Where We're Headed and the Power We Have to Set a New Course

Yesterday, LinkedIn featured a very popular article posted by Henry Blodget (CEO and Editor, Business Insider) titled, “This One Tweet Reveals What's Wrong With American Business.”

His one statement sums it up well…

"The real problem is that American corporations, which are richer and more profitable than they have ever been in history, have become so obsessed with 'maximizing short-term profits' that they are no longer investing in their future, their people, and the country."

And a majority of what followed concentrated on the common corporate behaviors of little investment, obsessing about quarterly earnings (as well as daily fluctuations in stock prices), but most importantly the attitude toward employees.

Now… before you stop reading and scramble to the bottom of the page to comment and ask, “What choice do corporations have, when their existence depends on market performance?”  I completely agree with your concern. 

The problem stems from when almost every corporation tried to follow in Jack Welch’s footsteps to impress shareholders and attempt to multiply the value of their company primarily through its stock price.  I’m not discounting Welch’s intelligence or strategic thinking, but he chose to do that at the most opportune time.  The latter part of his reign at GE was during a surreal boom in the stock market.  Shares of individual stocks would jump hundreds of dollars in one day.  And regarding one of his other concepts of firing the bottom 10% of your managers, irrespective of absolute performance… I have a difficult time agreeing with that, especially in our current environment where most companies are understaffed and employees are overworked, but perhaps GE was quite the opposite at the time.

As a result, we now have super-lean corporations with very little room to be innovative and take some risks, because they’re now at the mercy of many short-sighted shareholders.  That surreal boom in the stock market came during the dot com explosion that made it possible for anyone and everyone to instantly trade, sell, short, and make other investment decisions that many of them probably don't even fully understand.  And as if the market wasn’t volatile enough then, the shift to mobile devices has allowed ability to manage a portfolio from anywhere at any time.

But that’s not even the biggest problem.  One commenter, David F., posted “Now go one step further. About 60% to 70% of all daily trading in the stock market and on NYSE is done by hedge funds, traders, and highly leveraged investment companies. They are often in and out of a stock in seconds, often only hours, and rarely have any long-term (as in"years") stake in the company at all. Taken together, they comprise the most powerful set of stockholders that any company has. Actually, considering the denial of access to "normal" stockholders to having any say or control at all, these hedge funds (et al) have no competition whatsoever for their control of their companies.”  He goes on to include, insider trading, government ties, and other forms of corruption, but I’ll just leave it at this.

Blodget’s article was actually a follow-up to his  Business Insider article titled, “Here's Who To Blame For America's Lousy Economy...” where he suggested that American corporations should increase the wages of its workers and pay for this by making slightly less money.  And, naturally, there were readers who argued how it wasn’t possible for corporations to do this and still survive in the market.

It’s our greatest challenge.  The current situation has left no room for corporations to make slightly less of a profit.  Short-sighted investors with no interest in the long-term (even when there's more value in it) turn and run with no confidence in such a company no matter how solid and promising it is.

Understanding the value of employees is paramount.  They are the core of every corporation, but how can employees have any regard for who they work for if they're not respected by their employer.  Treating them fairly, recognizing and appreciating their contributions, and acknowledging their value motivates them to do what they do best.

It all needs to start with removing the all-too-common mindset that is fueled by lack, limitation, and fear.

 

This mindset initiates such things as shareholder greed and causes CEOs to feel insecure in acknowledging employee performance out of fear that one day those employees might get comfortable and expect even more.

We need leaders who are confident and able to effectively communicate and convincingly articulate to shareholders the incredible value of their long-term plan.

 

The only way to initiate change is to lead by example, and there’s never been a greater opportunity for all of us to do so.  Through the myriad of social networks, each of us now has global reach.  Someone once made the point that many years ago the world was controlled by the church, then control shifted to government, and then to corporations, but the power of community continues to rise.  

Be a part of that community influencing change for the better.