by
Karen Ho
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Wall Street argues that its greed for money is a "counteracting" interest against other more evil passions such as racism and sexism. Because investment banks are so greedy, so singularly focused on money, they become money meritocracies: whoever makes them money will be rewarded regardless of background or identity. Of course, instead of understanding desire for money as itself a constructed "passion," most Wall Streeters see it as a naturalized state. Similarly, the Wall Street mantra that "money does not discriminate" resonates powerfully with the assumption of neoliberal economic theory that racism and other prejudices form "an impediment to efficient market transactions and [are] therefore likely to be overriden in the long run by the exigency to generate profit" [...]
Using money meritocracy as a dominant discourse of exceptionalism, investment banks differentiate themselves from corporate America, which they imagine to be caught up in the traditional "ol' boys' network." Unlike the bureaucratic, out-of-touch managers of most corporations, Wall Street bankers are a modern, renegade breed whose singular focus on money makes possible color-blind innocence and objectivity. [...] investment bankers did not have to be aristocrats, but could be "geeky quant-jocks" or amazing "chess players off the street". [...]
it's funny cus SV views WS as exactly this ol' boys' network
[...] In the immediate postwar period, then, the corporation was dominantly understood as a social institution, an organization with constituents and responsibilities well beyond the individuals and institutions that owned stock in the corporation. The primary concern of the corporation was the maintenance of the integrity of the organization over and beyond what was dubbed as the "derivative" claims of the shareholder - which might have to be sacrificed for the good of the corporation itself.
[...] the poor stewardship and excesses of managers and how it was Wall Street investment bankers who realigned managers to their true purpose of increasing shareholder value. If a CEO did not do what was good for the stock price, then he or she was being self-serving and the only way to guard against management self-interest was to tie compensation (via stock options) to the stock market. In this worldview, corporations exist for the sole benefit of shareholders, and any attempt to separate shareholder interests from those of the corporation was selfish and nonsensical. Although in the modern history of capitalism in the United States, the desire for profit accumulation is not new, what is clearly unique about Wall Street's shareholder value perspective is that employment is thought to be outside the concern of public corporations. Job loss was certainly a sad event, but beyond the responsibility of corporate America. [...]
The takeover movement of the 1980s was perhaps the single most important set of events to stimulate the "liquidation" of corporate America. Wielding the threat of corporate takeover, Wall Street investment banks forced corporations to choose between shareholder value and other alternatives of corporate governance, and thus "actualized" the shareholder value worldview by instigating fundamental structural changes in U.S. corporations in line with Wall Street's particular vision of what corporations are and whose interests they should serve. [...]
[...] when a company's stock price was lower than the total value of its separate assets, "there was either something wrong with the stock market, which may be true, or there was something wrong with the guys who were running that company. Because if they [the managers] were smarter, they would have been generating more value for the shareholders. They would have been using the assets more productively and making more things ... that would have added to the stock price." That all the corporation's stock could be bought for $50 million and its "parts" could be sold for $75 million was evidence enough of the stock market divining shareholder betrayal, which in turn justified the takeovers. [...]
or maybe the stock price is a dumb signal for whatever it's supposed to be measuring??? who knows
[...] while the assumptions that shareholders are the "true owners" of corporations, that corporations are solely private property, and that shareholder betrayal caused a post-Second World War corporate decline are all problematic and contestable assertions, they must also be understood as strategic and political claims to truth and power that have had very real consequences. [...]
i like the concept
LBOs generated such an environment of fear that corporations restructured themselves in anticipation of takeover attempts, hoping to raise their stock prices and render themselves less vulnerable to the restructuring rationales of corporate raiders. Shareholder value advocates applauded this avalanche of LBOs as a salutary spread of market discipline. By the mid-1980s, we see an illustration of Foucault's notion of capillaries of power: corporations across the United States were restructuring as if doing so out of individual choice and efficient self- and shareholder betterment. While Wall Street's stock market surveillance was constantly in the background, the actual threat of an LBO was no longer necessary (Foucault 1980).
leveraged buyouts
what do you call this. domino effect? feedback loop? i guess panopticon is the most obvious analogy here
[...] George Roberts, the "R" of KKR, claimed that since the Oregon public employee pension fund invested in the KKR fund which bought Safeway, "the masses" benefited. He justified the LBO by stating that Safeway employees were finally being held accountable to global competition. [...] The company whose "first store had been opened by a clergyman who wanted to help his parishioners save money" was redefined. Now, "the new corporate statement, displayed on a plaque in the lobby at corporate headquarters, read in part: 'Targeted Returns on Current Investment'" [...]
jesus. relevant for VC model
The concept of "disciplining through debt" was popularized and widely accepted by the business community in the 1980s. What was rendered invisible by this discourse was that this debt was a mechanism through which corporate wealth was transferred from the multiple stakeholders of a corporation to a small number of owners. Despite Wang's reference to frivolous golf club memberships, the bulk of the cuts were actually in people's jobs, research and development, and infrastructure. Not surprisingly, since the selling off of assets inevitably cuts into productivity and profitability, countless LBOs imploded under the weight of their own debts. [...]
[...] Shareholder value must be read as a political strategy to monopolize corporate control and advocate for "the demands of financial interests to reap high returns" in a very short amount of time. This logic of shareholder value imposed certain practices that "victimized the poorly protected parties such as workers, suppliers, and host communities" [...]