There’s nothing like intellectual consistency to inform and illuminate the world and this, from Harold Meyerson, is nothing like intellectual consistency:
Let that sink in for a moment. The staffers of CFIUS—probably the most business- and security-savvy civil servants in the government, headed by those at Treasury—are saying that the private-equity control of companies, which is a dominant feature of current American capitalism, reduces investment and results in profit extraction. CFIUS does not go on to say that the purchase of U.S. companies not only by foreign companies but by U.S. private equity firms, too, also leads to reduced investments and the kind of profit extraction that has enriched the 1 percent at the expense of other Americans; that’s not CFIUS’s mission. But having baldly stated that private equity leads to profit extraction, that’s the inescapable conclusion that any reader of CFIUS’s letter must reach.
The long term holding of equity by concentrated shareholders is a bad idea. Because those owners don’t invest in the longer term interests of the company nor its production, they just extract profits for the short term.
Hmm, OK, it’s a view, not a good one, but it’s a view. A few years back the same Harold Meyerson told us this:
What underlies this striking lack of shareholder power and utility? For one thing, shareholders ain’t what they used to be: They’re more renters than owners, and short-term renters at that. In the 1950s, a stock listed on the New York Stock Exchange was held, on average, for seven years, Fox and Lorsch write. Today, it’s six months. As much as 70 percent of the daily volume on the NYSE comes from high-frequency traders who hold a stock for roughly the same amount of time it takes a Higgs boson to disintegrate. Capital that impatient does not fund, discipline or measure the value of a company.
Short term and dispersed shareholders is a bad idea. Because those owners don’t invest in the longer term interests of the company nor its production, they just extract profits for the short term.
Assuming that companies are going to be owned by someone that rather covers the bases, doesn’t it? Whether short or long term, concentrated or dispersed, all they do is extract short term profits and don’t look nor invest for the long term. Which, given that this shareholder capitalism is what has made the modern world, by any historical or even global standard, so stinking rich is an interesting take on it.
But if any possible arrangement of shareholders just isn’t right then we’ve got two choices concerning Meyerson himself and his views. One is that it’s not what shareholder arrangements which matter to him but the mere existence of shareholders. The other is that he’s the intellectual consistency – possibly the attention span – of a mayfly. I’ll admit that I tend toward the second but am willing to be persuaded of the first. Being a fool is better than being slapdash, no?