I think one of the most interesting subplots of the financial crisis surfaced this week courtesy of John Stewart and The Daily Show. Stewart has been critical of CNBC and, in particular, Jim Cramer, in their coverage of the markets and the crisis. I have not watched all the clips (feel free to search for them on YouTube and/or visit The Daily Show website), but what I have seen is both entertaining and relevant.
This little feud points to two interesting issues in my mind. First of all, I think Stewart's characterization of CNBC and Cramer is quite fair. I watch CNBC a lot these days, and I did not watch them much in the past. But, Cramer and the rest of the crew - from analysts to anchors - are quite often nothing more than cheerleaders. Is this bad? Well, it depends on your perspective. What service is CNBC providing: investment and financial advice or a medium for advertisements? This leads me to my second point. There was widespread criticism of Stewart on both CNBC and MSNBC (and probably other "news" outlets as well). The basic attack was that Stewart is nothing more than a comedian. He is not a journalist and does not not put himself out there with opinions and predictions like the respectable news and financial analysts in the mainstream media.
Frankly, this is the type of hypocrisy that really bothers me when it comes to the mainstream media. There are (probably) plenty of legitimate journalists in the media. But, at the end of the day, it is ratings - and thus ad revenues - that the media is seeking. This is no different than John Stewart or any other television show. News outlets like CNN, MSNBC and Fox News are both looking for ratings and sacrifice the high road of journalistic integrity to do so.
This provides a nice segway to another story that surfaced this week which is an interesting subplot to the crisis (in fact, in my opinion, this might really get at the heart of the matter - we'll save that for another post). Jack Welch, famed former CEO of GE, the parent company of NBC, gave an interview to the Financial Times this week. In the interview, Welch stated that "shareholder value is the dumbest idea in the world." Why is this important?
The concept of "shareholder value" as a business strategy is attributed to Jack Welch based on a speech he gave upon becoming GE CEO in 1981 and his actions as CEO for the next twenty years. Now, almost thirty years after the speech, he says it's dumb. This strategy has been central to corporate America and Wall Street for quite some time now. The concept is that the role of a public company is to deliver value to its shareholders as its ultimate goal. This is done by constant focus on the stock price. I'll save a lot of my thoughts on this for another post, but I believe that this plays a significant role in the crisis we face today.
That's all for tonight...
2 comments:
John Stewart is lol funny and there's no better caricature than Cramer. I am a bit surprised nobody in the mainstream comic media took a pot shot at him before. I find Bloomberg to have better coverage of the financial markets than their rivals. CNBC's a complete joke here in the US and their sister networks are just plain ridiculous in the emerging markets.
On a different note, I would like to see how you tackle the question: "What's the objective of an enterprise- private or public?" I believe the dogma out there is one of "maximizing stakeholder value". Technically stakeholders are a broader set of people involving shareholders, creditors, employees, customers and the communities and environment affected by companies' activities. Now, that sounds like a really challenging problem to quantify, let alone solve. Trust neoconservative capitalists (I believe it was the Chicago School which proposed the idea; Welch popularized it) to come up with a simpler framework: Maximize value for shareholders and you end up maximizing value over entire set!
This may leave me sounding pinko (which I am not) but this is what I understand. It's supposed to make everyone feel warm and fuzzy like they are being looked after and makes private enterprise the focal point of free market capitalism without understanding its limitations.
Now, I wont even begin to pretend that I know the answers.
Just providing some fodder for blog writing thought.
What do I know, I am just a monkey throwing darts.
Keep up the good work- will follow you blog!
Thanks for visiting and adding yourself to the followers. It's great to see people coming back for more!
I do agree that Bloomberg provides better coverage - although CNBC is more entertaining. So, I do end up watching CNBC more frequently. If I want to read a news story and dig deeper - I go to bloomberg.com.
I am definitely a free market guy in that I believe that the firm should chart its own goals and objectives driven by ownership. So, on the surface, I agree with "maximizing shareholder value" (not "stakeholder" which is very broad, still important, but not the typical expression). That said, the form that this takes has problems.
I'll save more details for future posts, but two quick thoughts. First, I believe with the proper controls (transparency and justice) free markets will function just fine and give private enterprise the best chance for success - be it financial, social, or any complex definition of goals. Second, it is important that shareholders, as owners, have a means to have a strong voice in driving the company to its goals. Not everyone can have their way, but there are flaws in today's system which serve to silence the majority of shareholders.
Look forward to seeing you around.
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