A new column in The Washington Post goes a long way in revealing the real reasons why our economy is in the doldrums, the job market sucks (to use technical terminology), and our infrastructure is crumbling. It seems that due to a number of interesting factors, most large corporations are now run with the over-arching purpose of “maximizing shareholder value.” The result is that all decisions are made based on the share price and the projections that “analysts (morons)” on Wall Street spew out.
Many companies in other parts of the world, most notably Western Europe, take a much longer view when making critical business decisions. It’s not unusual for European companies to have 5-year plans and what that means is they are far less likely to suddenly lay off 5,000 workers one quarter, just to bump the stock price only to hire them back a few months later when production inexplicably drops.
What’s truly ironic, according to the article, is that shareholder value has actually gone down during this period. But even more revealing is that because executive compensation is now tied to share value, the decision making process continues to be skewed. There are many other interesting and insightful tidbits in this admittedly lengthy piece, but for anyone interested in seeing things change, I think this is mandatory reading matter.
To read the complete story, please click here.
Image courtesy of ecologyofeducation.net.