Comment Public companies have four groups of stakeholders: shareholders; execs paid with share performance in mind; other workers; and their customers. Shareholders and share value-incentivised execs are ripping the heart out of many public companies, siphoning off their wealth, going for short-term in favour of long-term interests, and exhibiting naked, self-serving greed.
Consider share buybacks. A company buys its own shares to lift their value (through buyer pressure) and so make shareholders' holdings more valuable. What a grotesque distortion of common sense. Instead of using profits to fund dividends to shareholders, which supports long-term investors, it diverts dollars to assuage short-term investor concerns.
Consider exec pay linked to raising shareholder value. That sounds worthy enough, but when execs are partly paid through share options then raising share value affects their future wealth directly. If they can take cost out of the business and fund share buybacks from resultant profit increases then that directly benefits their short-term interest while screwing the longer term interests of workers and customers.
Whenever execs are paid 100 or more times what the lowest-paid employee receives then there is a good reason to think greed has taken hold and that the execs are living in a gold-lined vault while everyone else working for the company has to struggle to get by. The extremes of this are often seen in the fast food industry – but our storage business has its share of greedy cash-guzzling execs.
Consider activist investors. These people promote themselves as worthwhile recoverers of value from companies that management has screwed up. But they have no long-term interest in the health or viability of the companies they attack. They are short-termists to a fault, swooping in, harrying management from its proper task, and aiming to get rich quick while seducing shareholders with the prospect of a return on what they call “distressed stock”, a recovery from what they call “value-destruction.”
Look, investors; you are gamblers in the casinos of the New York Stock Exchange and Nasdaq. If an investment (gamble) goes sour or does not deliver as much growth as you want, then tough shit. It’s called risk. That’s what gambling/trading/investing in the stock market is all about. Man up.
Take your knocks on the chin and move on. Don’t give in to this “I’m a victim of value destruction by crazed execs” rubbish. You walked up and bought the shares; you, a normal, functioning, sensible human being. It’s called taking responsibility for your own mistakes, misjudgements and misfortune.
Activist investors are about as far from being disinterested recoverers of value as it’s possible to conceive. But hey, who gives a shit? If you, a poor victim of ignorant execs running a business valued at less than you think it should, and can make a few bucks on the back of activist investors making tens of millions of dollars, then screw the workers, screw the customers, and basically screw everybody but yourself.
It’s called selfishness and greed.
Consider these ideas:
- People who buy shares should be forbidden from selling them for five years.
- Execs paid with share options should be prevented from vesting them for five years from the award date.
- Everybody in the company should be paid with the same share option deal.
- Public companies should go private to escape activist investor hell.
Something should be done. Where we are now is a breeding ground for hyena-like activist investors ripping the guts out of good companies. They should be stopped. ®