Corporate Loyalty

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Ahso!
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Corporate Loyalty

Post by Ahso! »

This would appear to be a simple straight up question. But is it? Let's give it a go, shall we!

From your perspective, do you believe public corporations should be accountable to their shareholders only, and that accountability will then, in turn, naturally steer those corporations to do what's in the best interest of society as a whole? Or is the question in and of itself not a valid one?
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gmc
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Corporate Loyalty

Post by gmc »

Ahso!;1366948 wrote: This would appear to be a simple straight up question. But is it? Let's give it a go, shall we!

From your perspective, do you believe public corporations should be accountable to their shareholders only, and that accountability will then, in turn, naturally steer those corporations to do what's in the best interest of society as a whole? Or is the question in and of itself not a valid one?


It's not really a valid question as there is only two reasonable answers, No to the first part and what planet are you on for the second.
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Lon
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Post by Lon »

Ahso!;1366948 wrote: This would appear to be a simple straight up question. But is it? Let's give it a go, shall we!

From your perspective, do you believe public corporations should be accountable to their shareholders only, and that accountability will then, in turn, naturally steer those corporations to do what's in the best interest of society as a whole? Or is the question in and of itself not a valid one?


Most all corporations have adopted MISSION STATEMENTS and to the extent that they adhere to their MISSION STATEMENT, I have no problem.

Corporate Mission Statements:
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Lon
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Post by Lon »

Here are 32 Corporate Mission Statements

http://retailindustry.about.com/od/reta ... tement.htm
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LarsMac
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Corporate Loyalty

Post by LarsMac »

Obviously, corporations should be responsible to their stockholders, but it does not follow that this drives them to naturally do what's in the best interest of society as a whole.

For the most part, today, the "Stockholder" is a corporately held mutual fund, whose purpose is to advance the value of its own shares.

So unless doing what's in the best interest of Society is also recognized as the best interest of the stockholders, meaning profitable, then society will lose out.
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Bryn Mawr
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Corporate Loyalty

Post by Bryn Mawr »

Ahso!;1366948 wrote: This would appear to be a simple straight up question. But is it? Let's give it a go, shall we!

From your perspective, do you believe public corporations should be accountable to their shareholders only, and that accountability will then, in turn, naturally steer those corporations to do what's in the best interest of society as a whole? Or is the question in and of itself not a valid one?


Corporate loyalty is an oxymoron but to address the question.

No, I believe that where any institution is responsible only to its shareholders (and in the UK at last, as I understand it, the board of directors has a legal duty to maximise the return to those shareholders) then it is not only bad for society but it is also bad for the shareholders as it leads directly to short termism.

How can it possibly be in the best interests of society as a whole for a company to be run with the intention of making as big a profit for the shareholders as possible?

One of the common results of such a policy is for the company to eventually fold due to lack of forward investment. Investment in the future takes money away from the shareholders' dividends and many of the shareholders won't be shareholders by the time it makes any difference.

Investment in society and in the community takes money away from the shareholders and does not add asset value to the company - and as RBS found, including goodwill in your ballance sheet can lead to a spectacular loss when that goodwill evaporates.
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Lon
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Post by Lon »

Bryn Mawr;1367018 wrote: Corporate loyalty is an oxymoron but to address the question.

No, I believe that where any institution is responsible only to its shareholders (and in the UK at last, as I understand it, the board of directors has a legal duty to maximise the return to those shareholders) then it is not only bad for society but it is also bad for the shareholders as it leads directly to short termism.

How can it possibly be in the best interests of society as a whole for a company to be run with the intention of making as big a profit for the shareholders as possible?

One of the common results of such a policy is for the company to eventually fold due to lack of forward investment. Investment in the future takes money away from the shareholders' dividends and many of the shareholders won't be shareholders by the time it makes any difference.

Investment in society and in the community takes money away from the shareholders and does not add asset value to the company - and as RBS found, including goodwill in your ballance sheet can lead to a spectacular loss when that goodwill evaporates.


Corporate stocks in the U.S. are not just owned by fat cat multimillionaires but by Union Pension Plans and the pension plans of many institutions and corporations. The LONG TERM profitability of these stocks is paramount to providing decent retirement benefits for it's members as opposed to the QUICK PROFITS to which you allude.

Unfortunately, the DEFINED BENEFIT PENSION PLAN & YEARS OF SERVICE PENSION PLANS are rapidly becoming a thing of the past, due in part I believe to the gross mismanagement of corporate officers in their attempt to feather their own nests with QUICK PROFITS. The recent HOME LENDING FIASCO & subsequent financial meltdown is a good example. There was a time when the individual and society in general was served well, but it appears that those days are over, at least until there are some regulations with teeth in them.
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Bryn Mawr
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Post by Bryn Mawr »

Lon;1367036 wrote: Corporate stocks in the U.S. are not just owned by fat cat multimillionaires but by Union Pension Plans and the pension plans of many institutions and corporations. The LONG TERM profitability of these stocks is paramount to providing decent retirement benefits for it's members as opposed to the QUICK PROFITS to which you allude.

Unfortunately, the DEFINED BENEFIT PENSION PLAN & YEARS OF SERVICE PENSION PLANS are rapidly becoming a thing of the past, due in part I believe to the gross mismanagement of corporate officers in their attempt to feather their own nests with QUICK PROFITS. The recent HOME LENDING FIASCO & subsequent financial meltdown is a good example. There was a time when the individual and society in general was served well, but it appears that those days are over, at least until there are some regulations with teeth in them.


I think you will find that the majority of shares in most markets are owned by the pension plans - they are the ones with a few billion spare to invest.

You will also find that they do not leave their money in a share long term but move it around as the market moves - and they're not averse to bringing a board down if they fail to deliver a good enough dividend.

Look at the contract of employment of most CEOs nowadays, their bonus is linked to performance over the next three to five years at most and most do not expect to stay with any given company much beyond that - what pressure is there to look to long term performance.

I agree that the firm I work for may not be typical but we've had five CEOs so far this century.
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