Tuesday, May 4, 2010

A Knight in shiny (corporate) armour?

What is the ultimate meaning of business? Profits? No, think again! Shareholder value maximisation.

Alas in the last 24 years I have met too many people who confided in me that "Gekko" & "Wall St" were their inspiration for becoming executives.

In his famous/infamous "greed is good" speech in "Wall St." "Gordon Gekko" says a lot more "interesting" things than "greed is good". That seen from a 2010 point of view may prove either partly explanatory of what has happened in the last 24 years or insightful re what may happen in the next 24. Waiting for the sequel!

IMO (as an MBA) when a company doesn't perform well it should be the top management that gets the pink not the "foot soldiers" (like in soccer). In armies and in corporations there exists the bad habit of sacrificing the "foot-solders" instead of the brass, for tactical gains. IMO as an MBA, the managers are knights and as such they are supposed to be the ones to be "sacrificed" for the corporate "cause" (shareholder value maximisation), not the "ordinary" workers who work for a living and from monthly paycheck to monthly paycheck to pay the bills!

Note that the cumulative salaries + bonuses of the senior mgt in (many, most, all?) the companies you have invested in is equal to the sum of the salaries of many "simple" ("average") execs and other workers. Thus firing a senior exec will save as much money as firing dozens maybe hundreds of "workers" (but for the contract clauses many senior/top execs have that provide for a quite hefty severance ("divorce") fee).

Not that senior/top execs are not useful or valuable to a company. But how much more valuable than the average worker? And why should that value in any case be reflected in their pay and not their job satisfaction/sense of service?

I know, I know, "a knight in shiny armour".

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