Category: shareholder

Buffett Says No Second Recession – I Hope He’s Right!

On By southwerkIn business ethics, Capitalism, ethics, Philosophy of Business, shareholder1 Comment

In an item from Yahoo News, Buffet is bullish on the economy. Normally I would place a lot of importance on what he has to say. However, as you see in the article, he company just made a 27 billion dollar deal that stands to lose considerable sums in a pessimistic environment. He may be more stoking the stock price than giving a reasoned opinion.

Warren Buffett ruled out a second recession in the U.S. and said businesses owned by his Berkshire Hathaway Inc. are growing.

“I am a huge bull on this country,” Buffett, Berkshire’s chief executive officer, said today in remarks to the Montana Economic Development Summit. “We will not have a double-dip recession at all. I see our businesses coming back almost across the board.”

Berkshire bought railroad Burlington Northern Santa Fe Corp. for $27 billion in February in a deal that Buffett, 80, called a bet on the U.S. economy. The billionaire’s outlook contrasts with the views of economists such as New York University Professor Nouriel Roubini and Harvard University Professor Martin Feldstein, who have said the odds of another recession may be one in three or higher.

“I’ve seen sentiment turn sour in the last three months or so, generally in the media,” Buffett said. “I don’t see that in our businesses. I see we’re employing more people than a month ago, two months ago.”

Roubini has been very successful at predicting economic problems. His web site is here. It would be a good decision to make it a favorite of yours. He knows his business and has no railroad purchase to influence his judgment one way or another.

James Pilant

Andrew Comments On “Suggested-Rules-For-Corporate-Moral-Decision-Making.”

On By southwerkIn business ethics, Capitalism, Corporate Social Responsibility, Economic measurement, ethics, Philosophy of Business, shareholder

Andrew has once again offered his insights and, as usual, I am more than pleased to post them. I want you, gentle reader, to understand that if I get a post of more than two or three paragraphs (and it is thoughtful and on point), it is going to appear as a blog post. This blog isn’t just about me. If I didn’t think you were intelligent and perceptive, I wouldn’t write this thing.

Andrew is commenting on my blog entry, Suggested Rules for Corporate “Moral” decision making.

(I don’t post Andrew’s last name, his e-mail, etc. He has not directly given me permission and I am loath to volunteer such data.)

Here’s what he has to say –

Mr. Badaracco seems to put much stock into the idea that what is popular is best. 2 of the 3 steps in his quick process revolves around how others will perceive the decision. I think this is a shallow and intellectually hollow way of developing a system of ethics.

The “Golden Rule Test”, I think, warrants some merit, but it also has a flaw. Sometimes the best decision for a company will involve a negative impact to one or more individuals. If one utilizes this rule and thinks “what if I were the one being laid off or fired?”, then it could lead the CEO to make a decision that, while compassionate, is detrimental to the company as a whole.

I find the long method to be more intellectually and morally stable. Of course, its not perfect either. I agree that #1 is a good place to start, and that it alone is not sufficient. #2 is a fairly simple question in my mind. The rights of the people involved are usually determined by the overall society that the corporation resides in. This can, of course, vary from society to society. The value and character of the organization should be paramount. To preserve that, the leader must act in accordance with the organizations set of values. If he does this, then he needs not worry about how his character is perceived. The character of the organization is inevitably linked to the character of its leader.

Shareholder Power?

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics, Government Failure, Philosophy of Business, shareholder

One again, I’m going to lament that the people who own the corporations don’t seem to have any actual control over them. Let me quote Nouriel Roubini from his excellent essay, Gordon Gecko Reborn.

There are also massive agency problems in the financial system, because principals (such as shareholders) cannot properly monitor the actions of agents (CEOs, managers, traders, bankers) that pursue their own interest. Moreover, the problem is not just that long-term shareholders are shafted by greedy short-term agents; even the shareholders have agency problems. If financial institutions do not have enough capital, and shareholders don’t have enough of their own skin in the game, they will push CEOs and bankers to take on too much leverage and risks, because their own net worth is not at stake.

At the same time, there is a double agency problem, as the ultimate shareholders – individual shareholders – don’t directly control boards and CEOs. These shareholders are represented by institutional investors (pension funds, etc.) whose interests, agendas, and cozy relationships often align them more closely with firms’ CEOs and managers. Thus, repeated financial crises are also the result of a failed system of corporate governance.

That’s what I think too.

Simple statement – We hear over and over again about property rights but start talking about actual shareholder control, power held by the actual property owners, howls of outrage cloud the horizon.

The people that own the corporations should have say about what they do.

James Pilant