Thursday, June 22, 2017

Corporatization of greed

The recent news of layoffs in IT companies raised much hulla-bullao across all circles. For it was the only golden goose in job sector which paid good money upfront from fresher onwards, that lured grads from across all engineering and management streams to join IT. Till 2 years back, its common knowledge that, clear 12th, join any stream in BE and get into IT after 4 years of UG study, was the society norm. With engineering colleges mushrooming across, even, empty terraces, past year has seen several scores of those colleges shutting shop due to lack of patronage. Surprisingly, the younger sibling of ITI study, which had been given step motherly treatment all this while seems to have picked up steam this year with their admission coffers crying full. Why suddenly the golden industry has lost its sheen. The answer lies in one of the 7 sins – greed. When I say greed, i don’t just mean the promoters and major shareholders, but every single shareholder of those companies, who have been crying hoarse whenever the share value goes down and buying like crazy to make big bucks when the share value goes higher. With such a gambling industry being the deciding factor on the company performance, the present situation was bound to happen, with TRUMP or without.

Any company, while going public, puts up their worth in shares for general public and as a promotion give dividend and mouthwatering guidance targets for future quarters. People rush headlong and accumulate shares for that company and every time when the guidance targets are excelled, the share level shoots up and investors rake in the moolah. Repeat the cycle across few years, the bar for making profit keeps increasing and after a while, even meeting the guidance levels are not enough and are often criticized. The pipeline for future projects has to be ever increasing to maintain the unimaginable guidance targets, which is more often than not a possible scenario. And one look at what those projects are will throw light on how people like TRUMP, trample the pipe dreams of shareholders. One policy decision on awarding contracts is just what it needs to change to have far reaching impact on how much the share will increase or decrease. To put it in perspective, people put money on companies, who win projects, pay salary and those who are salaried again goes back and invest in the same share market, make money from it and again invest it back for even more money. When the projects run dry, guidance targets go down. People gets disillusioned with reality faced by the companies and start pulling their money out, which brings the share even down. Companies cut salary or employee counts, the very people, who invested their money in the markets are now super glued between the proverbial rock and hard place. Eventually, it’s the greed of the investors who drive the company to achieve near impossible repeats of double digit profits, who finally end up killing it. It could be majority shareholders, privately owned group or just a bunch of several thousand retail-sum investors. The concept of money making greed is the single common factor which finally drives the nail into the coffin.

The other side of the argument could be from the growth perspective. If at all they don’t go public, how will the companies grow? When the going gets good, people DO make good money. So why deny them of the opportunity to bet on a winning horse? And by publishing guidance figures, all the companies are doing are just promotional activity of their product, which is the company in itself. It’s as simple as Levi’s offering 40% discount as against Lee with only 30%. Only difference, albeit the major and most important one, being it bites the very person back when things go bad.

Whether we like it or not, this wheel of perpetual motion is already well set and cannot be stopped now. With hope being the only company, just have to wait to see the flood recede and for the glory site of the shore.

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