Why are corporations doing so well as the economy struggles?

[Direckshun]

This is something I'd like to see your explanations on.

Corporations are recording record profits in 2012. Not good profits, record profits.

And yet our economy struggles at a little under 3% growth and a high unemployment rate.

Why, in your opinion, is the economy so bad yet businesses are doing so great?

http://economix.blogs.nytimes.com/20...orate-profits/

Record Corporate Profits
United States corporate profits reached a record high in the third quarter of this year, even adjusted for inflation, according to a report from the Bureau of Economic Analysis.
By CATHERINE RAMPELL
November 29, 2012, 3:00 pm



The increase from the second quarter was entirely a result of stronger business at home. Profits received from American-owned businesses abroad fell slightly in the third quarter, which may not be surprising given the recession in Europe and the slowdown in China.

Additionally, all of the growth in domestic corporate profits was accounted for by the financial sector.

Domestic profits of financial corporations rose $71.3 billion in the third quarter, after falling $39.7 billion in the second. Domestic profits of nonfinancial corporations, on the other hand, decreased $1 billion in the third quarter, after rising $27.8 billion in the second quarter.

[chiefzilla1501]

Originally Posted by HonestChieffan

Couple questions without getting too personal...

Do you now or have you ever owned a business that has more than yourself as an employee?

Have you at any time worked for a large company in a management role that gave you financial decision making responsibility?

Have you or are you now responsible for a profit and loss statement? Do you or have you ever had to detail a bank or a board on the annual plans for a business and how that relates to a long term plan?

No, I have not worked in a small business. Most of my time has been in the private sector. Yes, I have owned a P&L and a strategic plan/budget. Yes, I love working for a corporation and I love my job. I think most managers do a very good job of running their business units or at least try to. A lot of corporations function nicely, except the part where executives are creating top-down decisions that are based on self-interests instead of what's best for their corporation. incidentally, I don't feel that way where I work, but think it's prevalent lots of places where it shouldn't be.

Now that that is out of the way, you can define success as you like. For most businesses, success is a mater of year to year survival, generating enough profit to compensate ownership at a level that makes them want to continue the business another year. Lots of small companies have 3 to 5 year plans but they deal with annual issues that drive the business. These people are currently in that group that likely has been hurt by the recession and have very real concerns about an unknown cost structure due to ObamaCare and tax treatments of expenses, depreciation, investments in new equipment and maintaining inventories. You can bet, and you know, these companies from two to probably 50 or 70 employees are not hiring, they are repairing not replacing, they have slashed inventories, and are doing more with less at all levels.

Regulation is necessary to some extent, but I generally want the government to back off. I would back tax cuts if I felt they would be invested back into the business. That's not happening. You can't give a sob story about an executive forced to make cuts when he/she is simultaneously in cahoots with boards that are driving their compensation up at a disproportionate rate. If they really cared about the success of their company, it is outrageous that at a time when they're cutting costs to "better" their company that they're adding a shitload of cost to line their own pockets.

Take that to a major fortune 500. These companies operate, or at least the two I spent 30 years working for, on a very bottom up management of their divisions and markets. Any department is under intense pressure to achieve the annual plan set for that department. My experience was in sales and in marketing. I managed a $42 million dollar business. I had sales people and was responsible for expense management as well as people management. Over the span of my career we went through a number of downturns.

I am in strategy/marketing. I know I am limited by what is allocated to me. It is ridiculous to cripple our sales force with poor technology while the company is sitting on cash. When your executives get paid disproportionately more, that forces your business units to do more with less. Every extra dollar a CEO makes is a dollar you could have spent on, for example, a marketing awareness campaign or a tech upgrade or a better sales commission.

In those downturns we knew it was coming. The successful managers were those who sized the salesforce and expense loads such that people were not laid off. No one wants to lay off people who you have invested in training and who have built relationships at customer levels and internally. But sometimes it happens. You cut staff, you cut spending, you delay expenses. Company cars are driven 100000 miles where in the great times they were traded at 48000. And managers took on more people, more area, more responsibility and a few times raises were put on hold.

As a result, we made our goals, we actually came out stronger, more profitable, and better prepared not just for the growth times but for the next downturn.

Success in bad periods is a matter of survival, not spending, retaining profits, and building cash reserves. You grow the business in the up times and you protect the future business in downtimes. No business invests in expansion unless they have solid evidence that they are in fact experiencing demand for what they sell or do that justifies investment. And no business is going to spend on expansion until they know what the return to the business is going to be.

