Everywhere the pundits are quoting Gordon Gekko from the 1987 movie "Wall Street". "Greed is good" he expounds -- and now everyone laments that we have allowed Wall Street to become a reflection of Gekko's philosophy.
The reality is that this is much deeper than just the traders on Wall Street. In fact what this is about is the entire way that the success of a corporation is measured. Look at the Fortune listing of companies -- it is by revenue...not in order of profit...but by revenue. Oh, profit is of course mentioned in due course, but it is this lusting after the Holy Grail of revenue that makes the numbers be massaged and the mis-truths told.
When corp
orate CEOs and their disciples are measured and rewarded on revenue growth and the analysts can make or break a company by their recommendations based on the latest quarterly report -- is it really a surprise that some shenanigans are in play?
For years I have been a proponent of focusing on the profit picture -- not at the expense of revenue -- but when making a decision -- it shouldn't just be "full speed ahead". There should be some reflection on whether a deal actually meets the standards which will ensure the growth of the company for the future. Yet, "alas poor Yorick, I knew him well", is the head of a corporation who wishes hailed as a saviour in the short-term, so he/she can reap the rewards and move on as a messiah to their next position...while leaving destruction in their wake.
Many years ago, I saw this in action in a firm where I was employed. The devastating effects from his reign resulted in this blue chip firm never recovering.
The problem is how the entire markets measure success. Perhaps it is time to go redefine its meaning and go down the right path for the future.
The reality is that this is much deeper than just the traders on Wall Street. In fact what this is about is the entire way that the success of a corporation is measured. Look at the Fortune listing of companies -- it is by revenue...not in order of profit...but by revenue. Oh, profit is of course mentioned in due course, but it is this lusting after the Holy Grail of revenue that makes the numbers be massaged and the mis-truths told.
When corp
orate CEOs and their disciples are measured and rewarded on revenue growth and the analysts can make or break a company by their recommendations based on the latest quarterly report -- is it really a surprise that some shenanigans are in play?For years I have been a proponent of focusing on the profit picture -- not at the expense of revenue -- but when making a decision -- it shouldn't just be "full speed ahead". There should be some reflection on whether a deal actually meets the standards which will ensure the growth of the company for the future. Yet, "alas poor Yorick, I knew him well", is the head of a corporation who wishes hailed as a saviour in the short-term, so he/she can reap the rewards and move on as a messiah to their next position...while leaving destruction in their wake.
Many years ago, I saw this in action in a firm where I was employed. The devastating effects from his reign resulted in this blue chip firm never recovering.
The problem is how the entire markets measure success. Perhaps it is time to go redefine its meaning and go down the right path for the future.
2 comments:
The meltdown of 2007 chronicled in a three minute parody video:
http://www.youtube.com/watch?v=dE-LDfroa1w
Less than one week after bailout, AIG throws lavish party to celebrate
ABC:
"Less than a week after the federal government committed $85 billion to bail out AIG, executives of the giant AIG insurance company headed for a week-long retreat at a luxury resort and spa, the St. Regis Resort in Monarch Beach, California, Congressional investigators revealed today. …AIG documents obtained by Waxman’s investigators show the company paid more than $440,000 for the retreat, including nearly $200,000 for rooms, $150,000 for meals and $23,000 in spa charges.
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