Friday, June 9


I'd like to have the time to discuss at length the pernicious influence Wall Street has on publicly held companies and their employees. I don't. But I will vent for a minute in a sort of stream-of-consciousness way on the way the Street works to the detriment of both.

My company has revenues of approximately $14 billion. Last year's operating earnings amounted to just barely under $2 billion. Pretty profitable, wouldn't you say? We've never declared a quarterly or annual loss since going public in 1969, never had a major write-off. We're one of the nation's top (according to the Fortune 500 listing) 200 companies, one of the world's top (again, according to the Fortune Global 500 list) 500 companies. Yet we're forced to make decisions regarding profitablity and long-term investment according to the short-term thinking of Wall Street analysts or face losing shareholder value.

Last week I was informed that a project we had in development that would have netted $400 million over the next four years had to be sold off for a paltry $40 million. And why? Because the division responsible wouldn't otherwise meet their projected quarterly numbers, and Wall Street would react negatively! And even though our industry has been a vital component in driving the prosperity of the overall economy for the last decade, all the major players in that industry have been valued at a paltry 7 or 8 P/E (price vs. earnings) ratio while underperforming industries have P/E's in the 30-40's (the very range that experts such as Michael Porter have suggested is rational for our company and industry sector. We've hired any number of famous economists and experts who have validated Porter's opinion, but to no avail -- Wall Street won't budge.

So the boards of directors of companies like mine force decisions based on what Wall Street likes to see -- short-term profits (which we have!) favored over sound long-term growth strategies. That results in layoffs, terminations of contracts with subcontractors and vendors and the like, all of which affect real people with real expectations and obligations of their own.

I'm sick of it. That's no way to run a company, much less an economy. Wall Street has become a crap game, and it's doing no favor to anyone except the high-rollers.



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Anonymous Anonymous said...

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