COMMENTARY-- How can we expect any stability in a market where executives don't seem to be willing to invest in the future?
It's fast becoming one of the most commonly uttered phrases. No longer do we greet one another with -Hi, how're you going?" Now it's -Hi, when do you think the market is going to pick up?"
It's hard not to be an optimist. Who didn't want to believe IDC when they said -A Slow Year but Recovery Is in Sight" back in December 2001? Of course, then you have to believe all the millions of reasons it didn't eventuateââ,¬"reasons that include everything from the effects of government intervention (or lack thereof) to El Niño.
IMHO, however, there's one factor that far outweighs all the othersââ,¬"and one that simply doesn't get enough attention.
To illustrate, here's an interesting news item from the Web: under the headline -CEOs overpaid and secretive, says shareholder survey" the Australian CPA newsletter states, -More than three-quarters of Australian shareholders believe that CEOs are overpaid, according to a survey conducted by Victoria University's Accounting and Finance Research Unit. The survey of 2880 individual shareholders found that 76 percent of respondents believe CEO remuneration is too high, particularly when not tied to company performance."
Not a heck of a lot different from many of the news headlines these days . . . except for one thing: this was published in December 1998.
So why are we still seeing the same stories? Why is it so hard for everyone (shareholders especially!) to realise that overpaid and unscrupulous executives are a big, big problem that is still a long way from being anywhere near fixed? Is it my imagination, or is this all being met with a shoulder-shrugging attitude of Oh well, what are you going to do?
I mean, take a look at this opening sentence from the article on -Share Options and Executive Remuneration" on ceoforum.com.au: -Options can have a legitimate role in executive remuneration as part of a properly designed Long Term Incentive (LTI) plan." Really? A legitimate role?
Certainly there have been isolated cases of corrupt executives being punished, but until developed countries around the world make it clear that unscrupulous businesspeople will be dealt with severly, it's difficult to imagine that things will change. Perhaps it's a bit melodramatic, but why isn't the Australian government standing up and saying, like US Senator Conrad Burns, that business executives convicted of corrupt financial practices should be treated the way drug lords are treatedââ,¬"by confiscating their personal assets?
Because not only do those crimes imperil the companies they work for (and the livelihoods of their employees), but they take money out of the market in a way that can shake confidence in the entire IT economy.
Just look at the recent cutbacks in R&D spending in Australia. In recent months, Ericsson, Alcatel, Lucent, and Nortel have all reduced spending on research and development. The fact is these are not one-off cost-cutting measures, they are measures that severely limit a company's future.
Investors, of course, can see this. As writer P J O'Rourke so succinctly put it: -At the end of the worst possible day for stocks, the market contains the same number of shares it started with. The market is not a different size, we just like it less."
And how can investors be expected to like any business whose principal has taken off with all the profits to retire in his newly built state-of-the-art mansion?
Brian Haverty is Editor-in-Chief of technology & Business. Reach him at brian.haverty@zdnet.com.au.
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