Social Security [in the U.S]...

[Pugwash]

There is no correlation between something changing and it getting better. Things can and do change for the worse as well. I'm not advocating one or the other in this post, but that people seem to get too hung up on the change/no change issue.

Like the Amish.

[eddhead]

I think the same could be said of change for the sake of change itself.

There is no correlation between something changing and it getting better. Things can and do change for the worse as well. I'm not advocating one or the other in this post, but that people seem to get too hung up on the change/no change issue.

While there is logic to your statement about change, I think the willingness for people to accept change.. ANY change is an indictment on just how bad people believe things really are, and how poorly they believe th country is being managed and how dissatisfied everyone is with the current course and speed. Let's face it... for the most part, people are usually resistant to change... this type of reaction is a barometer ... it shows just how desperate the electorate really is. Because at length, the democratic congress did not receive an electoral mandate.. rather, this was a rejection of the current government.

[eddhead]

... and the opposite of Progressive is Conservative.

Yes, I get it, and I don't understand how fear of change and belief in something because "that's the way we always dun it" can be seen as a positive stance.

yep. you are preaching to the choir my friend.

[eddhead]

Just had an after-thought...

This thread will probably end up being censored because we all know Gore invented the internet...

Gore gets a lot of grief for this statement. Here is what he actually said:

"During my service in the United States Congress I took the initiative in creating the internet. I took the initiative in moving forward a whole range of initiatives that have proven to be important to our country's economic growth and environmental protection, improvements in our educational system."

Hardly a claim to have invented anything. Typical of Karl Rove's dirty tricks,

The fact is, as a senator he sponsored the legistation that funded the commercialization of the internet, which until that time was nothing more than a closed private network for the scientific community. Say what you will about him but Gore understood the power of the internet as a driver for e-commerce and social change very early on, perhaps earlier than any other mainstream politician. According to Vint Cerf and Robert E. Kahn , " ...there is no question in our minds that while serving as Senator, Gore's initiatives had a significant and beneficial effect on the still-evolving Internet. The fact of the matter is that Gore was talking about and promoting the Internet long before most people were listening. " In 2005, the International Academy of Digital Arts and Sciences honored Gore at the Webby Awards for Lifetime Achievement for three decades of contributions to the Internet The fact that he stll gets mocked for his involvement in the internet is more of an indictment on this president and his administrations anti-intellectulist mindset than it is on Gore himself. It also says a lot about the american electorate, who are more suseptible to 15 second sound bites than they are with understanding the truth.

Gore has a lot going for him. He was right on the internet. He was right on Global Warming. He was right on the first gulf war, and he was right on iraq. Under his leadership as Vice President, the federal beauracracy was trimmed and the budget was balanced. It is also worth noting that while he opposed the Vietnam war personally, he enlisted and served in Vietnam. He arguably has the best record of public acheivement of any mainstream US politician. I find it amazing that he is so universally mocked.

[Craytonic]

While there is logic to your statement about change, I think the willingness for people to accept change.. ANY change is an indictment on just how bad people believe things really are, and how poorly they believe th country is being managed and how dissatisfied everyone is with the current course and speed. Let's face it... for the most part, people are usually resistant to change... this type of reaction is a barometer ... it shows just how desperate the electorate really is. Because at length, the democratic congress did not receive an electoral mandate.. rather, this was a rejection of the current government.

I wasn't talking about the recent US election, although it appears you are.

I do agree with you that people are usually resistant to change, it makes evolutionary sense. For instance, why eat from tree #1 which might kill you when you know the fruit on tree #2 will not? That said, it proves only that people are resistant to change, not that change is always good. My point is that it can be good or bad.

Pug: The Amish? Quick-witted but not sure it is an argument. The opposite reply isthe Nazis/Fascists/Stalin or or any other reactionary (i.e. driven by change) government... The Amish may ride in buggies but they don't kill too many people with them. I think those of us in the middle of the change/no change continum are the happiest. I am very leery of using the "Nazi" argument and feel like it is a cheap one but here it does seem appropriate. Obviously there are some "change" based governments that have turned out differently, but while we are naming examples...

Funny fact: the "conservatives" use to be the "crazy liberals" way back in the day. Its just a pendulum that swings both ways gentlemen... when it gets too high on one side it swings all the way back to the other - most people get too caught up in the day to day to see that big picture.