What you are saying is the exact opposite of what is going on. Again, cost structures are going down but executive compensation is going up disproportionately. Investment back into the company is going down. Executives are hoarding cash, and they are bragging about having a ton of cash lying around that isn't being put back into the company. You don't have to invest in a new plant. You can invest in R&D. You can invest in employee training or engagement programs that improve your retention rate. You can invest in new technology, because almost every company can improve. You can invest in marketing which has a long tail to it. This is all about opportunity cost. Again, think about how much MORE money executives are making and think about all the things those same dollars could have been invested back into the company for.

If an employee of any company does not understand why the company is making the decisions they are making, its managements fault for not developing an understanding of the companies goals, plans, outlook and the state of the industry they are in. Or its the employees fault for not listening when it is explained. Some people never do develop that understanding and often are unhappy a lot of the time. Those who are the worst at that are often the ones who have a new opportunity presented to them to find a job that makes them happy.

And the problem is that today's executive is rewarded for failure and short-term growth. They get handsomely rewarded for big profits, even if that meant they took a huge chunk out of R&D that makes them competitive 5 years from now. They get rewarded even for making massive mistakes, especially when you have the luxury of a golden parachute if you really screw up. This is messed up. Executive compensation needs to be based on LONG-TERM incentives and there has to be some way to lower the reward for failure.

[mlyonsd]

Why is this still being discussed?

Corporations that offer wanted products and services have the resources to cut during down times and still survive.

Reducing their work forces, cutting benefits, stopping capital projects when their products and services are still needed will increase profits. It aint rocket science.

[chiefzilla1501]

Originally Posted by mlyonsd

Why is this still being discussed?

Corporations that offer wanted products and services have the resources to cut during down times and still survive.

Reducing their work forces, cutting benefits, stopping capital projects when their products and services are still needed will increase profits. It aint rocket science.

Because the question is that when you're cutting costs, why are they adding disproportionate executive compensation costs simultaneously.

Because executives are serving their self interests instead of doing what's best for their corporation. And not even just a little bit. A lot.

[mlyonsd]

Originally Posted by chiefzilla1501

Because the question is that when you're cutting costs, why are they adding disproportionate executive compensation costs simultaneously.

Because executives are serving their self interests instead of doing what's best for their corporation. And not even just a little bit. A lot.

I thought the question was why are corporations doing so well when the economy struggles.

You seem to be arguing a different question. And to that, I'd say the vast majority of executives whose corporations are flourishing have the company interests ahead of their own.

[HonestChieffan]

Originally Posted by mlyonsd

I thought the question was why are corporations doing so well when the economy struggles.

You seem to be arguing a different question. And to that, I'd say the vast majority of executives whose corporations are flourishing have the company interests ahead of their own.

This is his issue. Cant argue his pov. He thinks CEOs get paid too much. Simple opinion, thats cool. Obviously the Board of Directors see it quite different.

[Garcia Bronco]

(Technology + Automation)innovation = jobless recovery


The economy is/has shed jobs it should have lost sometime ago. Business can reach more customers from the above with less overhead.

Combine that with competing in a global market...man...people in the US will have to adjust.

[chiefzilla1501]

Originally Posted by mlyonsd

I thought the question was why are corporations doing so well when the economy struggles.

You seem to be arguing a different question. And to that, I'd say the vast majority of executives whose corporations are flourishing have the company interests ahead of their own.

And I'm arguing... what is the definition of "flourishing"? Because their profits are up?

Meanwhile, our American businesses are getting crushed by foreign competition. These profits aren't being driven by American industry. It's being heavily driven by financial services. Thank God for Google and Apple, or we'd be getting annihilated in tech too. Because those are companies that value innovation and an unbelievable environment of R&D and test/learn.

I'm sorry. I get that companies have to cut expenses in a recession. But unless your business is one of the lowest cost in your industry, you have to win with value-add. If you're not going to offer the cheapest car, you sure as shit better find something about your car you can't find in a different car. The economy will never recover until we encourage innovation. That's not going to happen if the government punishes risk-takers, and it sure as shit isn't going to happen if executives hoard cash and try to boost their short-term paycheck at the expense of making their corporation competitive globally.

[chiefzilla1501]

Originally Posted by Garcia Bronco

(Technology + Automation)innovation = jobless recovery


The economy is/has shed jobs it should have lost sometime ago. Business can reach more customers from the above with less overhead.

Combine that with competing in a global market...man...people in the US will have to adjust.

American businesses have to adjust too.

It's not that hard. If you give an executive a $5 million pay raise, what if you invested that into getting your technology up to global competition? What if you used that money to re-train your workers to adjust to the new economy?

But no. We continue to defend executives who are increasingly selfishly lining their pockets while their corporation becomes less competitive.

