For an unrealistic narrative, it’s one we’ve seen time and time again since the mid-1980s.
The unrealistic narrative in that period would be one in which a bank that lent money to a distressed company bought out by vulture capitalists would not successfully ensure that they’d be at the front of the line to collect every last dime they’re owed “if” the company is wound down (scare quotes because the bank knows exactly what’s going on). The only risk that they want to take is the opportunity cost of not participating in a more lucrative bust-out, so not securing themselves when they put money in would verge on the negligent.
Yes, there are always senior obligations that the bank can’t get around, and there’s jockeying amongst the institutional creditors prior to the deal being signed. Overall, though, the endgame is usually the same after a company like Bain or KKR rolls in, the company has been stripped of all its assets by the vulture firm, and the wind-down begins: the various bank loans get paid back first, the C-level executives get their golden parachute clauses fulfilled, the vendors get sorted out (mainly by clout and size, which gives them the ability to put those restrictive terms in place), and pensions (if they exist) and other worker-related obligations are at the end of the line.
This outcome wouldn’t occur as often if, as you succinctly describe, the concept of “stakeholder” took precedence over that of “shareholder.” I doubt that the typical outcome of an American-style LBO is common in Germany, where corporate boards have to include employee and/or union representation.
Furthermore, even the shareholders generally benefit when a company is managed with an eye for the future, instead of the management myopically focusing on the next-quarter profits and stock prices only.
These days, the ownership gets smeared around via various funds, to the point where a hell of a lot of rich people no longer know or even care where, exactly, their money comes. They have no stake in the businesses they own slices in, beyond demanding that it must be profitable Or Else. Combine this with the existence of a separate manager class, where the highest executive positions rarely are filled by people who rose through the company, but instead go to professional managers who treat companies as interchangeable.
So yes, ultimately it’s neither corporations nor the stock market that are the root problem, but short-sighted greed and detachment of the rich from the actual business of business.
To your point, I’d like to see an emphasis towards more discrete, independent corporate board of director governance in the USA and abroad. One contributing factor to this is shareholders voting their proxies, even we the little people.
I’m in retail (run four stores) and your points made about overshoot and the demise of ‘sport shopping’ - especially the latter, are right on, and that is something which has an accelerating impact, because it’s ‘organic’ for lack of a better term.
Vivian: You don’t actually have a billion dollars, huh?
Edward: No. I get some of it from banks, investors… it’s not an easy thing to do.
Vivian: And you don’t make anything…
Edward: No.
Vivian: … and you don’t build anything.
Edward: No.
Vivian: So whadda ya do with the companies once you buy 'em?
Edward: I sell them.
[Viv reaches for his tie.]
Vivian: Here, let me do that. You sell them.
Edward: Well, I… don’t sell the whole company, I break it up into pieces, and then I sell that off, it’s worth more than the whole.
Vivian: So, it’s sort of like, um… stealing cars and selling 'em for parts, right?
ETA: Hostess is a pretty classic recent example of this behavior
(Note- I didn’t read this article, am somewhat relying on Atlantic’s good name.)
Yes, I think everybody knows that. What I wrote is about who is buying the parts.
I you buy cars and sell them for parts, finding buyers for the parts is not a big problem. The only problem you have is the junkyard: you will be left with lots of scrap metal nobody wants. Note that some junkyards simply go bankrupt and let the city clean the mess.
If your business is selling corporation parts, your only possible customers are even larger corporations. They are usuallly a lot less gullible than used car parts buyers. So what prevents them in going into the lucrative business of slaughtering smaller corporations themselves? See the problem?
