Widows_and_Orphans - John Cullinane.pdf
5墨值下载
John J. Cullinane
Fellow
Center for Business & Government
John F. Kennedy School of Government
Harvard University
79 John F. Kennedy Street
Cambridge, MA 02138
Reproduced with permission.
1
Introduction
Most CEOs grow to hate the treadmill of quarterly reporting. I certainly did, and I was the CEO of a
company that boasted 29 consecutive quarters of sales and profit growth in excess of 50% and four stock
splits. We were the first software company to reach $1 billion in valuation.
However, the more successful my company became, as quarter after quarter it met projections and the
price/earnings ratio climbed, the greater the pressure to continue to perform. Even a slight slowing in
growth rates could cause a dramatic fall in the price of the stock and threaten to trigger a class-action
lawsuit against management. Consequentl y, management diverted an inordinate amount of time and
energy to the quarterly reporting process, particularly as each quarter drew to a close.
Yet I knew, as does every CEO, that operating a company on a quarterly basis is no way to "run a
railroad." This narrow, short-term view gives lawyers and accountants too much influence, but that is only
part of the problem. What is more important is that the natural conflict between customer and investor
interests intensifies in a public company. The dilemma is this: Do customers get the service they want, or
do investors get the profits they want? Many economists say a CEO should be able to satisfy both
requirements, but does it really happen?
Most CEOs of dynamic American companies have lime time to ponder this issue or to compare their
predicament with similar customer/investor conflicts in other countries , such as Germany and Japan. As
the former CEO of a high-growth, high-tech company, I am sure of three things: my company became
successful by focusing on customer needs; by so doing, it created great investor rewards; and the
company changed in fundamental ways once it went public.
While thinking about these changes and what brought them about, my initial sense was that the American
financial system was fundamentally flawed and that quarterly reporting might be at the heart of it. However,
quarterly reporting turned out to be just a highly visible symptom of the problem. The real root cause lies in
the legislation of the 1930s, which was designed to protect investors, including "widows" and "orphans,"
from the abuses associated with the 1929 stock market crash and subsequent bank failures. The term
"widows" refers to unsophisticated investors, those outside the mainstream of the American financial
system. Widows are the last to know, and as a result they usually buy high and sell low. "Orphans" refers
to the often-neglected customers of American publicly held corporations.
What follows is a personal view of the American financial system.(1) My experiences and views may not
align with accepted economic theory. Therein, perhaps, is their value.
The Legislative Foundatio n
'The period from 1924 to 1928 was an era of greed that has never been witnessed in the United States,"
according to Joseph Auerbach, Professor Emeritus of the Harvard Business School and eyewitness to
events leading up to the crash. Considering currant abuses, this is quite a statement. Professor Auerbach
also said that American investors were particularly furious with the banks after the 1929 stock market
crash because the banks had sold them the securities.(2)
This resentment led to legislation designed to protect the investor via an efficient market So many people
lost so much in the stock market crash and the subsequent bank failures in the early 1930s that something
of 20
5墨值下载
【版权声明】本文为墨天轮用户原创内容，转载时必须标注文档的来源（墨天轮），文档链接，文档作者等基本信息，否则作者和墨天轮有权追究责任。如果您发现墨天轮中有涉嫌抄袭或者侵权的内容，欢迎发送邮件至：contact@modb.pro进行举报，并提供相关证据，一经查实，墨天轮将立刻删除相关内容。
下载排行榜
文档被以下合辑收录
评论