Chasing the Quarterly-earnings Rabbit


So the news this week is that Meg
Whitman, CEO of Hewlett Packard has upped the ante for firing employees to some
50,000 in the implementation of what is euphemistically called restructuring. And I don’t mean to whine
and cry about it, far be it from me, because running a global enterprise is
tough and she’s a tough lady. Good enough.
It’s a dog-eat-dog world out there, unless you’re among the top dogs and Meg’s
annual remuneration package of $17.6 million puts her right up there. But she
works for a dollar a year, doesn’t she? Right you are, which brings me to the
core of an argument I’ve long made:


Corporate
CEO’s have been out there chasing the Quarterly-earnings Rabbit, essentially
since the Reagan 80s. Where hotshot CEOs were once valued for enhancing the
long-term health and welfare of the companies they manage, the thirst today is
for ever-growing stock prices and they’re outrageously compensated for doing
just that. The $17.6 million Meg tucked in her savings account (aside from her
$1 salary) mostly made up of $12.7 million in stock options and $4.4 million in
stock awards—money slid across the table for ‘beating corporate targets’—breathlessly
running down the rabbit.
How did the HP quarterly report make
such big headlines? Part of it was timing. The report was meant to be posted
after the markets closed, but registered a few milliseconds early and fired-off
all those algorithms Wall Street uses now in place of common sense. HP reported
$27.3 billion in second quarter revenue, but ‘analysts’ expected $27.35 billion
and that missing $50 million threw the dogs off-scent. That kind of cash gets
lost behind the copy machines at HP. The turnaround is apparently going fine
(except for the 50,000 pink-slipped employees) and progress is being made, but
there’s nothing but frowns and bitten lips in Palo Alto over a 1.8% HP stock
decline. But hey, put on your smiley-faces, Year-to-date, the stock is up 17.6%,
exactly a million dollars a point for Meg.
C’mon, folks,
is this really how we want Corporate America to run—like the 5th
race at the Daytona Beach Kennel Club? Not that we have a say, but it’s a
cogent complaint.
It’s probably just grouchy old me, but
ninety days is a hell of a short time to run a company and still have to show
up at the track. Are any decisions
made at any major corporations that
don’t consider the extortion of Wall Street? And extortion it is, the entire
algorithm-based trading frenzy that pits earnings against production and
enables raiders like Carl Icahn to hold boards of directors at gunpoint brings
not a crumb of value to the table: they
produce nothing, sell nothing, build no factories, support no research and
development, contribute to no pension funds, sustain no middle-class and feed
themselves entirely off encouraging the rabbit to run.
Even
California Chrome needed to be bred, fed and trained. No one in the colt’s
brilliant career shorted the patience and care, or robbed his feed-bucket.
Meg Whitman’s plans seem right in line
with Carl’s goals; pink slips and enthusiastic stock-buybacks, up 27,600% from
a year ago. Twenty-seven thousand, six
hundred percent!
Stratospheric stock buybacks goose the stock and send
investors happily to the Hamptons, but they’re funded on the backs of fired
employees and don’t leave much ready cash in the bank for the pink-slipped or the company.
But what the hell, workers are an expense not an
asset. Inquire at any McDonald’s counter. They’re resources, just like
commodities: (definition) Available
source of wealth;
a new or reserve
supply that can be drawn upon when needed
and, we might add, discarded like
hamburger-cartons. Corporations no longer have Personnel Departments, they have
Human Resources departments. Even Meg
is a human resource and she damned well knows it, but her pink-slip is a
parachute and there’ll be another top job waiting. Whitman is playing the rules
elegantly, but by a new book that’s unsustainable. Unfortunately, there’s too
much cash available for anyone to notice the price being paid.
HP is reportedly having problems in its
computer division. As the world moves from PCs and laptops to tablets, one can
only wonder if research and development at Palo Alto is being shortchanged,
ignored or stripped of attention. Innovation is the key to technologically
oriented companies and innovation doesn’t juice the Carl Icahns of the world,
bless their greedy and self-serving little hearts. Not to lean on Meg too hard,
but she’s being paid to have her
attention elsewhere.
My HP call-center in India is giving me
a busy-signal, Meg.

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