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122

Wall Street Historiographies and the Shareholder Value Revolution

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Ho, K. (2009). Wall Street Historiographies and the Shareholder Value Revolution. In Ho, K. Liquidated: An Ethnography of Wall Street. Duke University Press Books, pp. 122-168

124

[...] 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.

—p.124 by Karen Ho 4 years, 10 months ago

[...] 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.

—p.124 by Karen Ho 4 years, 10 months ago
128

[...] 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. [...]

—p.128 by Karen Ho 4 years, 10 months ago

[...] 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. [...]

—p.128 by Karen Ho 4 years, 10 months ago
129

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. [...]

—p.129 by Karen Ho 4 years, 10 months ago

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. [...]

—p.129 by Karen Ho 4 years, 10 months ago
131

[...] 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

—p.131 by Karen Ho 4 years, 10 months ago

[...] 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

—p.131 by Karen Ho 4 years, 10 months ago
133

[...] 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

—p.133 by Karen Ho 4 years, 10 months ago

[...] 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

—p.133 by Karen Ho 4 years, 10 months ago
144

[...] 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

—p.144 by Karen Ho 4 years, 10 months ago

[...] 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

—p.144 by Karen Ho 4 years, 10 months ago
145

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

—p.145 by Karen Ho 4 years, 10 months ago

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

—p.145 by Karen Ho 4 years, 10 months ago
146

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. [...]

—p.146 by Karen Ho 4 years, 10 months ago

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. [...]

—p.146 by Karen Ho 4 years, 10 months ago
156

[...] 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" [...]

—p.156 by Karen Ho 4 years, 10 months ago

[...] 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" [...]

—p.156 by Karen Ho 4 years, 10 months ago
157

Kedd made sense of shareholder value-led downsizings by using rationales of efficiency, long-term economic value, and the prospect of a "better" overall economy. By justifying restructuring and the breakup of companies with discourses of future excellence, Kedd not only excised worker trauma from his account of downsizing but also deflected into a vague future concerns and critiques that corporate restructurings might subvert the professed result of the (supposedly) "best," "most efficient," and "most imperative" companies. He not only assumed shareholder value was ample justification for corporate dismemberment, but also that share-price-led downsizing would necessarily produce profits, jobs, productivity, and efficiency. Asset stripping, then, gets read as a social good, as a sign of "fixing" previously inefficient corporations.

maybe it's ok if the economy isn't 100% efficient idk just spitballing here

—p.157 by Karen Ho 4 years, 10 months ago

Kedd made sense of shareholder value-led downsizings by using rationales of efficiency, long-term economic value, and the prospect of a "better" overall economy. By justifying restructuring and the breakup of companies with discourses of future excellence, Kedd not only excised worker trauma from his account of downsizing but also deflected into a vague future concerns and critiques that corporate restructurings might subvert the professed result of the (supposedly) "best," "most efficient," and "most imperative" companies. He not only assumed shareholder value was ample justification for corporate dismemberment, but also that share-price-led downsizing would necessarily produce profits, jobs, productivity, and efficiency. Asset stripping, then, gets read as a social good, as a sign of "fixing" previously inefficient corporations.

maybe it's ok if the economy isn't 100% efficient idk just spitballing here

—p.157 by Karen Ho 4 years, 10 months ago
158

[...] "Well, that is just a matter of making the economy more efficient. In the end that is good because you take people out of dead-end jobs anyway and sort of force them to find something in an industry that is growing. But, I am sure, if you are on the other side of that equation, it is a lot harder." [...]

amazing how she means dead-end as in, doesn't create shareholder value, whereas one could alternatively argue that the whole paradigm of shareholder value is itself a dead end (creating dead-end jobs like her own)

(Christine Chang, high-yield bond VP at BT)

—p.158 by Karen Ho 4 years, 10 months ago

[...] "Well, that is just a matter of making the economy more efficient. In the end that is good because you take people out of dead-end jobs anyway and sort of force them to find something in an industry that is growing. But, I am sure, if you are on the other side of that equation, it is a lot harder." [...]

amazing how she means dead-end as in, doesn't create shareholder value, whereas one could alternatively argue that the whole paradigm of shareholder value is itself a dead end (creating dead-end jobs like her own)

(Christine Chang, high-yield bond VP at BT)

—p.158 by Karen Ho 4 years, 10 months ago