Edited November 27, 2006 by Craytonic

[eddhead]

I wasn't talking about the recent US election, although it appears you are.

I do agree with you that people are usually resistant to change, it makes evolutionary sense. For instance, why eat from tree #1 which might kill you when you know the fruit on tree #2 will not? That said, it proves only that people are resistant to change, not that change is always good. My point is that it can be good or bad.

Pug: The Amish? Quick-witted but not sure it is an argument. The opposite reply isthe Nazis/Fascists/Stalin or or any other reactionary (i.e. driven by change) government... The Amish may ride in buggies but they don't kill too many people with them. I think those of us in the middle of the change/no change continum are the happiest.

\

Indeed I was. But more broadly speaking, I agree with Pug's perspective on how people embrace sameness and reject any idea that is different from what they are used to. Not just in politics but throughout society. I hear it all the time at work.. this is how we've always done it... well, so what? People should be open to new ideas and new ways of doing things... I mean I get your tree example, but if nobody ever ate the fruit from tree no. 2, we would have a horribly boring diet. As a society we are too afraid to try something and fail.. I just think that experimentation and curiosity lead to invention and discovery

[Pugwash]

Funny fact: the "conservatives" use to be the "crazy liberals" way back in the day. Its just a pendulum that swings both ways gentlemen... when it gets too high on one side it swings all the way back to the other - most people get too caught up in the day to day to see that big picture.

Q: What does it take to change a liberal into a conservative?

A: Thirty years.

[eddhead]

Q: What does it take to change a liberal into a conservative?

A: Thirty years.

actually, after 30 years they become neo-cons....

[Craytonic]

\

Indeed I was. But more broadly speaking, I agree with Pug's perspective on how people embrace sameness and reject any idea that is different from what they are used to. Not just in politics but throughout society. I hear it all the time at work.. this is how we've always done it... well, so what? People should be open to new ideas and new ways of doing things... I mean I get your tree example, but if nobody ever ate the fruit from tree no. 2, we would have a horribly boring diet. As a society we are too afraid to try something and fail.. I just think that experimentation and curiosity lead to invention and discovery

The idea is you can eat whichever fruit you want, its just a cost/benefit analysis of the risk of dying v. benefit of finding a new food source. i.e. lets say there is a problem on tree #2 making it less attractive and you have a new need... this makes you more likely to try the other tree. Same thing happens in politics, people switch when they think it is worth their while.

You would swith trees for a reason, you would not just switch for the sake of switching. You may switch because you think boredom of diet outweighs the risk of death/problems from the other tree. whatever. the point being there is a reason behind the switch. Switching just for the sake of switching would be... darwinian.

I think you are missing my point and pug got it. There is really no reason to get caught up in politics, it just swings back and forth.

Edited November 28, 2006 by Craytonic

[eddhead]

The idea is you can eat whichever fruit you want, its just a cost/benefit analysis of the risk of dying v. benefit of finding a new food source. i.e. lets say there is a problem on tree #2 making it less attractive and you have a new need... this makes you more likely to try the other tree. Same thing happens in politics, people switch when they think it is worth their while.

You would swith trees for a reason, you would not just switch for the sake of switching. You may switch because you think boredom of diet outweighs the risk of death/problems from the other tree. whatever. the point being there is a reason behind the switch. Switching just for the sake of switching would be... darwinian.

I think you are missing my point and pug got it. There is really no reason to get caught up in politics, it just swings back and forth.

No, I understood your point. My last response was not intended to be political at all, sorry if it came accross that way. I just don't know if I necessarily agree with you. I think sometimes making a change for the sake of change alone is a good thing. Not always, but sometimes. It shakes things up, challanges the status quo, and leads to unpredictable but often positive outcomes. In the corporate world, even high-perforning organizations re-org every 2-5 years or so. I guess you could say the rationale there (your reason) is to premptively manage against staleness, but you can use that as a justification for any change. No hard feelings it is jst my view take it with how many grains of salt you wish.

