• Concentration on new product development? Not hardly, that takes R&D and costs money.
• Investment in plants, personnel and technology? In your dreams.
• Training programs, quality circles, support for continuing education? Guess again.
• Long-range planning? Get serious.

The corporate hired-gun isn’t part of the connective tissue that makes up a company. He is always from the outside, so that allegiance is to the slash and burn tactics of stockholder wealth maximization--a term that has only recently come into the lexicon.

The texts speak for themselves;
    Van Horne: "In this book, we assume that the objective of the firm is to maximize its value to its stockholders;"
    Brealey & Myers: "Success is usually judged by value: Shareholders are made better off by any decision which increases the value of their stake in the firm... The secret of success in financial management is to increase value;"
    Copeland & Weston: "The most important theme is that the objective of the firm is to maximize the wealth of its stockholders;"
    Brigham and Gapenski: "Throughout this book we operate on the assumption that the management's primary goal is stockholder wealth maximization which translates into maximizing the price of the common stock."

Who can wonder why the corporate bathwater has pitched so many babies?

(Surowiecki again) There’s nothing wrong with cost-cutting, and in any dynamic economy layoffs will be necessary. The problem is that too many companies today define workers solely in terms of how much they cost, rather than how much value they create. This is understandable: after downsizing, it’s easier to measure a lower wage bill than it is to see the business the company isn’t getting because it has too few salesmen, or the new products it isn’t inventing because its R. & D. staff is too small. These lost opportunities may be hard to measure, but over time they can have a huge impact on corporate performance. Judging from its reaction to layoff announcements, the stock market understands this. It’s time executives did, too.

The road to success is written in the business schools and its guru, the Burma-Shave sign painter, is Jack Welch, “chainsaw Jack.” Wreck the company, sell off the parts like an automobile chop-shop, pocket the profits and move on. Welch-style wannabe hired guns not only come to town to shoot the sod-busters, they get paid a hundred million dollars to do it.

Where stock-markets were conceived to support business and industry, they have lately been reinvented in such a way that business and industry arguably exist to support stock-markets. Without much success, I might add.

The Dow Jones Average was at 11,750 in January, 2000. It’s gained 1,250 points, a measly ten percent in seven years, during which time the dollar has dropped by half in value. U.S. companies are being bought up today by foreign investors at 50 cents on the dollar and we celebrate that.

Meanwhile, jobs in the country have become so worthless that we rage against Mexican squat labor for taking our jobs. We demand that fences be built to keep out immigrant labor because the mad race to quarterly earnings has reduced us to immigrant labor within our own country.

Thanks, Jack and thank you Harvard Business School as well.

Under the guise of globalization, investors have come in on little cat feet and stolen our vibrant and productive nation from under our noses. Against this scenario, Treasury Secretary Paulson was quoted;

"The global economy is more than sound. It's as strong as I've seen in my business lifetime," Paulson said after meeting Japanese officials in Tokyo.

 1  |  2