Bing: Once again you nailed it, excellent article, I hope this particular article gets wider distribution and it is read by the majority of American investors, like the one you came face to face. Thanks

Alas, Bing, I don’t think so. While there are still a few employee-owned businesses, where the employees who make the product(s) and invest their livelihoods in the customer’s acceptance of the product(s), they are few and far between.

The balance is, I believe, made up of owner-owned businesses and publicly-traded businesses – the difference there being whether the owner’s capitalistic tendencies (notice that I avoided using the word ‘greedy’) cause him or her to gamble that taking the company public will multiply the value of the company – and his or her net worth in the process – sufficiently. Once the decision has been made to go public, the owners generally make a bunch of money, while the ‘risk managers’ (there’s an interesting term, given the dismal failure of the “securities marketplace” over the past several months) crank up their computer models that, without any apparent common sense or rationality, determine which stock should be sold and which should be bought.

Consistently, the resulting buy or sell actions seem to be as influenced – if not moreso – by the blathering of some expert analyst (also an interesting term in today’s economic environment) than by the actual performance of the company being bought or sold.

As you’ve suggested more than once in the past, the only possible way to divorce the welfare of our businesses from the fear, greed and feral hysteria of Wall Street is to take back our money, admitting that the potential for vast rewards is not worth the risk that has come home to roost, and invest it ourselves in our respective companies and their futures. That is how and why our country invested in itself and its people to become the world’s business and enterpreneurial leader. And so that you or others don’t think that I’m just whining, I took my money away from the ‘risk manager’ to whom I had given it (and who lost 25% of it without even calling me to ask if I wanted to do something different than what he had recommended) and am reinvesting it in things I believe in – and for which I am willing take the consequences if I’m wrong. If enough investors take control of their hard-earned investment money and send Wall Street and the publicly-traded companies who spawned it the message: We’re sick and tired of what you’ve done to our businesses and our country and we’re not going to let you do it any more!

america is too big for that. There is no real utopia no matter what the system.

“Is it possible, that at some time in the future, the welfare of the companies we serve could be divorced from the fear, the greed, the feral hysteria of the securities marketplace?”

Well, yes it is possible, indeed. It’s called a PRIVATE company.

and we should also update the archaic thought which permeates our educational institutions that drills into our collective heads: ‘the goal of the company is TO INCREASE SHAREHOLDER VALUE’. I remember this being beaten into my conciousness going through business school. i also remember that the founder of a successful company (which I am now lucky to be a part of) published a ‘mission statement’ some years back which said it went far beyond increasing shareholder value but the co. had a ‘Commitment to Employees, Consumers and the Community’. these visionaries are now few and far between, much to everyone’s detriment

Is that an X-ray of Homer Simpson’s brain? Bing, you are classic! I love it. And the article was thought-provoking too! I cannot add anything. Bold thinking, well stated.

Excellent, Bing.

Hopefully we are not too far down the rat hole to turn this around.

Small businesses make the country tick and “bottom-line” mentality prevents businesses from growing through measured risk and courage.

Bing

Do you think that the stock market has just become too much of an elaborate gambling scheme? I don’t see how investors can benefit a company when they are allowed to pull money out so fast, which can directly lead to the downfall of a company.

I believe we really need to make investing about a ‘long-term’ goals so we don’t have market collapses but also surges. Slow is better. Long-term is better.

Bing,

You can’t take Daddy’s money without hearing his opinion. That’s new?

Since when has cluelessness ever acted to disqualify. Were that so churches, governments, and enterprises all over the world whould have fallen by the wayside.

Wait a second, we might be on to something.

Bing there are two kinds of investors, “Inital investors”; these are the small original group who see a good thing and wish to build on it because they believe it has long term potential.
This type of investor is generally good for the employees, cause they realize that employees add value to a company.

The second type of investor is the “Bandwagon Investor”; he heard about the inital group and he wants to jump on the bandwaogon.

The problem is he is in for the short term and wants instant gratifacation and soon he out numbers the Intial investors and the tail starts to wag the dog.

This type of thinking is never good for employees or the company in the long run.

In these days of energy conservation why should we cultivate a prejudice against dim bulbs? If such a man buys, and therefore owns, a piece of a company is he not entitled to a corresponding piece of its profits?

As for the company workers, can they not purchase pieces of the company too? Many companies in fact offer shares to employees at a discounted price. Some even give shares to employees from time to time as a free bonus, understanding this to be motivational. Maybe not enough companies do this. Maybe wads of the bailout would accomplish more in the form of company shares bestowed upon the long-term, hard-working employees.

Wouldn’t it be fun to see the jet set company officers answering to them?

If you don’t want your company to be owned by shareholders, don’t go public. I’m surprised someone who writes a column in a financial magazine is unaware of this possibility…

Bing – If shareholders own the company, how is it shareholders have no say over what management pays itself? Or, except when caught with it’s hand too far into the cookie jar, whether management is canned for abysmal performance.

