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“Shareholders first” has a wave of confrontation with “user first” in China.

Editor’s note: This article is from WeChat public account “Magic Iron World (ID : jiangpeiyu0916), the author of the magic iron, the first Tencent Technology, authorized to release.

Focus on focus

1. Since the 1980s, management used capital technology to promote stock price rises to please shareholders and pursue short-term interests. This is actually a common phenomenon. It has occurred in other industries such as automobiles and pharmaceuticals, AT&T and Nortel. The encounter with technology giants such as Hewlett-Packard is just a tip of the iceberg.

2. IBM CEO Samuel promised to give back to shareholders for $70 billion, but a corporate shareholder is still not satisfied. Samuel dared not to speak, and he swallowed and asked: “How much do you think is enough?”

3. On August 19, 2019, the American Entrepreneur Business Roundtable BRT issued a statement, for the first time, clearly delineating the “shareholder first” values ​​in two places, the first is the user.

In September 2019, the biggest news in the Internet industry was that Ma Yun, chairman of the board of directors of Alibaba Group, announced his formal retirement. Although Ma Yun retired, his practice of “user first, shareholder third” was at the 20th anniversary of Ali, and was written into Alibaba’s “new six-pulse sword”, ranking first in the company’s six values.

Some people have noticed that this value of Ali has caused friction between Ma Yun and Wall Street.

According to Ma Yun’s self-report, on the eve of the listing of Alibaba, Wall Street people had asked him sharply: “Jack, you put shareholders in the third place, what are you doing on Wall Street?”

The “shareholder supremacy” that Wall Street has never forgotten is the value of American capitalism and the basic course of the MBA of the National Business School. But a century-old technology company, because of it, either declines or dies, and is rarely spared.

1, AT&T has been dismembered repeatedly

AT&T was founded in 1877 by the father of the telephone Alexander Bell, and its Bell Labs gave birth to crystal transistors (the core components of modern chips), radio telescopes, digital switches, Unix operating systems, lasers, communication networks and C Languages ​​and other influences affect the world’s inventions, and eight of them won the Nobel Prize.

It is no exaggeration to say that today’s information society is based on the inventions of Bell Labs.

By 1995, AT&T was exactly 118 years old, an authentic century-old store. In the past 118 years, AT&T has survived the coffers of rivals, survived the economic depression, and survived the anti-monopoly split, but in the end it fell into a hunt in the outside world.

This is the case. In 1994, the US economy recovered and the stock market began to rise. AT&T is a big story, lacking the story of the stock price skyrocketing, and the stock price is slow like a turtle crawling. This makes Wall Street investment institutions (mainly funds) and shareholding executives who hold most of the shares very uncomfortable.

Therefore, under the collusion of Wall Street investment institutions and executives, the board of directors quickly passed the AT&T splitting plan: AT&T retained the telecommunications services business, and the telecommunications equipment manufacturing business was spun off to form Lucent, and owned Bell Labs, a computer. The business was split into NCR.

In February 1996, after Lucent’s listing, it began to skyrocket. Before the stock market bubble burst in 2000, in four years, the stock price rose 13 times and the market value reached 244 billion. Wall Street’s investment institutions and Lucent’s management have all made a fortune.

The company has lost a lot of mold.

Although Lucent received orders for telecom equipment from former AT&T competitors MCI and Sprint, sales increased compared to AT&T’s spin-off, but this growth was one-off. In order to support the stock price, Lucent took a step back and borrowed money to buy Lucent’s equipment for small and medium-sized customers. Lucent’s calculation is that these customers make money, and naturally they will pay back the money.

But people are not as good as days. In 2000, the Internet bubble burst and a large number of small and medium-sized Internet companies that sold Lucent equipment went bankrupt. As a result, Lucent’s “receivables” became a net loss.

Luxun’s share price has started to fall. Wall Street shareholders who don’t admit their losses are not willing to put pressure on the board. Lucent executives then once again offered a god operation to spin off the company’s wireless equipment division Avaya. Unexpectedly, Wall Street shareholders and Lucent executives made another big profit. Lucent’s days were not as good as one day, and the stock price fell from nearly one hundred dollars per share to $0.55 per share. It was finally acquired by Alcatel of France to establish Alcatel-Lucent.

Under the nest, the golden egg of Bell Labs’ technology industry was also shattered.

After losing the big backing of AT&T, the new owner’s Lucent has gone from bad to worse, and it is difficult to maintain the huge amount of R&D investment. The top talents have begun to flee and enter a large number of new businesses like Google, including the Unix operating system and C language. One of the inventors, Ken Thompson.

