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Thing 2

Companies should not be run in the interest of their owners

1
terms
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notes

Chang, H. (2011). Thing 2. In Chang, H. 23 Things They Don't Tell You About Capitalism. Bloomsbury Press, pp. 11-22

[...] At the same time, the non-managing investors in a limited liability company would also become less vigilant in monitoring the managers, as their risks were capped (at their respective investments). Adam Smith [...] famously said that the 'directors of [joint stock] companies ... being the manager rather of other people's money than of their own, it cannot well be expected that they would watch over it with the same anxious vigilance with which the partners in a private copartnery [i.e., partnership, which demands unlimited liability] frequently watch over their own'.

by Ha-Joon Chang 2 years, 9 months ago

[...] At the same time, the non-managing investors in a limited liability company would also become less vigilant in monitoring the managers, as their risks were capped (at their respective investments). Adam Smith [...] famously said that the 'directors of [joint stock] companies ... being the manager rather of other people's money than of their own, it cannot well be expected that they would watch over it with the same anxious vigilance with which the partners in a private copartnery [i.e., partnership, which demands unlimited liability] frequently watch over their own'.

by Ha-Joon Chang 2 years, 9 months ago

a concept popularized by Jack Welch in a speech in 1981; in 2009, he came out against the idea

attributed to Jack Welch here

by Ha-Joon Chang
notable
2 years, 9 months ago

attributed to Jack Welch here

by Ha-Joon Chang
notable
2 years, 9 months ago

[...] Share buybacks used to be less than 5 per cent of US corporate profits for decades until the early 1980s, but have kept rising since then and reached an epic proportion of 90 per cent in 2007 and an absurd 280 per cent in 2008. [...]

mostly likely explanation: corporations are taking on debt in order to do share buybacks

by Ha-Joon Chang 2 years, 9 months ago

[...] Share buybacks used to be less than 5 per cent of US corporate profits for decades until the early 1980s, but have kept rising since then and reached an epic proportion of 90 per cent in 2007 and an absurd 280 per cent in 2008. [...]

mostly likely explanation: corporations are taking on debt in order to do share buybacks

by Ha-Joon Chang 2 years, 9 months ago