Comment 39390

By Kiely (registered) | Posted April 01, 2010 at 13:52:04

"The problem is that when they're on the board, they can't look at people as individuals. If they don't make decisions to maximize profits they can and will be replaced with people who will." - Brandon

Yes, but one of the big problems with the shareholder system is the desire and focus on the part of shareholders for companies to obtain short term profitability. They want their profits this this year or even this quarter. This focus on short term profitability often comes at the expense of long term profitability. For example, many studies have shown that one way to increase long term profitability is to simply treat your employees better, but very few corporate boards will promote that notion because initiatives to improve employee moral are viewed as a cost (even if it is just a short term one) with ambiguous ROI. Another example is cost reduction. I have witnessed firsthand cost reduction in the name of short term profitability damage the long term viability of the company product. Sure you cost reduced your product and made more profit this year but the product was crap and no one wants to buy it anymore. I have seen this focus on the shareholder and subsequent short term profitability suck the life out of more than one large company I have worked for.

What I'm saying is there are obviously issues with the current shareholder system that make it less than ideal from the perspective of the company, the employees, the general public and even the shareholders themselves, (e.g., the current system allowed many of them to be easily duped). So I agree with nobrainer that the system does need to change for almost everyone's benefit and if they could find a bit of moral high ground in the process that would be a good thing too.

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