[Craytonic]

I don't think I could ever stand before a board of directors and tell them I wanted to "shake things up" because i want an "unpredictable" outcome. That would get me fired and acting on it might be a violation of their fiduciary duty to their shareholders, getting them sued if the unpredictable outcome was a bad result (try telling shareholders "oops, we had no idea what the outcome would be"). If I gave them a cost/benefit and risk analysis and explained how this meant more money in their pocket, they would do it (and if it tanked it is still legally protected under the business judgment rule). But, your milage may vary.

[eddhead]

I don't think I could ever stand before a board of directors and tell them I wanted to "shake things up" because i want an "unpredictable" outcome. That would get me fired and acting on it might be a violation of their fiduciary duty to their shareholders, getting them sued if the unpredictable outcome was a bad result (try telling shareholders "oops, we had no idea what the outcome would be"). If I gave them a cost/benefit and risk analysis and explained how this meant more money in their pocket, they would do it (and if it tanked it is still legally protected under the business judgment rule). But, your milage may vary.

"Willingness to change is a strength, even if it means plunging part of the company into total confusion for a while." Jack Welch

Look, I get it. I realize it may appear that I advocate Change for Change's sake alone.. in fact I do not. I do however believe that what sometimes appears to be change for changes sake's alone is most often something much more than that. The preception is created by people (ion the receiving end) who are resistant to change, or by people (on the sending side) who are poor communicators.

I work for a huge world class global financial institution. Within my LOB we reorg every 2-4 years even when we are in a high performance mode. Some people would perceive this as change for the sake of change alone. Others would suggest that this is the hallmark of a dynamic organization which is constantly trying to stay fresh and circulate new blood. Even with my my career, i try to change jobs within my company every 2-5 years, even if it means making a lateral move. Again, some people may perceive this as change for change's sake, I look at it as trying to stay fresh and re-invent myself. The point is that change for change's sake is seldom that at all. There is almost always a more concrete objective... it is just that not always understood.

[Pugwash]

That would get me fired and acting on it might be a violation of their fiduciary duty to their shareholders, getting them sued if the unpredictable outcome was a bad result (try telling shareholders "oops, we had no idea what the outcome would be").

The problem with boards of directors is that their sole responsibility is to the shareholders. Their job is to increase shareholder value, which leads to outsourcing and short-term gains. It's a stupid way of running a business, to be honest. But that's an argument for a different day.

[Craytonic]

"Willingness to change is a strength, even if it means plunging part of the company into total confusion for a while." Jack Welch

Look, I get it. I realize it may appear that I advocate Change for Change's sake alone.. in fact I do not. I do however believe that what sometimes appears to be change for changes sake's alone is most often something much more than that. The preception is created by people (ion the receiving end) who are resistant to change, or by people (on the sending side) who are poor communicators.

I work for a huge world class global financial institution. Within my LOB we reorg every 2-4 years even when we are in a high performance mode. Some people would perceive this as change for the sake of change alone. Others would suggest that this is the hallmark of a dynamic organization which is constantly trying to stay fresh and circulate new blood. Even with my my career, i try to change jobs within my company every 2-5 years, even if it means making a lateral move. Again, some people may perceive this as change for change's sake, I look at it as trying to stay fresh and re-invent myself. The point is that change for change's sake is seldom that at all. There is almost always a more concrete objective... it is just that not always understood.

Yes but the confusion Welch referred to has a purpose; I never said change for a reason was bad. I do corp. law so I am familiar with your work; as you said there is a purpose for those changes, those are all situations where the purpose is relatively concrete.

I think we are just quibbling over words at this point...

@ Pug: Not a stupid way to run a business if you are the shareholder... and the corp. does belong to them so the duty of care is to them. Seriously though the BoD gets a good deal of lattitude legally under the business judgment rule and the board IS allowed to consider other factors to a limited extent. Could they be voted out? Yes, but that does not happen much. Obviously laws in your country may vary.

Edited November 29, 2006 by Craytonic

[Pugwash]

@ Pug: Not a stupid way to run a business if you are the shareholder... and the corp. does belong to them so the duty of care is to them.

I disagree. It's a terrible way to run a company, but a good way to make money. Shareholder revenue isn't a mark of success, it's merely a mark of making money. Shareholders care about their returns, not the success of the company. It's a subtle difference, but it's there.

For example, Rolex, and therefore most of the modern mechanical watchemakers, wouldn't be here today if they'd relied on listening to the shareholders. You can't have a decent long term plan post-yuppie boom.

