Fiduciary irresponsibility
I caught this in an automotive thread, and thought I’d throw it open for discussion.
That Schlitz story [start of that thread] seems to be more about the folly of constantly pursuing greater market share and increased margins instead of focusing on making a great product that people enjoy, and making that product at a profit.
That’s why publicly-traded stocks screw up our entire economy, to a degree. Companies keep digging around for more and more profits, often beyond the point where they can be successfully realized without compromising the product. When shareholders clamor for ever-increasing profits even after a company has achieved both market saturation and optimum efficiency, we get outsourcing and cost-cutting, neither of which benefits the consumer (or the shareholders in the long run).
Short-sighted executives only care about quarterly results, and that is why many of the auto makers are in the mess they’re in. Once it’s about profits and not about product, once you’re more beholden to your shareholders than your customers, your company is bound to fail because you’ve stopped operating in a real production/sales economy and are rather more in the business of fudging numbers than anything else.
The shareholders, of course, own the joint; but I suspect that rather a lot of them are just as “short-sighted” as the executives.
I have a 401(k) account somewhere in the middle five figures. I suspect that if I were obsessed with quarterly results, I’d be changing my investment options every three months. Maybe even every three weeks, if they’d let me. But that way, I suspect, lies madness.
Charles Pergiel »
31 August 2008 · 2:35 am
Once upon a time I seem to recall something about the proper way to run a company was to treat it like a three legged stool. The three legs are your stock holders, customers and employees. You need all three to be successful. Once you start favoring one over the others, your three legged stool becomes unstable and will surely fall over.