Behind the Bust: Bad Ethics Or Bad Luck?

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  arvanro@...07/25/08 Report as spam
  1

  Bad Incentives

  Neither.
  Bad incentives.
  Wall Street is paid on revenues, not profit.
  Misaligned incentives create bad behavior.
  "Heads the trader wins, tails the investor loses."
  Easy to decide what to do in that environment.
  No one will dispute that.

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  Michael Fitzgerald07/25/08 Report as spam
  2

  re: incentives

  well, they aren't doing so well this year. But in the three before that they were making record profits.
  
  Here's a post that pulls together some data from bloomberg and the NYT: where did wall street's profits go?

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  Leading With Kindness07/28/08 Report as spam
  3

  RE: Behind the Bust: Bad Ethics Or Bad Luck?

  GM just announced that they're no longer paying dividends. Like you asked... Is it bad ethics or bad luck?
  
  My colleague wrote an essay about Ford's choices over the years and how that might have led them to the state they're in today.
  
  Read his essay here:
  http://www.thirteen.org/leadingwithkindness/essays/ford-where-were-your-values

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  Michael Fitzgerald07/29/08 Report as spam
  4

  re:dividends

  well, neither. you cut dividends when you are desperate to conserve cash. Your lenders want to know you're doing everything you can to turn things around. This is a time of very tight credit; what lender wants to give money to a company that might not be able to pay it back, while it's still paying dividends?
  
  Thanks for the link, though. Corporate culture has to change before an established company can do something so dramatic as shift from SUVs to small cars. Small cars don't have very good margins for the automaker or its dealers, and that creates a disincentive to sell them in the kind of market we had. That's a truism, of course. Clay Christensen makes a big deal out of culture in The Innovator's Dilemma.
  
  Michael
  
  Michael