Great read on a subject that I don't know much about.
For someone interested in how large corporations function and the power dynamics among the top, do any of you folks have any other recommended reading?
What it’s like to be on the board of a Fortune 500 company
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Re: What it’s like to be on the board of a Fortune 500 company
#12>>> Well the first responsibility is to ensure the company is being run in the best interest of shareholders Do me a favor and tell me that best interests are something else than money, please...
Social, environmental, moral concerns are all reputational, and should hence be reflected by the share price. So it all comes down to money.
The extent to which those factors are NOT priced into the stock, they typically won't be included in the "best interests".
Re: What it’s like to be on the board of a Fortune 500 company
#13This is interesting but a bit self-serving. Imagine going around where you work and interviewing someone about their job: "Is your job easy?" "The days of my job being easy are over. Everyday I work very hard." etc.
Especially when you blame your investors for how hard your job is these days: "[It] used to be that way but its changed in the last ten years because the activists [investors] have gotten more involved."
Those darn meddling activists!
Re: What it’s like to be on the board of a Fortune 500 company
#14>>> Well the first responsibility is to ensure the company is being run in the best interest of shareholders Do me a favor and tell me that best interests are something else than money, please...
I hope it isn't. My 401(k) won't provide for my retirement using Good Feelings. The best interest of the shareholders is running a profitable enterprise.
Re: What it’s like to be on the board of a Fortune 500 company
#15What I didn't hear was anything about the customers.
You may have heard the old saying about relationships: "If Momma ain't happy - ain't nobody happy". I think the same thing goes for a firm's relationship with their customers. If the customer isn't happy, there's no repeat sales and no positive word-of-mouth advertising, leading to decreased sales and revenue, leading to reduced shareholder value.
Re: What it’s like to be on the board of a Fortune 500 company
#16And if a board member isn’t performing well, we get rid of them. I’ve been on boards where the SEC is in there. I’ve been on boards where the Department of Justice is involved. You don’t want that. You destroy companies when you do that. You destroy shareholder value. So what you try to do as board is make sure people are above board. You guard against anything that hurts the companies from an outside perspective. It…
A lot of times they do. What you have to remember is that board members serve multiple functions. They are partially there to help inroads into other companies. They are their to provide insight into how the organization is to do business and what direction it should take. A lot of times this means that the people on the board need an inside perspective of what's going on in the industry.
Other functions they serve is to protect the organization from unwanted influence. The board ultimately votes on things like, when and who to sell the company to. By weighting the board with people you know will vote a certain way, you protect against things like hostile takeovers. (This along with other rules that many companies have, like only being able to replace 2 board members per term).
In large companies, if you say own 10% of the shares, you really have a massive amount of voting power with a fraction of the shares, because all the with say 5 shares of a stock, aren't going to bother to send in their ballot when voting on board members etc. By weighting the board with insiders etc., you are helping to ensure that a rival or some other organization isn't buying shares through subsidiaries and then making a play before anyone notices.
Re: What it’s like to be on the board of a Fortune 500 company
#17What I didn't hear was anything about the customers. You may have heard the old saying about relationships: "If Momma ain't happy - ain't nobody happy". I think the same thing goes for a firm's relationship with their customers. If the customer isn't happy, there's no repeat sales and no positive word-of-mouth advertising, leading to decreased sales and revenue, leading to reduced shareholder value.
They didn't mention customer satisfaction because it's not always a priority, shareholder value is.
A fantastic example of this is Comcast. It is regularly voted America's most hated corporation in the country, yet because of its unique leverage in the areas that it operates, this poor customer satisfaction rating just doesn't matter. They're still able to satisfy the shareholders.
Re: What it’s like to be on the board of a Fortune 500 company
#18What I didn't hear was anything about the customers. You may have heard the old saying about relationships: "If Momma ain't happy - ain't nobody happy". I think the same thing goes for a firm's relationship with their customers. If the customer isn't happy, there's no repeat sales and no positive word-of-mouth advertising, leading to decreased sales and revenue, leading to reduced shareholder value.
They didn't mention customer satisfaction because it's not always a priority, shareholder value is. A fantastic example of this is Comcast. It is regularly voted America's most hated corporation in the country, yet because of its unique leverage in the areas that it operates, this poor customer satisfaction rating just doesn't matter. They're still able to satisfy the shareholders.
The problem there are the endemic local monopolies on internet and cable rights that prevent meaningful competition. (I have no disagreement that Comcast/Xfinity aren't anyone's favorite company.)
Re: What it’s like to be on the board of a Fortune 500 company
#19Earlier quoted context omitted.
They didn't mention customer satisfaction because it's not always a priority, shareholder value is. A fantastic example of this is Comcast. It is regularly voted America's most hated corporation in the country, yet because of its unique leverage in the areas that it operates, this poor customer satisfaction rating just doesn't matter. They're still able to satisfy the shareholders.
The problem there are the endemic local monopolies on internet and cable rights that prevent meaningful competition. (I have no disagreement that Comcast/Xfinity aren't anyone's favorite company.)
Exactly, and in this situation, the Board of Directors would probably work diligently to maintain that which differentiates Comcast from its competition, namely political leverage and monopolistic behaviors in their areas.
It's not a failure of the Board of Directors to think this way. Its sole purpose is to provide shareholder value within the existing legal framework. Like they said in the article, those on the Board who don't produce value get removed.
Re: What it’s like to be on the board of a Fortune 500 company
#20What I didn't hear was anything about the customers. You may have heard the old saying about relationships: "If Momma ain't happy - ain't nobody happy". I think the same thing goes for a firm's relationship with their customers. If the customer isn't happy, there's no repeat sales and no positive word-of-mouth advertising, leading to decreased sales and revenue, leading to reduced shareholder value.
They didn't mention customer satisfaction because it's not always a priority, shareholder value is. A fantastic example of this is Comcast. It is regularly voted America's most hated corporation in the country, yet because of its unique leverage in the areas that it operates, this poor customer satisfaction rating just doesn't matter. They're still able to satisfy the shareholders.
Exactly. Companies have figured this out long time ago. The customers whose voice matters are not the same group as the customers you are nominally serving. You can see clear examples of that not only with corporations like Comcast, but also in startup economy - often (the way I see it, more often than not), the customers-that-matter are the investors, and not the actual users.