I think that’s only half right… the financialization is driven via a priority of short term profits that are incentivized by the market to executives. They play the BS game to just get rich and then dip, company be damned in the long run.
The economy has essentially been ruined by looting. People finding ways to strip out assets from companies.
Variations on this include private equity racking up debt and bankrupting companies. Executives doing stock buybacks to boost their options while hollowing out the company's resources. Hedge fund management fees. It's everywhere.
Given the above, isn’t the optimal strategy to maximize profit extraction in order to invest in new industries?
The US corporate right evangelised this culture as "freedom", and now it's being eaten from the inside out by it.
Maybe the tech was to far out, or maybe we would have had vastly more advanced industrial robots.
If those people don't own the company, what is the owner doing by allowing this to happen?
If those people _are_ the owners, then there shouldn't be a problem, since it's their own company, and they ought to be allowed to do anything they wish. Including short term reward for long term loss (if it is worth it in their eyes).
So i dont think it's "looting" (implying it's being stolen without knowledge of the owner).
only agents acting on behalf of the owners have fiduciary duty. Of course, if you are a majority owner, but there exists minority owners, you cannot screw the minority owners to profit yourself - i guess this is a form of fiduciary duty.
But if you own it outright 100%, then you don't have such a fiduciary duty to yourself.
A company has no legal responsibility to maintain the livelihood of their employees at the cost of the business' profit margins.
Also viewing a company as just a collection of assets owned by capital can be somewhat limiting. Companies are generally made up of human employees, and many schools of thought treat employees as one of several stakeholders in a company and assign various rights to them and various responsibilities to the company for them.
Looking at it this way, the “owner” of a company can easily be described as looting the company if they are destroying a lot of value in the company for marginal benefit for themselves.
This problem is solved using the court system, and then legislation system. Things which _should_ be unacceptable needs to be made illegal. And over time, this has indeed been the case. Things like environmental regulations etc are the examples.
> various responsibilities to the company for them
i think the employees are reading too much into this responsibility, because the only responsibility the company has for the employees are the legals ones: such as OSHA, timely payment of wages, safety from harassment etc.
Longevity of the job, social responsibilities (such as improving the community etc), are all secondary to the financial success for the shareholders.
I think you're describing the way things are, while dwalling is talking about how things ought to be. There's no law of nature saying that companies can't or shouldn't behave socially responsibly.
Edit: I'm not advocating for socialism, not at all. There's a wide spectrum between pure laissez-faire capitalism and nationalization of all private property.
putting financial success for the shareholders above all is the reason for so many things wrong right now,
I 100% agree with you, but isn’t this how capitalism works?
I do notice similar sentiments to use more frequently on HN lately. Feels like people are actually aware there are problems now but unsure what’s to be done?
The model is that you can buy your way out of this slavery if you're talented (ruthless) and well-connected enough.
Otherwise you die, and no one - at least no one who matters - cares.
Can feel Lenin spinning in his tomb from here.
https://en.wikipedia.org/wiki/United_States_involvement_in_r...
anyway in this case the term "looting" is meant to do things that will be of benefit to the people to the company that will in the short term maybe benefit the company but in the long term destroy it. The short term benefit often aligns with what benefits the looter, but this alignment is not hard and fast.
PMs loot products by throwing in needless features to game some metric, or cutting features that users want but are "too expensive".
Engineers loot by burning resilience and multi-dimensional reliability to eek out 5% more straight line speed.
Sales folks loot by offering huge discounts to get huge deals signed, etc.
They look like heros, then they move on, leaving the place worse than they found it.
Hedge funds working with consultant buddies (BCG) to take over the board/leadership of a victim company.
The consultants then deliberately destroy the company from the inside while their hedge-fund buddies (naked) short it into literal bankruptcy.
It's a very easy game, it's tax-free (because the short position is technically never closed? or something) and it only very very rarely fails and backfires (GME).
Hard to imagine the delightful people involved leaving money on the table by missing an opportunity to profit from shorting.
I'm curious to understand why China is to be blamed, exclusively? Correct me if I am misunderstanding your premise.
My understanding, possibly biased by my Britishness, is that Jim Goldsmith was one of the earliest raiders who took over companies and asset-stripped them.
Not "almost all", but that bucket is quite leaky.
I'm confused about how your model of the economy works. It sounds like you believe CEOs are selfish and greedy when it comes to workers, but when it comes to pension funds, they keep stock prices high out of the goodness of their hearts?
If liquidpele's thesis is true, and executives are looking to "get rich and dip", "company be damned in the long run", then we would expect this to be reflected in the company's stock price in the long run. The stock price is essentially the fair market value of the company. And the American stock market has been performing very well for a good long while.
This entire comment thread strikes me as populist pitchfork-waving with little grounding in economic reality. Here's a question: If you're truly pessimistic about American companies, do you hold any short positions or put options? At the very least, are you overweighting non-American countries in your portfolio? And if so, which ones?
Sure.
This is exactly the same playbook as with private equity - the point is to make the shareholders richer as fast as possible, and long-term strategies do not pay out as fast while possibly introducing longer term risks.
https://www.npr.org/2022/06/01/1101505691/short-term-profits...
Gee I’m wondering what we should all be thinking and doing about those pension funds and who that would actually serve.
Y’all get that most of us don’t have pension funds, right? They’ve been gutted long time ago. Defined benefit to defined contribution ring any bells?
But yes, let’s fight against the other plebs that have things we don’t, let’s blame pension funds and not the plethora of other issues.
I tell ya, we’re funding pensions alright but it ain’t the teachers kind.
But look at any big corporation, take the CEO's total compensation and divide it by the number of employees. The CEO of IBM earns an obscene $16.5 million per year - but divide that by IBM's 288,300 employees and it's $60 per employee per year. Wal-mart's CEO makes $25.31 million, but it's only $12 per employee per year.
Even if we redistributed the CEO's entire salary to workers, $60/year isn't going to do much to close the gap between rich and poor.
It helps address the question: wouldn't the company perform better if we did other things with that excess money?
Of course. That's not what CEO pay/employee does, though; it trivializes the massive (over)compensation by putting it in seemingly-small terms. What we need to be analyzing CEO pay in terms of is 1) How much a person needs in order to live decently and with dignity in one's particular area, and 2) How much better than the "average" CEO any give one performs (to determine incentive pay). Certain entities, institutions, and groups have cartel-ized executive positions as a class and bid up their compensation, decoupled from real value.
Another view: $60/employee doesn't seem like a lot, but if you remove the employees making over the median, or $100k, or some other resaonable cut-off, something tells me that the lowest-paid employees would see a meaningful increase in their take-home. GGP is purposely being reductive in a way that makes rethinking the issue more silly than it actually is.
Take a look at this, re institutional ownership: https://money.cnn.com/quote/shareholders/shareholders.html?s.... 95% of outstanding stock is owned institutionally, which is pretty normal in manufacturing. For decades, this has been a core investment sector for pensions and other institutional funds, and remains so, even if it's just to balance investments in tech, biotech/pharma, retail/CPG, financial services, the military industrial complex and transportation. Moreover, if you attend quarterly results calls, you typically end up with a few analysts from banks and at least one from some pension fund, who ask questions. We young people may not care about pensions as almost none of us will have one, but they still exist and still influence large pieces of our economy.
And they happen to have large influence on choice of CEO and who said CEO is going to try to please.
That is something some people choose to believe to be true. The same way some people choose to believe that God (or a number of Gods) exist.
The vast majority of us are working class.