels guilty for everything it is and does will lack the energy and conviction to defend itself."

~Jean-François Revel

garbon

"I've never been quite sure what the point of a eunuch is, if truth be told. It seems to me they're only men with the useful bits cut off."
I drank because I wanted to drown my sorrows, but now the damned things have learned to swim.

Grallon

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.
"Clearly, a civilization that feels guilty for everything it is and does will lack the energy and conviction to defend itself."

~Jean-François Revel

Siege

Regulations will kill us all, and our economy,  and hand over our collective head to China in a platter.


"All men are created equal, then some become infantry."

"Those who beat their swords into plowshares will plow for those who don't."

"Laissez faire et laissez passer, le monde va de lui même!"


Monoriu

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: