Monday, March 30, 2015

Harvard Business Review Announces "The Best Management Article Of 2014"

From Forbes:
Good news: Harvard Business Review has announced that Bill Lazonick is the 2014 HBR McKinsey Award winner for the best HBR article in 2014 for his brilliant, hard-hitting piece, “Profits Without Prosperity” (September 2014 HBR). Lazonick is a professor of economics at the University of Massachusetts Lowell, where he directs the Center for Industrial Competitiveness.

In the article, Lazonick described the horrifying impact of massive stock buybacks: net disinvestment, loss of shareholder value, crippled capacity to innovate, destruction of jobs, exploitation of workers, runaway executive compensation, windfall gains for activist insiders, rapidly increasing inequality and sustained economic stagnation. Lazonick’s article explained with quantitative detail why buybacks are an economic, social and moral disaster.

The article revealed for instance that share buybacks weren’t done for the most part when stock prices were low: astonishingly, most of the big purchases came when the stock price was high. Why? “Because stock-based instruments make up the majority of executives’ pay, and buybacks drive up short-term stock prices.” These firms are engaged, the article said, in “what is effectively stock-price manipulation.” In September 2014, The Economist called them the “corporate cocaine.”...MORE
Here is Profits Without Prosperity, HBR, September 2014