Maximizing shareholder value: The goal that changed corporate America

[n2doc]

By Jia Lynn Yang, Published: August 26 E-mail the writer
ENDICOTT, N.Y. — This town in the hills of Upstate New York is best known as the birthplace of IBM, one of the country’s most iconic companies. But there remain only hints of that storied past.

The main street, once swarming with International Business Machines employees in their signature white shirts and dark suits, is dotted with empty storefronts. During the 1980s, there were 10,000 IBM workers in Endicott. Now, after years of layoffs and jobs shipped overseas, about 700 employees are left.

Investors in IBM’s shares, by contrast, have fared much better. IBM makes up the biggest portion of the benchmark Dow Jones industrial average and has helped drive that index to record highs. Someone who spent about $16,000 buying 1,000 shares of IBM in 1980 would now be sitting on more than $400,000 worth of stock, a 25-fold return.

It used to be a given that the interests of corporations and communities such as Endicott were closely aligned. But no more. Across the United States, as companies continue posting record profits, workers face high unemployment and stagnant wages.

Driving this change is a deep-seated belief that took hold in corporate America a few decades ago and has come to define today’s economy — that a company’s primary purpose is to maximize shareholder value.

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http://www.washingtonpost.com/business/economy/maximizing-shareholder-value-the-goal-that-changed-corporate-america/2013/08/26/26e9ca8e-ed74-11e2-9008-61e94a7ea20d_singlePage.html

[Kelvin Mace]

1. "Maximizing shareholder value"

Is the religious imperative that drives corporate America. It justifies everything up to and including criminal activities and turned every corporate "person" into a sociopath, and not a few into full-fledged psychopaths.

It will be written on democracy's tombstone.

"Here lies democracy. It failed to maximize shareholder value".

[woo me with science]

2. This is the moral cesspool from which THIS grows:

http://www.democraticunderground.com/10022665091

Letters to Shareholders from Private Prison Executives
http://www.huffingtonpost.com/2013/04/11/cca-prison-industry_n_3061115.html


...Corrections Corporation of America (CCA), now the nation's largest private prison company, was founded just over 30 years ago in Nashville. Since then, it has become a multi-billion-dollar-a-year business with more than 60 facilities across the country. Meanwhile, the U.S. prison population has grown 500 percent.

A look at the CCA's annual shareholder reports over the past few years shows an aggressive business strategy based on building prison beds, or buying them off the government, and contracting them to government authorities — sometimes with decades-long contacts mandating minimum occupancy rates as high as 90 percent. Profits, after lining the pockets of shareholders, are used to create more beds and to lobby state and federal agencies to deliver inmates to fill them. The resulting facilities can be violent and disgusting.

Excerpts from the letters:

We continue to benefit from a positive environment where the need for prison beds should exceed supply for the foreseeable future.
– CCA 2005 Annual Report


We believe the issue of border enforcement will be a priority over the next several years, supported by both political parties as evidenced by increased funding on a year-over-year basis to the two agencies primarily responsible for dealing with border enforcement, ICE and the U.S. Marshals Service. We further believe that the private sector will play a major role in assisting these agencies deal with this mandate.
– CCA 2005 Annual Report


We believe we have been successful in increasing the number of residents in our care and continue to pursue a number of initiatives intended to further increase our occupancy and revenue.
– CCA 2010 Annual Report


Any changes with respect to drugs and controlled substances or illegal immigration could affect the number of persons arrested, convicted, and sentenced, thereby potentially reducing demand for correctional facilities to house them.
– CCA 2010 Annual Report


Prison facilities consist primarily of concrete and steel and don’t require the level of capital improvements as many traditional real estate properties. Therefore, prison facilities typically have economic lives much longer than many traditional real estate properties.
– CCA 2013 Annual Letter to Shareholders


We have staff throughout the organization actively engaged in marketing this available capacity [of extra beds] to existing and prospective customers. Historically, we have been successful in substantially filling our inventory of available beds and the beds that we have constructed.
– CCA 2009 Annual Report


Since we are paid on a per diem basis with no minimum guaranteed occupancy under most of our contracts, the loss of such inmates and resulting decrease in occupancy would cause a decrease in our revenues and profitability.
– CCA 2009 Annual Report


For instance, any changes with respect to [laws governing] drugs and controlled substances or illegal immigration could affect the number of persons arrested, convicted, and sentenced, thereby potentially reducing demand for correctional facilities to house them.
– CCA 2009 Annual Report


We believe CCA has additional growth opportunities to expand our real estate portfolio by purchasing correctional and detention facilities from state governments.
– CCA 2012 Annual Letter to Shareholders


A recent study released by the Pew Charitable Trust indicates that one in every 100 U.S. adults are in prison or in jail. With the U.S. population estimated to grow by more than 18.5 million between 2007 and 2015, about 20,000 prisoners per year will be added to the system over the next seven years if historical trends in incarceration rates continue.
– CCA 2008 Annual Report


The President recently signed the Homeland Security Appropriations Bill into law, which included an 11 percent increase for U.S. Customs and Border Protection, adding more border patrol agents and funding for detention beds. We believe these initiatives could lead to meaningful growth to the private corrections industry in general, and to our company in particular.
– CCA 2005 filing


Finally, the Department of Homeland Security has also increased it efforts to secure America’s borders and reduce illegal immigration through its Secure Border Initiative... We believe these initiatives should result in increased demand for detention beds.
– CCA 2006 Annual Report


In January 2007, an organization advocating rights for immigration detainees joined a lawsuit against ICE on behalf of detainees at the San Diego facility charging that detainees are being held in overcrowded and inhumane conditions at the facility. The Company was also named in the complaint. We cannot predict the ultimate outcome of this lawsuit, or the potential impact the lawsuit could have on the number of detainees we house or the revenue we generate at this facility.
– CCA 2006 Annual Report


Further, the use of facilities owned and managed by private operators allows governments to expand correctional capacity without incurring large capital commitments and allows them to avoid long-term pension obligations for their employees.
– CCA 2011 Annual Report


Our competitive cost structure offers prospective customers a compelling option for incarceration.
– CCA 2011 Annual Report

This is what happens when corporations gain power in governments. The corporate profit motive replaces all other motives in a system that wields power over human lives.

The Obama administration is aggressively growing private prisons
http://www.democraticunderground.com/?com=view_post&forum=1002&pid=2643210

[Brickbat]

3. I call it the tyranny of the shareholder.

[DonCoquixote]

4. There is an even DEEPER level

Business investment used to be, more or less, about Math. It was NOT sexy, full of the sort of number crunching that made you realize why accountants get paid. Since it was math based, it had to be based, more or less, on objective data, you could only slick things up so much with salesmanship and snake oil.

Now, even the talking heads on the television cannot explain what a derivative is; it helps that they have to avoid using simple terms, like "a bet" or "the sort of thing that used to be done in casinos right alongside poker and roulette." Go to these investment seminars, and you see see the sort of emotion and preaching that would make televanglists curl their nose, why?

Because Capitalism, in particular Wall Street, has become the new religion. It has filled the need for meaning that religion once did.

[antigop]

5. k&R. Thanks for posting. nt