Almost every empirical study of the value of takeovers indicates that overall there is no gain; the acquirer doesn’t benefit and the overall economy usually loses out. The only ones who gain are the shareholders of the acquired company, and in cases like the Tomkins sell out currently going through, its top management whose pay off is really nothing more or less than a bribe. This is in contrast with ordinary employees who usually face an immediate cull as well as a long term loss.
Category Archives: Management Practice
Current management practice
The Politicisation of Industry
Keynes recognised that the legislation protecting worker’s rights might lead to powerful trades unions, motivated by political ideals rather than the long term interests of their members, being the cause of wages led inflation damaging economic activity. His mistake was to argue that it was a political problem for governments, rather than a problem for economics. So no action was taken till the advent of the Thatcher government.
Today the boot is on the other foot. Free market fundamentalism is no less political than the unions were 30 years ago. The fervent ideological belief in private industry being good, public bad, regulation bad, and above all, the primacy of shareholder property rights and the purpose of industry being to maximise their value … all that is equally damaging to industry, perhaps even more so, than was unbridled union power.
The Case for Monopoly
Keynes said he could see no reason why a government should become involved in owning a railway. However, the result of privatizing British Rail and trying to open it to competition, suggests Keynes may have been short-sighted. Monopoly might be a bad thing when exploited by some profit maximising economist, but the case against is by no means shown to be universally true.
Was Friedman right?
Milton Friedman is given a rather severe critique in The Rise and Fall of Management, especially over his malign influence on industrial management, how it is taught and how it is done. The Friedmanism which best captures his contribution to that endeavour is the one which tells the world that ‘corporate officials’ have no ‘social responsibility other than to make as much money for their stockholders as possible’.
Entrepreneur to Deal Maker: the strategic manager’s progress
As recounted in ‘The Rise and Fall of Management’, from the earliest days of industrialisation down to the present day, perhaps one of the most striking step changes to take place has been the adoption of the strategic perspective. It was not till the mid 1960s that long range planning and what became known as strategic management received much overt attention. First in large companies, then among consultants and, finally, in academe, strategy became a dominant perspective, widely acknowledged as the lynch pin of management theory and practice.
Continue reading Entrepreneur to Deal Maker: the strategic manager’s progress
Justifying the bonus culture
Earlier this year it was reported in the national press that, despite the decline in its investments and fall in profit from £576m to £17m, the former mutual Standard Life’s chief executive, Sir Sandy Crombie, received £380,000 bonus on top of his salary of £754,000. Fellow director Keith Skeoch’s take was £1.3m while finance director David Nish’s take was £885,000.
The following extracts are from a letter, arguing the case made from a historical perspective in ‘The Rise and Fall of Management’, written to Sir Sandy Crombie asking how these payments could be justified:
Dear Sir Sandy,
Free market capitalism vs company law
A key tenet of free market capitalism is that businesses should focus exclusively on maximising shareholder value and not allow other considerations, apart from compliance with the law, to intrude on their business activities. As demonstrated in ‘The Rise and Fall of Management’, approaches such as corporate philanthropy, corporate social responsibility and business ethics, are only justifiable if they add to profitability. This appears to be a clear and simple model for businessmen to work.
Fighting for Fairness by Remaking the Real Economy 