The Anti-Wall Street Movement

Over the past few years, I have been wondering why do companies want to go public?  Yes, the biggest reason is capital to grow the firm, but more and more it’s about creating wealth for a small group of folks — and I don’t necessarily have a problem with creating wealth.  Yet, I wonder if that’s the only reason why some firms get created — but that’s a blog for another day.

No, my question is this.  Do the company’s creators realize how much they give up in controlling their company’s destiny when they go public?  Ask anyone who has worked in the publicly held world and you quickly realize that EVERYTHING is measured on three-month cycles — and maximizing this year’s earnings.  In my mind that’s not always best for the customer AND the company (and I include the employees as part of the company.)  No longer does providing a product or service that consumers desire or value the most important company goal.  The development of employee pride in producing that product and service becomes secondary to “did we beat our numbers.”

What we’ve seen in the past twenty years is the creation of wealth for a handful of individuals and Wall Street — who more than ever are influencing decisions company CEOs make to keep their shareholders happy.  And who are those shareholders?  It’s no longer the individual.  It’s large institutions and massive funds that are constantly beating the drum of “beat your earnings forecast for next quarter.”  Folks, the system is out-of -balance.

And that’s one of the reasons I applaud the move American Greetings is making (and hopefully Michael Dell will pull off) to go private.  AG has been getting flack on Wall Street because it can no longer produce the numbers it did in the past, BUT it still has a massive market of consumers who want to use printed greetings AND it’s profitable.  In the 12 months ended in February it reported $57.2 million in profits on $1.7 billion in sales.  Granted it’s not as profitable as it was in 1998 when sales were 29% higher and profit margin more than double — but that’s true for many companies in the US regardless of their industry.

AG needs to reshape its business model — and it has already started that process — but it needs to make long-term decisions.  Decisions that go against the concept of “we must make next quarter’s numbers.”  So, hooray for American Greetings, and I for one hope that more companies follow suit.  The over-riding goal of a company should be providing an outstanding (and desired) product/service for it’s customer.  The secondary goal should be creating wealth for its principles and company partners (suppliers/employees).  Wall Street should not be in the mix.

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