[KCWolfman]

http://economistsview.typepad.com/ti...on-stalls.html

[chiefzilla1501]

Originally Posted by KCWolfman

http://economistsview.typepad.com/ti...on-stalls.html

And again... it is hypocritical for executives to blame Europe or government when they are getting huge pay raises in an economy where everything is being cut back. It's like Jamie Dimon going on a rant about government regulation when his lack of oversight led to a freaking $6B loss to the company. Look, steroids need to be eliminated in the game of baseball, but I don't want to hear people like Barry Bonds complain about it.

[KCWolfman]

Originally Posted by chiefzilla1501

And again... it is hypocritical for executives to blame Europe or government when they are getting huge pay raises in an economy where everything is being cut back. It's like Jamie Dimon going on a rant about government regulation when his lack of oversight led to a freaking $6B loss to the company. Look, steroids need to be eliminated in the game of baseball, but I don't want to hear people like Barry Bonds complain about it.

It's just as critical to blame ALL American corporations for a small percentages stupid decisions.

Corporations are not the Empire lead by a lightning bolt wielding old man with a hard breathing black masked thug crushing the American worker with his Force Choke.

In 2008, more than 1000 major US registered companies filed Chapter 11. Most American corporations are struggling to show a profit, just like the American family.

If people want to get angry about a corporation-like entity voting themselves huge bonuses while abusing the people who they represent - get pissed at your federal government. They are the ones spending money they don't have for stuff you don't want and taking more from you without your permission.

[chiefzilla1501]

Originally Posted by KCWolfman

It's just as critical to blame ALL American corporations for a small percentages stupid decisions.

Corporations are not the Empire lead by a lightning bolt wielding old man with a hard breathing black masked thug crushing the American worker with his Force Choke.

In 2008, more than 1000 major US registered companies filed Chapter 11. Most American corporations are struggling to show a profit, just like the American family.

If people want to get angry about a corporation-like entity voting themselves huge bonuses while abusing the people who they represent - get pissed at your federal government. They are the ones spending money they don't have for stuff you don't want and taking more from you without your permission.

Executive compensation is up. Dramatically. That's not just a few corporations. That's the entire U.S. and this is all happening during a recession where most corporations are cutting costs.

And don't feed me the government spending spiel. I am much more conservative than I am liberal and dislike a lot of government spending and intervention. I don't know why people act like you have to choose which one is right, corporations or government. Isn't it possible that BOTH are responsible for problems facing America?

America used to be a global economic leader. We are losing our competitive edge. This doesn't represent a short-term problem. It's a long-term problem. Again, this is NOT a hard problem to grasp. Every extra dollar executives make could be going toward re-training and developing your employees, upgrading their technology, buying new plants, building a new retail location. People keep coming back with the excuse that CEOs aren't spending money because they're being conservative right now. B.S. They ARE spending money. They're spending it ON THEIR OWN SALARIES.

[KCWolfman]

Originally Posted by chiefzilla1501

Executive compensation is up. Dramatically. That's not just a few corporations. That's the entire U.S. and this is all happening during a recession where most corporations are cutting costs.

And don't feed me the government spending spiel. I am much more conservative than I am liberal and dislike a lot of government spending and intervention. I don't know why people act like you have to choose which one is right, corporations or government. Isn't it possible that BOTH are responsible for problems facing America?

America used to be a global economic leader. We are losing our competitive edge. This doesn't represent a short-term problem. It's a long-term problem. Again, this is NOT a hard problem to grasp. Every extra dollar executives make could be going toward re-training and developing your employees, upgrading their technology, buying new plants, building a new retail location. People keep coming back with the excuse that CEOs aren't spending money because they're being conservative right now. B.S. They ARE spending money. They're spending it ON THEIR OWN SALARIES.

The "Entire US"? I would need some sort of verification on that statement. That is about as far fetched as it gets.

As far as corporations vs govt. You can control corporations immediately. You don't even need a bulletin board, just simply don't support the ones with which you disagree - pretty damned simple.

Government on the other hand takes time (and usually a revolution). I am more concerned about a government I can't control than a corporation I can.

[KCWolfman]

This class warfare BS is old hat.

[chiefzilla1501]

Originally Posted by KCWolfman

The "Entire US"? I would need some sort of verification on that statement. That is about as far fetched as it gets.

As far as corporations vs govt. You can control corporations immediately. You don't even need a bulletin board, just simply don't support the ones with which you disagree - pretty damned simple.

Government on the other hand takes time (and usually a revolution). I am more concerned about a government I can't control than a corporation I can.

Far fetched? Look up wage gaps, executive compensation (be sure to look at overall compensation including bonuses), and overall pay of executives not just ceo's.

I can't believe there are people in denial that executive pay is going up across the board.