by
Karen Ho
If the shareholder value revolution was not sustainably enriching the average investor, who may also have been facing unemployment as his or her 401(k) appreciated a few hundred dollars (if that), then was Wall Street not increasing the stock price of corporations - their stated central mission? When I worked at BT, I certainly heard of corporations drastically cutting costs, whereupon their quarterly earnings and stock prices immediately jumped, but research and development suffered, productivity gains were negligible, and shareholder value over a longer time horizon did not increase and even declined [...]
[...]
[...] Morgan Stanley's advice, intended to bolster shareholder value, actually damaged AT&T's stock price in the long run, despite the fact that this deal making helped to generate an explosion of wealth for shareholders primed to cash out during the short-term price spikes. It is important to remember that investment bankers always receive high compensation for the deal no matter the result. [...]
the devil's in the details
this links to something i've been thinking about a lot, which has to do with looking at the actual proportions rather than blindly accepting vague statements. havent found a catchy term for it yet, but it's relevant to issues of tech IPOs (it benefits pension funds...! yeah, a tiny bit, for a small number of people, while it benefits others whose increasing power and wealth and control over the economy may end up hurting everybody else...)
also, something to think about: in this situation, compensation being independent of outcome is bad, because it makes WS people not care. and yet, for typical salaried employees, i think it is a good tie to uncouple comp from results, at least to a degree, to shelter people (so they arent subject to hardship for things out of their control, or even things somewhat in their control). what's the diff? is it the difference between abundance and scarcity?