Sundarrajk's Weblog

Archive for the ‘Shareholders’ Category gives details of why a long term employee (Greg Smith, Executive Director and head of the firm’s US Equity and Derivatives business in Europe, the Middle East and Africa) of Goldman Sachs is resigning. The reason quoted is that the only thing that the company is worried about is how much money can be made from the customers.

It looks like Mr.Greg Smith is going to be a disappointed man. Most companies around the world are doing exactly the same. They are all trying to do the same. And this is happening because we measure our CEOs by what they deliver for the company shareholders.

Read this article at HBR regarding this topic You are what you measure.

Stretching this further it reflects the adage “people get the government they deserve”.

It looks like we are getting into a spiral which looks like as follows:
1. The general populace invests in stocks to make money (without working)
2. The CEO of these companies try to optimize their cost to deliver maximum profit. How do they do this?
    a. Outsources jobs to be performed
    b. Cuts corner so the quality of service and/or product goes down (Goldman Sachs reflects this)
    c. Take high risks (Housing Bubble anybody?)
3. This leads to poor services/products for the same investors

Are we fooling ourselves that this will work?
Is it because of our greed?
How do we get out of it?

To get out of this situation the only way is that we all because honest, temper our expectations and learn to live within our means. But will that kill growth? Seems to be a conundrum.