Last week I got into a conversation with a friend of mine about the large amount of money that public companies accumulate, but seem to often not distribute to their shareholders. This conversation fits in with other public companies who pay huge bonuses to people who work in their organizations but don’t necessarily get outstanding results. Finally, this all comes together with a huge brain drain we have in our country with our best and brightest going to work at places that don’t really add value to our society. I hope to deal with each during this post.
The question for me is who is the real “owner” of the cash assets that public companies accumulate. I’ve recently read that Apple Computer is sitting on fifty billion dollars in cash. Research has shown that companies rarely add value through acquisition, but they often add a tremendous amount of value through organic growth. The question for me is does Apple really need the fifty million dollars they’re sitting on or would that money have a better use as dividends paid to their shareholders? My opinion is it would be better used by the shareholders as dividends.
The second question is about bonuses paid to employees of public companies. In the case of the financial industry, traders are paid bonuses that are in line with what professional athletes and other entertainers earn who are the top of their game. The difference between the traders and others who earn huge amounts of money is traders get paid well whether they perform or not. Entertainers only get paid top dollar after they’ve proven they in the outlier range of those who practice their craft. We’ve too often seen executives of companies who are more or less fired walk away with a pay package that often is close to ten million dollars. To me, this is an extremely poor use of corporate cash.
This leads to me to the real problem we face as a country. When a huge amount of our economy is produced by industries that don’t add value, like the financial services industry, we start to lose our competitiveness around the world. When our best and brightest want to have careers on Wall Street because they have a chance to reach for the brass ring without being ridiculously good we have a general societal problem. We aren’t getting our best and brightest interested or taking careers in areas where manufacturing real products that add value and wealth to a society are being made. We are seeing our best go to the fake world of derivatives where fantasy rules and stupid money is paid.
I can’t blame new graduates for going to where the money is. I blame our society and political system for not having the guts to change our system and make intermediary industries less attractive, especially when we as a society hold the bag when things don’t work out.
Do you have any interest in seeing the focus change and if you do, what are your suggestions?
Josh Patrick
Posted by stage2 
