Excel Versus Experience
With the covid stimulus packages behind us and the economies of most OECD countries creaking under a dangerous mix of high interest rates and huge debts, we can’t be surprised by the fact a significant number of large corporations are finding their plans and reality are diverging. Plans based on ever-increasing consumption coupled to a continuation of historically low interest rates are running into the proverbial wall as the opposite conditions are increasingly coming to bear. As executives and Wall Street coke-snorters alike tend to focus on the Right Now and have no meaningful incentives for longer-term thinking, we also can’t be surprised by the fact corporations are reacting to their unwanted circumstances by doing what they so often have done in the past: panicking and acting in haste.
Executives of large corporations have enormous responsibilities. They have to find ways to justify their huge bonuses even when corporate results suggest they should be defenestrated. Executives have to do whatever they can to boost the share price because their stock options aren’t worth much if the share price is below a critical threshold. And they have to ensure that all the perks they enjoy (use of the corporate jet fleet, a Personal Assistant who basically does everything in life for them, limos that whisk them in comfort from one location to the next, and a coterie of sycophants who pander to their every desire) are not reduced or — horror of horrors — removed altogether. With all these heavy burdens on their shoulders, it’s unreasonable to expect top executives to spend much time thinking about the impact their decisions will have on the longer-term viability of the companies they are paid so handsomely to steer.
Curiously, while the management of large US corporations is often simplistic beyond parody and UK companies often do their best to mimic their counterparts across the Atlantic, there are in fact other models of behavior that don’t involve flailing around and firing thousands of employees at the first sign of a downturn. Some of these alternative approaches may be worth studying and considering.
Large US corporations tend to be run by people who went to MBA school and from there…