RAP and infrastructure spending

“There is some incentive for forecasts to be high if they make [a project] more likely to get built” (WSJ, Sep 2021)

Why firms need strategies

 

Life at the top is often fleeting (WSJ, Sep 2021)

Facebook Tried to Make Its Platform a Healthier Place. It Got Angrier Instead.

I argue that the decision to maintain an algorithm that encourages divisive content is bad (WSJ Sep 2021). The bad decision raises three questions :

1. Who made the decision not to revise the algorithm?
2. What information did the decider have?
3. What incentives did the decider face?

Walmart to End Quarterly Bonuses for Store Workers

This report (WSJ, Sep 2021) raises an important question: "Which compensation scheme better aligns interests or employees and owners, quarterly bonuses based on store performance or higher wages?"

How do you think the employees view the change?

Funds Go Green, but Sometimes in Name Only

A rose by any other name would smell as sweet but saying something is a rose does not make it one (WSJ, Sep 2021). I tell students to be wary when someone can change a number with the stroke of a pen. The same caution applies to claims: not all claims are true.

For Chobani, Allbirds, Other Coming IPOs, Greed Is Out. Do-Gooding Is In.

"A new generation of companies, including startups such as Rent the Runway Inc., Chobani LLC, Warby Parker Inc. and Allbirds Inc., are on tap to go public this fall, people familiar with the matter say. They’ll be doing it with this message: It isn’t just about the money. It is also about the mission" (WSJ Sep 2021).

I doubt that Milton Friedman  would have objected when a company's founding owners include doing good as part of their mission, even if doing good reduces value. The company is theirs.

I also doubt he would have objected when the company maintains its mission after an IPO. The shareholders know in advance what they are buying. 

Peloton Slashes Price on Exercise Bike, Predicts Slowing Growth

This article illustrates complex pricing. (WSJ, Sep, 2021) It also illustrates that firms may sacrifice profits today for greater profits tomorrow. Peloton bikes and sbscription services are complements. The Bike is a substitute for the Bike+.

Do these pricing decisions conform with the guidelines developed in ECON 610?

"The lowest-cost Peloton Bike will sell for $1,495, down from $1,895. The higher priced Bike+ still goes for $2,495. "

"In a letter to investors, executives said they were trying to add as many customers to its subscription workout classes as possible, even though the price cut, coupled with higher shipping costs, would depress near-term profits."

"The company reduced the Bike to $1,895 from $2,145 in September, when it launched the more-expensive Bike+."

The Importance of Stakeholders to Profitability

In a Wall Street Journal opinion piece denoting [the anniversary of the Business Roundtable's revised statement on the Purpose of a Corporation], the director and associate director of Harvard Law School’s Program on Corporate Governance offered evidence that the 181 CEOs who signed the statement “didn’t intend to make any significant changes to how they do business.” Rather, companies were, for example, still aligning director compensation with the company’s stock price, sending “a clear signal that shareholder value is the objective directors are expected to pursue.”

Well, of course it is. The Business Roundtable’s statement did nothing to change that. But that doesn’t mean that a business’s sole responsibility is to its shareholders. Business have always owed responsibilities to other stakeholders including customers, employees, suppliers, and communities as an integral part of their primary responsibility — to make a profit. In fact, the statement confirms that corporate management will continue to do the things that lead to profitability and — God forbid — shareholder value. 

...

I’ll even go a step beyond that and bet that none of these CEOs, at least none that still have their jobs, reported that profits declined because they were focused on the needs of stakeholders other than their investors. Something like, “Profits are down and your stock price will decline but, hey, we’re really good guys.”

(Puzder, National Review, Aug. 2021)