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Contact Information:
Hari Trivedi
HTrivedi@trivgov.com
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Corporate Profit
With the recent financial crisis there has been a lot of anger towards corporations, particularly financial institutions, with the feeling amongst people that corporations are just out to make profit at any cost. without regard to the welfare of any body. Some of this anger has been expressed in the form of the “Occupy“ movement.
Many in the higher economic strata of society view this as an “anti-rich,” “bashing the rich” movement.
Deep down in their hearts, the Americans are not anti-rich. That is why we do not see “Occupy Microsoft Corporation,” “Occupy Apple Inc.” movements. These companies, and the people who started them, have changed our way of life. Americans have no problem with the fact that the pioneers who developed these corporations (Bill Gates, Steve Jobs) became rich. There isn’t even a “Occupy Berkshire Hathaway” movement though Warren Buffet, due respect to him, to my knowledge had never directly produced anything –he is a smart investor and used his knowledge effectively to grow his wealth –kudos to him. He has contributed to several companies’ growth via investment; again kudos to him.
The issue that riles people is that preceding the financial meltdown of 2008, bad decisions by people of several large financial institutions, particularly over-leveraging and excessive risk-taking (and no factoring of decline in house prices by these very smart people), resulted in big losses when housing took a down-turn. The domino effect, due to the size and scope of the amounts involved, lead to a near catastrophe of the global financial system and a severe recession. As a result, even companies and businesses that had no relation with banking and finance suffered severely and had to lay-off employees. Thus, many everyday people who simply wanted to do their job, take home a paycheck and had nothing to do with any of the events lost their jobs through no fault of theirs (or suffered furloughs, pay and benefit cuts). While all this was occurring, the corporate executives of financial institutions, who presumably were responsible for the bad decisions continued to enjoy lavish salaries and perks. In one instance an executive had himself built a bathroom worth several thousand dollars while his company was going was heading towards bankruptcy (or close to that). Many executives did lose their job, but none that I know of without a lucrative severance package. The foregoing is what has upset a lot of folks.
We want our corporations and businesses to make profit –make no mistake about that. That is what leads to capital investment and job creation.
But we also want them to be a good citizen.
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