As a “grandfather” in the programming world, Ken Thompson is a leader in computer science in the United States. It is said that Ken Thompson and his companions developed Unix and C languages ​​because they wanted to play games.

The final outcome of the Bell Labs Building, which carries countless glory, was sold to a New Jersey-based real estate development company called Somerset, which plans to develop it into homes and malls and extract the last value.

Later, Bell Labs went to the Nokia door and left only one sign.

At the same time that Lucent began its operation, AT&T began to split into three again: AT&T (Enterprise Services and Personal Business), AT&T Mobile and AT&T Broadband, and then listed separately to welcome the joint venture market to new investment themes. Chased. At that time, the concept of mobile Internet was on the rise, so AT&T Mobile raised $10 billion in funds, which was the largest fundraising amount at that time. Before the IPO, people holding AT&T mobile stocks (including executives and institutions) made another windfall.

After being dismembered, AT&T, a century-old store, now has only the blood of AT&T Mobile. Although it is still the largest telecom operator in the United States, it has long been glory compared to 1995.

2, “Death” of Nortel Networks and HP’s fall pit

The outcome of Canada’s national treasure giant, Nortel Networks (hereafter referred to as “Nortel”), is worse than AT&T.

For the present, Nortel is a strange name, but in the 1990s, Huawei was still a primary school student, and Nortel was a graduate-level student, it created the “fiber revolution,” and Cisco. The router revolution, Ericsson “mobile phone revolution” is the same, is a world-class telecommunications giant without discount. In the mid-1990s, if China’s top university graduates were chosen between Nortel and Huawei, most people would choose Nortel.

In 1995, Nortel celebrated its 100th anniversary, and the new CEO, John Roth, also walked.Immediately. Luo Shijie has a special liking for research and development. He has been a general engineer from BNR, the president of Nortel’s central R&D department, and then to the CEO of Nortel. Since then, he has made heavy investments in the research and development of optical communication products and has achieved great success in the market. Opened the biggest competitor Lucent and earned him a reputation.

But Luo Shijie found that honestly doing R&D and product innovation is far less rapid, accurate, and fierce than capital operation methods such as mergers and acquisitions. Mergers and acquisitions can quickly stimulate stock prices to soar, stock prices soaring and additional shares can provide sufficient ammunition for capital operations, and then push up the stock price again, forming a “virtuous circle.”

When you see this, maybe someone will ask, Luo Shijie cares about the stock price, is he trading stocks?

It’s really true. Luo Shijie (including other executives), employees, and board members have obtained more than one billion US dollars of stock options, and the company’s stock price must soar after the exercise (buy stocks) to make a lot of money.

So, from the end of 1997 to October 2001, Nortel spent $32.1 billion to acquire Bay Network, Aptis, Qtera, Cambrian, etc. The net assets of these companies are actually only $1.1 billion, but the capital market recognizes With the theme of M&A’s mergers and acquisitions, the company’s share price rose all the way, rushing to the peak of the market value of 267 billion US dollars.

As for the future research and development of Nortel, it was placed in the least important position. The central research and development department BNR, which has a pivotal position, was dismantled. Nortel’s research and development capabilities gradually fell behind, and no revolution was introduced after 2000. Sex products.

In 2000, Nortel CEO Luo Shijie cashed in $135 million in stock and then resigned to the company to successfully live the luxury of billionaires.

After Nortel’s bankruptcy, employees lined up to receive compensation.

Nortel was dragged down by the merger, and it fell from the peak to the bottom, gradually declined, and declared bankruptcy in 2009 after 9 years. The same idea as Luo Shijie is the former CEO of HP, Carly Fiorina.

HP is a living fossil company in Silicon Valley, but it was in trouble in the late 1990s. Fiorina, who took over the crisis, did not use her mind to transform the company and enhance her competitiveness. Instead, she planned to take a shortcut – to acquire Compaq, so that HP Plus Compaq’s market share can reach 37%, surpassing the first Dell, giving the capital market a beautifulThe theme of hype, so that the stock worth up to 65 million US dollars.

HP’s earnings are poor, and Compaq is losing money. The combination of the two is weak and weak, and will only be weaker. Therefore, Fiorina’s plan was opposed by the company’s founders, Hewlett and Packard. However, Fiorina worked as a small and medium-sized shareholder. Even with the opposition of the founder family, the $25 billion acquisition plan was passed by 51% in favor and 48% against the vote at the general meeting.