[Craytonic]

Pug: Sorry I am not following you (what are you saying should be the mark of success?). Here in the US the ultimate power of the corp. rests in the board of directors, who have a fiduciary duty to the investors. However the board is given a wide latitude of protection in its choices under the business judgment rule. The board's ultimate duty is to the shareholders because it is _their_ company (corps are basically fictitious people). It used to be they would want dividends but for various reasons (mainly tax) those typically are not paid out so now it is more value of the investment (share price). Things are a little different in Germany where the workers have some say, but I don't really know about any other countries. There are also a bunch of cool ways to keep control in the hands of a select few and completely out of the normal shareholder (a la google).

I know exactly what you mean about shareholders caring about returns, not success off the company. This is why in a hostile takeover the new majority shareholder will sometimes chop up the whole company and liquidate it, or liquidate all but a portion of it (and make lots of $ in the process). Instant profit great for shareholders taking the profit, bad for the company itself since it is dissolved.

Without writing a novel, the reason the ultimate power is in the board under incorporation statutes (who can of course be voted out), is that they tend to look out more for the company, but ultimately they have a fiduciary duty to their shareholders. BUT, the business judgment rule allows they a wide lattitude to basically skirt short term goals for long term profits and do all other sorts of interesting things. This is why shareholders of huge corps. do not vote democracy style on business decisions.

It is really a question of perspective. It may be a stupid way from the individual business' perspective (i.e. getting chopped up and sold off and ceasing to exist). BUT, the business only exists to make money for the shareholders, so this is not a bad thing since the shareholders ultimately have more $.

Not familiar w/ the rolex history and your long term argument but it has to be either they were going to chop the company up or shareholders wanted Rolex to do something stupid (make quartz or something)

The way I am reading your comments is that putting shareholders first is a bad way to run a company because that could lead to the company being dissolved/sold off for the profit of the shareholders. However, since it is the shareholders company, they should be able to dissolve it and take the profit.

If you are arguing shareholders are collectively stupid and should not run a company, this is the reason for the business judgment rule. It is the board of directors job to decide what is best (quartz v. mechanical or nice merge or not), not the shareholders. As long as they don't do several bad things, the board is entitled to make the decision and ignore shareholders (although they can be voted out at the next shareholder meeting). This allows some decent long-term planning to go on that is often _horrible_ for shareholders in the short term (the Paramount - Time merger is the _classic_ example of this, be sure to google it if you aren't familiar because shareholders got screwed. There are many others in merger contexts where shareholders got screwed out of a big premium on their shares and they could not punish the board for it).

Sorry for the long-winded reply; I somewhat meandered since I was unclear on your point.

Edited November 29, 2006 by Craytonic

[Pugwash]

Sorry for the long-winded reply; I somewhat meandered since I was unclear on your point.

Ok, the Rolex example ... Rolex was family-owned and decided to weather out the Quartz revolution (they were more of a trust than a company at this time) and in doing so kept the mechanical market alive.

The way I am reading your comments is that putting shareholders first is a bad way to run a company because that could lead to the company being dissolved/sold off for the profit of the shareholders. However, since it is the shareholders company, they should be able to dissolve it and take the profit.

The difference we're having is that I see a company as more than just a benefit drive for shareholders. Shareholders in general don't care how a company makes a profit or what they make a profit on, and that can lead to ... um, on-topic, Ferrari Panerais.

I'm not saying I'm right, but that's the way I see it.

[Craytonic]

Just out of curiosity - you have twice mentioned companies having some other goal than the enrichment of their shareholders. Could you elaborate a little on what you think those goals should be and where the duty would be derived from.

US Companies are allowed to give to charity to some extent and do other altruistic things.

BTW I hate those ferrari pams too. (but Panerai doesn't owe me any duty, fiduciary or otherwise, so what can I say )

[TJGladeRaider]

Our Social Security

And the worst part about it is uninformed citizens believe it!

Dear Lord, the irony of that statement.

The worst part is that all one needs to do these days is put together a "history," a collection of factoids from unidentified sources, and post it on the Internet to persuade people all over the world to quote them as if they were the Gospel. It's like a home made, propaganda do-it-yourself kit.

This particular crock of crapola is a wonderful, pitiful, example.

