Circuit City to liquidate V2
wb4jfi at knology.net
Mon Jan 19 11:37:01 CST 2009
> -----Original Message-----
> From: andre kesteloot [mailto:andre.kesteloot at verizon.net]
> Sent: Monday, January 19, 2009 12:08 PM
> To: Michael O'Dell
> Cc: WB4JFI; Tacos AMRAD
> Subject: Re: Circuit City to liquidate V2
> Michael O'Dell wrote:
> > that should become a case study in B-school - how to completely destroy
> > a business in one easy lesson.
> > the shareholders should have sued the incompetent bastards into oblivion
> > -mo
> US Law clearly states that the main responsibility of the Board is to
> increase value to shareholders.
> The problem is that the measurement is performed every quarter (Wall
> Street analysts requirements, etc) hence it is most tempting to increase
> short term value of the shares (by maximizing short-term profit to the
> expense of long-term one).
> Bonuses to CEOs and CFOs are based on short-term profit.
The problem with above is that the CEOs and CFOs are using very short-term
yardsticks to keep shareholder dividends artifically high, at the expense of
I think Mike's point can be that while this philosophy does keep dividends
up, the long-term viability of the company is being destroyed from within.
Once that company fails due to mismanagement, it becomes clear that
shareholder value is no longer there. How much value do the shareholders
get from Circuit City once it's gone, as an example? Dividends of $0, and
stock selling price of $0 does not provide much shareholder value.
Hopefully these ratbas****s can be sued for their irresponsibility.
One can say that purchasing stock is inherently a crap shoot, and too bad
for you if you buy stock and lose. But, over the last few years it seems
that CEOs and CFOs LIVE to meet the next quarterly meeting with Wall Street
analysts. In my opinion, more should tell Wall Street to go pound sand, and
do what's best for the long-term stability of the company. But, being
realistic, instant gratification is more visible.
It's like crack for CEOs. Do the stupid thing to keep Wall Street happy.
Interestingly, in at least one occassion close to me, Wall Street has
already branded the company (indeed the whole industry) as "traditional" and
in decline. So, trying to please the street will not help the company much.
They are destroying the company while trying to curry favor from someone
that will never give it.
Of course, the stockholders are interested in their dividends, so as long as
those are propped-up, they are happy, instead of worrying about if the
company still exists to pay those dividends two years from now.
Off the soapbox.
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