After the end of the game, everyone knows that HP and Compaq, two drowning people, are not out of danger, but are accelerating. During Fiorina’s tenure, HP’s share price fell by half, and shareholders lost a lot. In 2005, HP’s board of directors had to spend $20 million to build a “golden parachute” that allowed Fiorina to retire early.

Afterwards, Mark Hurd, who was on the line of fire, made a reform of Hewlett-Packard and improved the company’s operational efficiency before pulling HP back from the death line.

Since the 1980s, management used capital and financial technology to promote stock price rises to please shareholders and pursue short-term interests. This is actually a common phenomenon. It has occurred in other industries such as automobiles and pharmaceuticals, such as AT&T, Nortel and Hewlett-Packard. The experience of the technology giant is just a tip of the iceberg. The “shareholder first” values ​​are facing challenges.

3. Is MBA education the root cause of the problem?

The core of the “shareholder supremacy” values ​​is that shareholders are the owners of the company. The company’s property is formed by the capital they invest. They assume the company’s residual risk and take advantage of the company’s residual control and residual income rights. As the manager of the shareholder agent, the goal is to maximize the interests of shareholders.

How to maximize profits? Nobel Prize winner Eugene Fama’s “Efficient Market Hypothesis” provides theoretical guidance: “The company’s stock price will always display all known information, so stock price is the best tool for assessing the overall value of the company.”

In other words, the more stock prices rise, the maximization of shareholder interests, and the implementation of “shareholder supremacy”.

To this end, stock options such as financial instruments were invented, and professional managers became one of the shareholders, so that corporate shareholders and professional managers became the two grasshoppers on the rope.

Professional managers have the motivation to push the stock price up, satisfy the shareholders and let them earn the difference in the stock price, otherwise the shareholders will remove the professional managers through the board of directors.

Moreover, the education of professional managers in the United States is also centered on “shareholder supremacy”, making “shareholder supremacy” the absolute mainstream value of American capitalism.

The survey shows that the financial fundamentals of top business schools such as Harvard, Stanford and Wharton have not changed for decades, including:

• Shareholder value is more important than everything else;

• The purpose of business is to make money and create value for investors;

• The only criterion for measuring a company’s success is to look at stock prices, not core technology, creativity, human resources, or social goodness;

• The value of management exists is to use all necessary means to boost stock prices;

A follow-up survey by the Aspen Institute in the United States shows that MBA students are only educated for two semesters, and their values ​​are transformed from a “user-first model” that focuses on producing high-quality goods and providing high-quality services. The “shareholder first” model of shareholder returns. The study believes that MBA business school is doing this, it is almost a blatant education of students greed is a good thing.

Because the listed companies on Wall Street are basically operated by professional managers, and the professional managers are trained by the National Business School, the process of training is the process of “shareholders first” values, so it can be said that MBA education is a problem. source.

In fact, as long as the history of the century-old store in the United States is sorted out, an interesting phenomenon will be discovered. The founder of the company has hardly received an MBA education. Even in the prosperous period of MBA education, the high-tech enterprises in Silicon Valley are basically engineers. Founded, startups follow the “customer first” values.

As the company publicly listed, a large number of shares flowed into the hands of funds, consortia and other institutions, the founder or its family gradually faded out, and the person who led the company’s operation became the agent’s agent professional manager, and the values ​​of the company quickly changed from ” “Customer first” becomes “shareholder first”, product innovation, core technology, human resources and other strategic factors that affect the long-term development of the company, giving way to the data on the balance sheet such as cost and profit that can quickly boost the stock price.

McKinsey’s survey shows that 70-90% of the actual value of a company is related to the income of three years or even longer, but executives who get the most compensation through stock options will try their best to make the long-term development of the company more favorable. Decisions, such as product innovation, core technology, and human resources, focus on short-term interests, making a fuss about splitting, mergers and acquisitions, repurchasing stocks, and cutting R&D investment, making the cash flow, profit margin, and other figures of the book look more beautiful. .

How short is the short-term benefit? In the long-term planning of enterprises, American companies tend to be a quarter, while companies in emerging market countries, especially those in Asia, often take 10 years as a unit of time.

Because of the strong influence of the “shareholder supremacy” values, many companies in Silicon Valley have to plead their efforts even if the founders still dominate the operation. Stanford University research shows that after the listing of high-tech companies in Silicon Valley, R&D investment will be cut by 40% in order to increase profit data and please shareholders.