Bill

[Pugwash]

Just out of curiosity - you have twice mentioned companies having some other goal than the enrichment of their shareholders. Could you elaborate a little on what you think those goals should be and where the duty would be derived from.

Survival is one, ecological advances is another ...

Alternate Energy doesn't make shareholders jump for joy, unless they can see an immediate return.

I'll try to find you an example, somethign like Bose's work on car brakes, for instance.

[Craytonic]

Those are nice things, but I can't see where a duty to pursue them would be derived from. Imposing any thing else on the corp is basically telling the owners to go screw themselves; such outside ording is probably a bad idea (the late and great Milton Freedman would certainly argue against it).

They do try very hard to survive (and a lot of time shareholders get screwed) because the board of directors does not want to loose its sweet job and if they can keep a merger they don't like from happening the won't let it (many ways to do this). Now this may just be the board trying to survive, but it indirectly keeps the corp alive as well. The paramount merger, or even better the time-warner merger, are classic examples.

Those are nice things, but I can't see where a duty to pursue them would be derived from. Imposing any thing else on the corp is basically telling the owners to go screw themselves; such outside ording is probably a bad idea (the late and great Milton Freedman would certainly argue against it).

They do try very hard to survive (and a lot of time shareholders get screwed) because the board of directors does not want to loose its sweet job and if they can keep a merger they don't like from happening the won't let it (many ways to do this). Now this may just be the board trying to survive, but it indirectly keeps the corp alive as well. The paramount merger, or even better the time-warner merger, are classic examples.

[eddhead]

Just out of curiosity - you have twice mentioned companies having some other goal than the enrichment of their shareholders. Could you elaborate a little on what you think those goals should be and where the duty would be derived from.

US Companies are allowed to give to charity to some extent and do other altruistic things.

BTW I hate those ferrari pams too. (but Panerai doesn't owe me any duty, fiduciary or otherwise, so what can I say )

I think the point is that while the concept of shareholder value is mission critical to a corporation, in practice, it often pressures organizations to make decisions that maximize short term gains at the expense of longer term strategic opportunities. Or in worst case examples lead to the application of unethical business practices. Look at Enron, MCI/Worldcom, Computer Associates, Global Crossing. the list goes on and on. Every one of those companies made bad decisions or engaged in unethical accounting practices, and I guarantee you, they were all done in the name of shareholder value. Ofg course, at the end of the day, the shareholder's interests were not served at all. But in many organizations, shareholder value= the attainment of qauntum leap stock price growth opportunities (EDIT) which leads to making bad long term decisions.

The other thing is that if you are an employee and you hear the term "shareholder value" get ready to bend over. And I guess in a true market driven economy that is fine, darwinian even (dare i say it?) However, I cannot tell you how many times I have seen employees lose thier jobs in the name of process efficiency and shareholder value, only to be brought back at a later time as high paid consultants. All under the guise of shareholder value.

So in my view, shareholder value is a worhy aim, as long as it does not become so ingrained in the corporate culture that it creates a climate that puts pressure on achieving short term gains at the expense of long term health.

[Pugwash]

I think the point is that while the concept of shareholder value is mission critical to a corporation, in practice, it often pressures organizations to make decisions that maximize short term gains at the expense of longer term strategic opportunities. Or in worst case examples lead to the application of unethical business practices. Look at Enron, MCI/Worldcom, Computer Associates, Global Crossing. the list goes on and on.

What he said.

[Craytonic]

Those executives created _no_ shareholder value ( nonexistent asset is not shareholder value). What they did was trying to keep their own jobs and appease their huge egos. People is any walk of life can fall victim to pressure and there will be a few bad apples. Furthermore, there are just as many examples of shareholders getting screwed out of great short-term, real, profits for the "long-term outlook" of the company.

Bottom line is there will always be notable failures in anything that naysayers can point at and say "Look! Look!" but I think you would be hard pressed to tell me the corp. governance system has not created a ridiculous amount of wealth. Big picture boys, don't lose sight of the forest for the tree that fell over in it.

I certainly would not want a system where there was no "pressure" to turn a profit. That is how parents raise children, not how investors spend their money.

[Pugwash]

I think you would be hard pressed to tell me the corp. governance system has not created a ridiculous amount of wealth.

You can't 'create wealth'. It's a myth.