Well, one of the other alternatives put forward was revenue max. That may be another approach that hurts profits in the short run but may increase them in the long run.
A lot of people think that was the strategy of the Japanese corps during their decades of successful growth, aggressively expand market shares and then get the profits later. Probably worked for their auto producers in the 1970s and some other sectors as well. For that to work, one needed a financial backup that did not demand immediate profits, as with the bank-centered keiretsu system. Of course this has all broken down since the crash of the bubble in 1990. Barkley Rosser -----Original Message----- From: Doug Henwood <dhenwood at panix.com> To: lbo-talk at lists.panix.com <lbo-talk at lists.panix.com> Date: Thursday, November 02, 2000 7:16 PM Subject: RE: anti-Ralph petition
>Max Sawicky wrote:
>
>>A little. It seems totally unlikely that conditions
>>on the ground, so to speak, have caused the future profits
>>that one could legitimately anticipate to fluctuate in the
>>same way as share prices. Ergo the latter are not premised
>>on the former, ergo managerial behavior premised on maximizing
>>share value is not premised on profit maximization. Checkmate.
>
>Not so quick, Grandmaster Flash. Over the long term, share prices
>magnify movements in underlying profits, but they do move in the same
>direction, and around the profit trendline as a center of gravity.
>
>But we were talking about what motivates corporate managers. They
>want a high share price, and what gets a share price high is a high
>level of current profits and rosy investor expectations for the near
>future. We can argue about whether this is consistent with profit max
>over the long term - you could say that maximizing profit growth in
>the short term can steal from the future, by skimping on R&D, say -
>but there's not much question that to get the stock price up you have
>to make an appearance at least of getting current profits up.
>
>Doug
>