4, IBM’s CEO is swallowing

Walkers of Wall Street will not hesitate to punish or pressure companies that adhere to long-term strategies and attempt to “shareholder-first” values.

Jobs dare to take risks and like product innovation, but the iPod just sold 400,000 units that year. Shareholders were not optimistic and voted with their feet, causing Apple’s share price to fall by 25%. Fortunately, Jobs was unmoved, and later the iPod was a big success, defeating the global consumer electronics giant Sony.

IBM’s management is not as strong as Jobs. In 2004, IBM announced its withdrawal from the PC business and the transition to the service industry. Because the transformation is full of unknown risks, IBM CEO Samuel Palmisano was condemned by shareholders and was asked to step down. Samuel promised to give back to shareholders for $70 billion, but one corporate shareholder is still not satisfied. Samuel dared not to speak, and he swallowed and asked: “How much do you think is enough?”

The end result is that between 2000 and 2014, IBM spent $138 billion on stock repurchases and dividends, while spending on corporate development was only $59 billion, including $32 billion in acquisitions. .

In the listed companies on Wall Street, the courage to despise the “shareholder supremacy” values ​​is often the founder, and there are only a handful of them, which are quite different.

Amazon founder Bezos has always insisted on “every penny earned by spending money” to expand investment, and Amazon was ridiculed by shareholders as a charity, meaning that shareholders investing in Amazon is like returning charity without paying back.

After regaining power in Apple in 1996, Jobs publicly announced that he was “unwilling to pay dividends.” Even if shareholders repeatedly proposed dividends and dividends, they were unmoved. The angry shareholders then sent him the nickname: “Steve Jobs, who has been not paying dividends.” “.

But after taking office, Cook took over the scepter of Jobs, but did not take over Jobs’s “clothes.”

It is said that after Apple’s handsome print, someone wrote an email to Cook, saying: “Don’t be Jobs, be yourself.” Cook personally replied: “Do not worry, I will only Be myself.”

The truth of the story is not verified, but Cook’s dividend as soon as he took office is real.

From 2012 to 2017, Apple returned more than $312 billion to shareholders. The beneficiaries included not only Wall Street shareholders but also company executives such as Cook. How much has Apple invested in research and development during the same period? 65.2 billionThe US dollar is only about 21% of the returning shareholders. The proportion of R&D investment in operating income is only half of the industry level, which is difficult to meet the image of Apple’s technology-innovative company.

In order to turn enough cash in the hand into a hen that is a “golden egg”, in the past few years, Apple has become more and more like a bank, not only making loans to other companies through the corporate bond market, but also using cash reserves to support the new Debt issuance.

The difference between Cook and Jobs is simply that shareholders are ahead of users and their balance sheets are ahead of product innovation.

5, Wolf on Wall Street

The “Shareholders First” value has evolved a new species “rightsholders” on Wall Street in the 1980s.

The operation of this species is to use some of the most profitable companies in the United States as hunting targets. After buying the stocks on time, use the status of shareholders to create various means to intervene in the company’s stock price (including the split company). , M&A market, stock repurchase and dividends), earning the stock price difference after raising the stock price, and obtaining dividend income.

In the past few years, in addition to Apple, Dow Chemical, Yahoo, Dell, General Motors, DuPont, and HP have all become their targets.

Hollywood is based on Apple’s seventh-largest shareholder, Carl Icahn, and filmed a movie called “Wolf of Wall Street”, which earned him the nickname “Wolf of Wall Street.” It is said that Cook’s practice of breaking Apple’s years of non-dividends stems from the pressure exerted by Karl, “Wolf of Wall Street”.

The Hollywood film “Wolf of Wall Street” is based on Carl Icahn and starred by Leonardo DiCaprio.

When Apple announced the highest dividend in history, Karl earned a net profit of $112 million overnight, and he publicly praised Cook for “good business.”

However, with the wave of “rights-keeping shareholders”, the American business community has gradually realized that the “shareholder-first” values ​​have made companies focus on short-term interests and weaken their competitiveness, making the US in the automotive, steel, consumer electronics and semiconductor storage. The field has been completely defeated by Japanese companies.

In 1990, a business roundtable composed of CEOs of the largest and most powerful companies in the United States stated in a mission statement that “a careful measurement of the interests of all stakeholders is the responsibility of the leader, whether they are to the company or to the shareholders. Part of the long-term interest responsibility.” This is the first question of the “shareholder supremacy” values.