starleen2 wrote:Instead of taking their profits and reinvesting it in the company to make product that are what people can afford or want, they gave it to the shareholders instead – that is why they are failing – or part of the reason. Ever since the American economy changed to an investment economy – this time had to happen. When share prices dictate the viability of a company – then they (the company) begin to inflate their worth beyond what is sustainable to attract more shareholders and inflating the share price – And when you hit a correction in the market – then this is what you have. Remember when companies used to invest in themselves to gain a profit that was shared among the workers, not the investors! When GM goes under is my Jeep now Free? (there now I feel better)
Excellent points.
American companies are so focused on Quarterly Income Reports these days, that long term strategies get put on the back burner, IMO. In the 80s, corporations started basing executive compensation on performance of the company's stocks. That sounded like a good idea, but before long, corporate executives became very focused on this quarter's results, instead of balancing today's profits with tomorrow's planning.
To make matters worse, executive pay evolved even more, to the point now, where the executives make big money if the company loses money, and enormous money if the company does well -- for one quarter. And the company doesn't have to really do all the well, as long as you can fudge the numbers to look like the company's income is growing.
On top of that, a whole lot of new investors entered the stock market, and things like "day trading" got popular. So, looking for a wave to ride became the object of investing, instead of investing in companies with sound financials and good long-term outlooks.
Short-term profits have become the central goal of American free enterprise. Corporations and investors have become obsessed with making lots of money right now. That is not sustainable, IMO.