I’ve been pondering on what it is better: to work for an Asian corporation or for a Western corporation?. Obviously I was doing that exercise to post it at my blog “Passionate about Asia”. But, to be honest, I don’t have enough clarity yet to write about it. I will need to think further and deeper. The interesting thing is that thinking about what is best made me analyze a lot what it is to work for a family own or for a listed corporation. Surprisingly, I ended up concluding that we have in front of us, if we don’t put remedy, the origin and the rationale of the next super crisis.
Most of Western influential corporations are listed. Most of Asian are family owned. It is a matter of majorities, but I’m afraid, once again, the West will face much more turbulence than the West, because in today’s basics of the listed companies lies the germen of an economic crisis.
Let’s ask ourselves, what are the most important things for the decision makers at listed companies and in family owned businesses.
For listed companies, where normally the main executives are professionals with nil or very small shareholding:
- The most important thing are this year results, because big bonuses are related mainly to this year results. It is not very relevant if the decisions taken are good in the long run, as far as they are good for the current year. Nad, very importantly, results/profits, do not reflect the cash position but are better off thru a series of legal accounting principles (which end of the day are accounting practices, not cash at hand)
- The corporation destiny is “de facto” in the hands of the professional executives, not in the hands of a large pool of shareholders than usually do not have the tools to make their opinion count.
- Employees are an expense. They can make good income, but are, basically expendable resources
For the family owned, where shareholding and decision making are very close or are the same thing:
- Like in a family, cash is king. The measurement of performance, risk and success is made in terms of cash.
- The corporation is the work of their lives and hopefully, of the next generation
- Employees are somehow part of the family. No need to pay them too much, but they should be supported thru their difficult personal times or when the company is facing difficulties, because they are not a resource, they are “family relatives”
Now, if we made a little bit of memory, it was clear and simple what caused the crisis of the last decades: the first Irak War (not much we can do about it), the burst of the dot.com bubble, the overspending and debt of Governments, the toxic assets like packaged mortgages. Retrospectively we can say, yes, that was crazy and, hence, it was normal the subsequent crisis. The problem is that sometime, we don’t want to see the obvious. Everything is part of the landscape till something happen and then all fall down in pieces.
To me it is extremely dangerous that cash is not king and that shareholders do not have de facto the destiny of their company in their hands. Maybe one day, somebody candidly will ask: “please do not show me an spreadsheet or an audit report, show me the money”. Perhaps then we will face collapse and a huge economic crisis.
Do not want to end without some basic recommendations:
- Have a regulatory change for the corporations results reflect profits and losses in terms of cash, not in terms of one – offs and other accounting practices
- Do not link the executive bonuses, or most of them, to this year results but to the medium and long term results
- Give back to the shareholders the effective decision making power