It seems pretty clear that management has spread enough money around Washington that the rules were changed when you weren’t looking. Chuck Prince destroyed Citi, got over $60 mill for his “efforts” and the board that let him do it is still in charge.

Shareholders are disgusted and selling en masse.

Only the government is dumb enough to buy stock in these businesses, but then again they were collecting the “donations” all of these years and don’t want them to stop.

I thought that with Sarbannes-Oxley innaccurate books were a thing of the past? I guess if you have enough former gov’t officials on the board you can “discover” $100 bil in “off balance sheet” losses and you don’t get put in jail. Ken Lay’s mistake wasn’t cooking the books, it was not having former treasury officials on his board.

My point, Jesper, is that it’s a balance. Of course I know the implications of going public. But I don’t think that just because a guy owns 50 shares of my firm it means that he “owns” me. We have a responsibility not to fritter away his investment. But when his short-term interest comes into direct conflict with the best interest of the company and its various customers and citizens, I don’t believe that one constituency should be considered more important than any other.

I agree with James in Arlington Va: we are so focused on short term goals that we do not have nothing planned for the long term, and do not tell me that a series of short, quick term goals equals one long term goal because it does not (do I hear Citi, AIG, GM, Wachovia, Lehman Bros, etc???). Slow is better. Long term is better. Once again Bing, excellent article.

Two items in this ’stockholder-centric world’ have concerned me for some time:

1) Even the owners of privately held firms find themselves constantly being urged to only consider their rate of return on investment in the same terms as the whatever is the the current rage in comparable publicly held surrogates. They may have had decades of solid growth based on strong fundamental strength, through nurturing customers, and a genuine love of their particular business niche, but its pedestrian nature reaps no ‘rate of return’ respect at the club (or whatever constitutes the ‘club of big swinging business dicks in their neck of the woods’. So in desperation they enact step 2)

2) They engage the services of a renowned expert(s) (sometimes a prominent consultant firm, a new CFO, CEO, COO, or some combination thereof), and work fervently to morph the firm into something resembling the current flavor, all the while agressively divesting themselves of all the valuable (but superficially costly) home-grown talent that got them there in the first place. Of course your organization simply becomes the last place the imported (but detached) talent ‘rescued’ before they abandoned your worthless carcass.

It is certainly naive to think that specific industry (discipline?) expertise and leadership requires nothing more than generic management precepts held by the current crop of top-notch MBA’s. MBA’s are not ‘plug and play components’. While there will always be the danger of ‘entrenched attitudes’ posed by recruiting from within, there is simply no substitute for industry specific experience. I assure you, there has always been some capable underling, toiling away in the depths of the organization, that loves the business as much as you do, has thought long and hard about ways to improve the bottom line, and won’t fly away to the next opportunity when things get a little rocky. The sad part…he or she is probably not related to you.

Citi got HUGE by buying up tons of small banks over the years.

I say the gov. bail out should be finding small local and regional banks to buy up the local (to them) Citi branches for their current values, which would be almost nothing. Basically break up the whole company and make it back into what it was. Or rather, wasn’t.

Sorry Prince Alwaleed bin Talal.

10 years ago it was cool for everyone to invest in individual stocks (E-trade, Motley Fool, etc) but then enough of us got burnt doing it that the fad started to fade.

We were told to do Index funds as the safe alternative. We see how the investment banks were able to rock the entire economy, slam index funds, and nobody cared until afterward. And here flows the money OUT of mutual funds.

I think what you are saying should happen, IS happening. We’re twice shy now.

I have weighed on this article for a while and now i have to give an actual opinion instead of a tired cynnical response. I think people who put their money in companies should have equal gravity with the people who run the place because the dollars they work hard for are at play in these companies. If you don’t want stock holders to influence company policies then don’t take their money or have them sign a waiver saying that they don’t have a say. Otherwise people should have some mastery over the companies they invest in. Their money is in it too, and whatever work they did to make that money is just as important as the work those in the company do for the company.

Bing, you may be on to something! I have found that my upper management can’t prepare or see past the next shareholders meeting. Most of them live and die by the over use of buzz words like “leverage”, “potential”, “liquid” and “dividend”. Detaching this cat and mouse from the marketplace will be tough…what will the CFO’s and CEO’s do with themselves? Manage employees? Bight your tongue…

Do shareholders own a company? Yes and no. Many shareholders are traders holding as a temporary investment in some idea that the share price will go up or the dividend will give them a return on their investment. Most couldn’t care less if the company dies the minute they sell. Many don’t have a clue what the company does they just look at a chart and pull the trigger.
Other shareholders are long term investors or employees who plan to hold for a long period of time. They exhibit company ownership traits that the traders do not exhibit. They care about the long term health of the company and show some loyalty to the workers and products.
The problem is that the traders are want to get in and then get out without caring what the long term damage they do to the institution or the workers, or frankly, to the country.

Do you know that there is a rarely used economic system out there that basically tells investors that they need to share pain with workers or they’d be sinful otherwise?

Check Syariah system, brothers, and be amazed on how simplistic yet robust that one is