The stupid thing is that we know this. It’s all game theory - if there’s a way to monkey with the system to maximize your desired result, you are going to do it even if it has negative results down the road for you or someone else.
Even video game designers will talk about spending time thinking over how to keep players from finding ways to short circuit the progression system. If the game involves making money, they try very hard to make it impossible to figure out the metrics the game uses to determine how much money a given action returns, because if the players ever figure that out, they quickly end up getting insanely rich in the game. And that makes the game too easy, and therefore boring and they move on to something else, and don’t buy the expansion packs.
And even though people who play video games know that if they make the game too easy the game won’t be fun anymore, 9 times out of 10 they’ll make the game too easy anyway if they figure out how. And that’s all play-pretend. Introduce real money into the equation and the odds are even greater that if someone figures out how to maximize their personal gain, they’re gonna go for it no matter what it does in the future.
Well we agree folks. These are only symptoms of the real problem of many corporations being run only for short term for the folks in charge and not for the long term. Corporate execs, board members, bankers, equity groups, and so on. I’m not sure what is to be done about it but being able to gobble up big blocks of stock to take over leadership and start selling assets is one area to tackle. I got jumped on before for saying it but I think one vote per share of stock has to go away somehow.
Investment advisors are required by law to act in the best interests of their clients. i.e., if your investment advisor tells you to buy a bunch of stock in a troubled company because he wants to make it temporarily spike so he can sell his shares, even though that means you’ll be holding worthless stock, he gets in deep trouble.
If GM (and other corporations’) execs were required to act in the best interests of their client (namely, GM), then they’d know they would get in trouble if they chased short term profits just to drive their personal stocks up at the expense of the company’s future.
Jail isn’t a universal deterrent (look at Denny Hecker) but it would at least make corporate leadership think twice before they torpedoed their own companies for personal gain.
There are huge differences between this way of doing bonuses and the way many large corporations (especially the auto industry) does executive bonuses. I get stock bonuses, but it’s based on my (and teams) performance. My bonuses amount to MAYBE $20k/yr. Not several hundred thousand. Some of GM’s VP’s were nearing retirement and made some questionable business practices to ensure a stock increase. They took their hundreds of thousands of dollars in stock bonuses and retired.
What GM needs to do is stop making the same models under different badges and simply make their cars better. The Terrain and Trail Blazers are two of the biggest piles ‘O Crap and they make them under the GM, GMC and Buick badges. Renaming dog terds 3 different ways won’t make them better.
This is what the boards job is, to oversee the executives decisions. Those people are then responsible to the stock holders. No one is immune and making any big decisions in a vacuum. Of course, the more I own of a company, the more say I should have in how it operates and the decisions made.
No law requires that all ‘investment advisors’ be fiduciaries. That law that set up the CFPB originally had that requirement, but Rs got it out. You should ask.
A few years ago a friend’s mother (in her 90s), after her husband’s death, on my friend’s advice, put her savings in the management of the only broker in her small town, instructed him to put them in an index fund. A year later my friend reviewed her investment portfolio, saw that the guy hadn’t, had put them in investments that paid the advisor well but not the mother, got a mealy-mouthed explanation from him, invested the money himself. No law was broken.
While we’re on the subject of low sales, how long will the Mustang be around? The Flat Rock plant just downsized to one shift of Mustang production. If a well-executed, popular car like the Mustang can be down to one shift, that doesn’t bode well for sedans and coupes compared to SUVs and trucks.
Whatever. The point was that in my view, a private equity group should not be able to buy up a huge block of stock so that they can manipulate the board, sell assets, and otherwise destroy the corporation. Of course they will say that are saving an otherwise doomed organization, but I’d like to see the figures on that one. Then the other issue is the huge conglomerations that own multi brands like Yum brands. Just too much power controlled by too few people at the peril of the brands or companies they gobble up.
A little adjustment is needed I believe. Yeah maybe break up GM into its divisions like Bell years ago. The as President Wilson once wrote back in 1918 or so, there are important men, pillars of industry, that dare not speak of a force controlling them . . . or somewhere along those lines. Possibly the five families. Who knows, but it’s a snake pit-wear boots and gloves.
I read an article today about car sales. All major coupe/sedan sales are down. If a manufacturer has SUV/truck models, they offset the car losses to some extent. Even Prius sales are decreasing.
You got me to look at the Mustang ad after mentioning them. So Flat Rock is down to one shift? I dunno if they make all of the variations there but my gosh, they have nine different Mustang versions. Why? It’s like they are trying to capture multi-markets with a single car. Actually, I’d be interested if it were FWD and could pull a small trailer to replace my Pontiac. But no, I don’t want a performance car to squeal the rear tires or fishtail with. I’m just really starting to wonder about what the marketing departments are saying and if they are being listened to.
So back in the old days, you had a wagon in three different trims, a sedan in three different trims, plus you could choose 2 door or 4 door, and the engine and trans you wanted plus some other 70 options. And of course a compact after 1960. And a truck, and maybe a few more. But now they seem to have umpteen models with sometimes little difference in them.
Can you not profitably support one plant with one shift making a sedan or a car that maybe will sell but just not like hot cakes? Weren’t they talking about the ability to quickly change lines over to make different models with the same platform? That’s what other manufacturers do. I dunno, I guess I’m just starting to wonder about the whole process. Ford with nine Mustangs in one plant with one shift, and GM can’t support a sedan?
The Canadian GM plant was designed for flexible manufacturing it can build several models with minimal changeover time. GM has just too much capacity and has lost market share in key areas. Just look at the number of Camrys and Honda Accords compared with Chevy Impalas and Malibus.
The excuse for the plant closings is the “move to electric and other leading edge products”. My money on those leading edge products is not on GM. China will be exporting affordable electric cars long before GM gears up with a saleable product.
Heh heh, I’m not sure if I’d wanna be on that ship carrying a whole load of Chinese electric cars. Not many places to go with a ship on fire in the middle of the ocean.
