I’ve occasionally railed on here about the wide ranging damage that I believe the focus on shareholder value and associated cost cutting, manufacturing offshoring (read China), executive share options, quarterly focus, EPS, etc. has caused. I first saw the shift in the firm I worked for in 1998, and it has since transformed the company from one I was proud to be a part of to one I wouldn’t work for. Today its share price hit an all time high
This five part BBC podcast, 14 minutes each, is IMO an excellent synopsis of the issues that the tunnel vision on shareholder value has and continues to cause. I really reccomend it.
The US firm I worked for got into that form of corruption earlier as they were newer, fast growing technology firm. So more speculative and there was ongoing key desire to attract funds from stockmarket investors for “growth” (along with senior management’s cmpensation being hugely linked to the price of their shares in the stock market). The compromised decisions they made really began to accelerate from 1986-1988 .
A similar form of compromised deciaion making where only 1 party is favoured also seemed to happen a lot with Defined Benefit pension schemes when inevitably the continuous long term commitment to fund them regardless of market and cyclical changes, became less appealing to employers. Employers took funding breaks and did not continue investing to fund the future liabilities they"d committed to which resulted in multiple meltdowns, over 90% of DB pension schemes have been closed by emloyers, and severe degradation to employees, pension contrbutors and sometimea to pensioners.
A Defined Benefit pension scheme is run by the Trustees who are supposed to ensure fairness amongst 3 types of stakeholders ie employer, members paying in and pensioners and it seems quite a number of Trustees of DB pension schemes basically ran them representing the interests of the employer to the detriment of the 2 other types of stakeholder whose interests they were also legally required to consider.
The aim of any company is to make as much profit as it can. That’s capitalism, I believe.
What held many directors back - in the past - was morality that they could justify (1), a belief that there is something more important than making money, a belief in things you can’t put on a balance sheet.
We’ve lost that. It would be great if we could get it back, but society is far too fractured for that to be possible (outside groups which are prepared to put principles first. You don’t need to be a Christian to do that, of course).
A couple of weeks or so ago there was a business report on the radio that talked about Next (the clothing stores) maybe having to lay off staff due to the increased cost of employing them caused by the rise in NI contributions.
Breathtakingly the next item in the same report was about Next declaring net profits of some vast sum (might have been over 1 billion ÂŁ).
Next must have some very greedy shareholders.
For me shareholders should only gets dividends once all staff are remunerated fairly (but not excessively) & once the company is not destroying the environment. After all, people are always warned that their investments can go down as well as up.
Same as for Directors and very senior management of a company I would think - Professional Indemnity insurance basically funded for them or refunded to them.
Anyone who became a trustee of a large company pension scheme such as tbe defined benefit ones, would have been nuts to have accepted being a trustee without such cover.
I’m extrapolating from what I do know and have seen for Directors and very senior management in companies, guessing pension scheme trustees for similar company schemes would have received protection in the same way.
They were basically straw men for the company in so many of the pension schemes so far as I can tell.
