When will it be considered OK

[Flatpicker]

To bring out the torches and pitchforks to take down people like this.

http://qz.com/166324/silicon-valleys-most-generous-employer-has-incurred-the-wrath-of-hedge-fund-activists/

They will gut the company to line their pockets.

[badtoworse]

1. The short answer is never

The investors own the company and it's their perogative to direct management in how to run it. The hedge fund only has 6.2% of the shares but that is enough for them to have influence. If other shareholders agree with them, they could be in a position to elect different board members who would direct management to make changes.

[kcr]

3. What's the long answer?

Of course it's in the best interests the owner to pay the least amount they can get away with. That wasn't the question the OP was asking.

[badtoworse]

4. It's not a matter of best interests.

It's about an owner's right to manage his business the way he sees fit. The OP is basically asking when it's OK to take that right away from him and the answer, long or short is never.

[kcr]

5. So, the owner's best interests is the only interest to ever consider?

really? The only interests that matter? You don't want to rethink that answer?

[badtoworse]

6. That is up to each business owner to decide.

[kcr]

7. wow n/t

[badtoworse]

8. If not the owner, who would you expect to make decisions like that?

I'm getting the impression you haven't actually spent much time in the business world.

[kcr]

9. I'm getting the impression you're not familiar with a lot of progressive ideals n/t

[badtoworse]

13. Since when is taking down owners with torches and pitchforks a progressive ideal?

Not recognizing an owners right to manage his own business is a progressive ideal? That's news to me.

[kcr]

14. It sure has never been supporting sucking businesses dry for every penny

a la Romney, to hell with the consequences.

[badtoworse]

16. You're missing my point

You seem to support taking away an owner's discretion to act in his own interest. His best interest could be anything from handing out bonuses to selling the company, but whatever, it's his call not the OP's.

[kcr]

17. Talk about missing points. I said nothing of the sort.

This is a thread about a hedge fund that wants to do that very thing, however. Interesting that you have no problem supporting that. But heaven forbid anyone even consider the workers. That was my point and the point of my initial response to you. Where is the consideration for them. Who considers them? I don't know how you get I support taking away an owner's discretion out of that.

[badtoworse]

20. We're talking past each other and it's not working

Lots of companies treat their workers very well (I've been fortunate to have worked for a number of them) and I've also worked for companies that had to let me go for economic reasons. In all those cases the companies believed their best interests were being served by what they did. I support the companies rights to do what they did.

There are some hedge funds guys that are real scumbags and when they become owners, they can do nasty things. I don't like that, but I don't believe you can prevent that without taking away the discretion that all business owners need to effectively run their businesses.

[kcr]

21. Not talking past each other. You're just wrong.

For one thing, that's not even what you said in the beginning. You just started right off with the businesses have a right to do whatever they want. You showed no consideration for the workers. That's why I asked, to give you an opportunity to clarify. But you didn't, you stuck to your businesses are in the right, screw the workers guns.

To your second paragraph. I noticed that in another post in your thread that you think government is too big. This explains your mistaken belief that there's no way to stop these hedge fund assholes without hindering business owners. It explains a whole lot, actually.

[badtoworse]

22. Have a nice day.

[kcr]

11. Are you even aware of how a middle class came about in this country? n/t

[Flatpicker]

12. Then let me clarify

I guess my question is multi fold.

1. Is it a good decision to buy into the business knowing this is what they do, with the intention to force them to stop what has worked well for their long term viability? At that point, do you care for the life of the org, or is this a way to make short term money at the expense of the org as a whole? If they go under due to bad decisions from the board, these fund managers won't care because they will have already gotten their cut and gotten out.

2. Is it morally correct (business ethical) to work to undermine the business you are investing in?


My 3rd question, Is in light of the problems that the financial industry has caused American businesses in the last few years with their practices, should it be legal for an investor to buy into a business with the sole intention of draining it's coffers on non-core-business events?

It's complicated, but in my humble opinion, allowing an outside investor to intentionally sabotage successful business practices should be considered illegal.

Imagine if there was some type of law that required an investor to have a minimum of 5 year hold on their shares before selling them off, then we may have seen more interest in seeing businesses survive beyond the short term.

[badtoworse]

15. It's a complicated question because every case is different

Sometimes outside investors buy into a troubled company and turn it around - that's a good thing. Sometime, as you point out, corporate raiders will buy enough equity to run the company into the ground and realize a short term gain. I think that's wrong, but I don't like the idea of outside parties (most likely the government) telling business owners how to manage their businesses. IMO, that would be a cure that's worse than the disease. I think the government already has too much power and I'm very reluctant to give it more.

In this particular case, with only 6.2% of the shares, the hedge fund guys would probably get one seat on the board. They would have to convice the rest of the board that cutting costs is the right move (it might be; can you say for sure it isn't?). I don't see them getting enough support on the board to run the company into the ground however.

A mandatory 5 year hold would be very unfair to investors and would make it nearly impossible to raise equity capital. A lot can change for a business in 5 years and investing equity under that requirement would be highly speculative. I've been investing my entire adult life (more than 40 years) and there is no way I'd invest in equities if I couldn't sell for 5 years.

[Flatpicker]

18. That's where we are going to differ.

In reaction to relaxed governmental regs on business and from watching the results lately, I can't agree that government has too much power.

If anything, I believe that government has ceded too much to industry and think it's time the pendulum swings back towards tighter controls on industry in it's actions toward the environment, and to the population centers in which the orgs inhabit.

At one time, industry was expected to be a good neighbor in it's dealings with the outside. That's been lost and something has to fill in the vacuum. Expecting the org to act according to it's better angels has failed. Just look at WV and TX over the last few years.

In the past, I would have agreed with you, but the business leaders have not shown the ability to self regulate in any way shape or form.


Question to you:
Why would an across the board 5 year hold be considered unfair if it was applied equally? A lot can change, but it would not be incurring an unfair advantage to any particular entity. It would require new models and thought methodology from the financiers. There would be an actual incentive to see the business succeed, would it not?

[badtoworse]

19. Environmental regulations fall into a different category

They involve other people's rights. If you dump chemicals into a river, people downstream are impacted and they have rights too. There is a balancing act between restricting freedom and protecting other people's rights that has to be considered when government makes regulations.

You can argue that if the 5 years applied to everyone, it's fair because nobody has an advantage. I suppose that's true, but it doesn't change the fact that it's a terrible idea - it's unfair to everyone. Suppose you invest in a company and three years down the road, markets change and the company looks like it may go under. Under current rules, you could sell and likely take a hefty loss, but under your idea, you'd have to standby and watch your entire investment go down the drain. As an example, look at coal companies: In 2008 / 2009, natural gas prices were very high (I can remember seeing $14 per MMBTU) and coal companies were doing extremely well. Natural gas competes with coal as our main fuel used for power generation. Since then, two things happened: The EPA implemented stringent regulations affecting mainly coal plants and advances in drilling technology substantially increased the supply of natural gas and lowered its price. Today, coal companies are literally fighting for their lives. If you had invested in coal companies in 2008 based on then current projections of fuel prices, you'd be in rough shape today if your rules applied. I just don't believe it's fair to put investors in that position. Would you invest under those rules? I sure as hell wouldn't.

We already have incentives to hold for a longer period of time in the tax code. Long term capital gains (over 1 year hold) are taxed at a lower rate than short term gains (less than 1 year hold) which are taxed as ordinary income. That's good enough for me.

[leftyohiolib]

2. americans wont do a damn thing even if they could.

[BuelahWitch]

10. Find a hedge fund manager who's texting in a theater

and get a retired cop to shoot him.