Herb, you need to include info of what was Spent on Shareholders?? How much as Dividends, how much was Stock Buybacks. Then you need to recognize the accounting fact - which is also a “this ‘one-size’ really does fit all listed listed companies fact” - that management has failed their fiduciary duty to the remaining/continuing shareholders when any stock buyback price-per-share-paid is greater than the Equity-book-value-per-share (i.e., a Price/Book Ratio greater than 1/1). Because such a transaction represents management giving to a select few shareholders the excess Cash paid, which was in reality owned by - and belonged to - the remaining/continuing shareholders. Even though the shares of the remaining/continuing shareholders after a buyback own a slightly larger percentage of a company, when that larger % is multiplied time the now lower company Equity (which has been reduced by every dollar paid in the buyback), the dollars of Equity owned by each remaining/continuing shareholder are less than they owned before the buyback!
Almost like the second chapter of GE. Everyone hailed Jack Welch until it came out that an industrial giant had been turned into a speculative financial mess. Truly unfortunate. Thank you for the thoughtful and even-handed piece as always.
This is a very sad story. Another reason for Boeing's plight is lack of competition. It's just them and Airbus but a healthy industry needs at least three. Boeing's problems are slowing down its innovation and will allow the Chinese to catch up. Maybe that's not so bad...I don't know.
BA may have been 'gun decking' maintenance for years, and the US stock market is a matter of national security, however employee shareholders own the biggest percentage of stock in the company, or rather the Boeing Company Employee Savings Plan Master Trust.
Boeing, and many other companies, would save for a rainy day if not for the original implicit, and now explicit, regime under which U.S. citizens are forced to bail them out through congressional and Fed actions.
The Economic Policy Institute found that CEO compensation rose 1,209% from 1978 to 2022, compared with a 15.3% increase in the typical worker’s compensation. In 2022, CEOs were paid 344 times as much as a typical worker. In 1965? They were paid only 21 times as much as a typical worker.
Other accounts have claimed that the fatal misstep was in the early 90s. Until then, Boeing operated as 2 separate companies: civilian and military. Working in military was held to be morally corrupting, and people who worked in military could not transfer to civilian. You could go from civilian to military, but not the other way around- your soul was stained from doing government contracting. In the early 90s this organizational wall was dissolved on financial grounds, and everyone got corrupted- I read this somwhere.
I would argue that this is a case of management intentionally (most likely) or unintentionally misinterpreting the concept of "maximizing shareholder value". Maximizing shareholder value means doing things which makes customers (airlines, flyers, etc.) think that they are getting value from using your product, service, etc. This is illustrated well in Jake Taylor's book "The Rebel Allocator" which says that you can visualize the businesses "profit" with three straws (price, cost, and value). If your price is less than cost, you'll go bankrupt. If your value (the overall value that customers get) is not greater than price, customers will go elsewhere (in Boeing's case Airbus). It will not be immediate, but it will happen...and it did. If you make customers feel that they are getting value at a price that exceeds your cost, you are likely to be successful. If you instead just try to cut costs to the point that you are cutting value, you are likely to be unsuccessful.
Reading ‘Flying Blind’ last month really shook the way I feel about Boeing. The transition from being a world class engineering firm to some shareholder value machine was saddening.
Herb, you need to include info of what was Spent on Shareholders?? How much as Dividends, how much was Stock Buybacks. Then you need to recognize the accounting fact - which is also a “this ‘one-size’ really does fit all listed listed companies fact” - that management has failed their fiduciary duty to the remaining/continuing shareholders when any stock buyback price-per-share-paid is greater than the Equity-book-value-per-share (i.e., a Price/Book Ratio greater than 1/1). Because such a transaction represents management giving to a select few shareholders the excess Cash paid, which was in reality owned by - and belonged to - the remaining/continuing shareholders. Even though the shares of the remaining/continuing shareholders after a buyback own a slightly larger percentage of a company, when that larger % is multiplied time the now lower company Equity (which has been reduced by every dollar paid in the buyback), the dollars of Equity owned by each remaining/continuing shareholder are less than they owned before the buyback!
Almost like the second chapter of GE. Everyone hailed Jack Welch until it came out that an industrial giant had been turned into a speculative financial mess. Truly unfortunate. Thank you for the thoughtful and even-handed piece as always.
This is a very sad story. Another reason for Boeing's plight is lack of competition. It's just them and Airbus but a healthy industry needs at least three. Boeing's problems are slowing down its innovation and will allow the Chinese to catch up. Maybe that's not so bad...I don't know.
BA may have been 'gun decking' maintenance for years, and the US stock market is a matter of national security, however employee shareholders own the biggest percentage of stock in the company, or rather the Boeing Company Employee Savings Plan Master Trust.
Boeing, and many other companies, would save for a rainy day if not for the original implicit, and now explicit, regime under which U.S. citizens are forced to bail them out through congressional and Fed actions.
From today’s issue of “We Study Markets”
The Economic Policy Institute found that CEO compensation rose 1,209% from 1978 to 2022, compared with a 15.3% increase in the typical worker’s compensation. In 2022, CEOs were paid 344 times as much as a typical worker. In 1965? They were paid only 21 times as much as a typical worker.
Probably nothing….
Management put Management first. Shareholders also benefited but only in the short term.
Or
Management put Shareholders first in the short term and made out like Bandits themselves
So
Shareholders and employees eventually lost out and Management (Bandits) were long gone.
You are right it sounds like mismanagement
Other accounts have claimed that the fatal misstep was in the early 90s. Until then, Boeing operated as 2 separate companies: civilian and military. Working in military was held to be morally corrupting, and people who worked in military could not transfer to civilian. You could go from civilian to military, but not the other way around- your soul was stained from doing government contracting. In the early 90s this organizational wall was dissolved on financial grounds, and everyone got corrupted- I read this somwhere.
I would argue that this is a case of management intentionally (most likely) or unintentionally misinterpreting the concept of "maximizing shareholder value". Maximizing shareholder value means doing things which makes customers (airlines, flyers, etc.) think that they are getting value from using your product, service, etc. This is illustrated well in Jake Taylor's book "The Rebel Allocator" which says that you can visualize the businesses "profit" with three straws (price, cost, and value). If your price is less than cost, you'll go bankrupt. If your value (the overall value that customers get) is not greater than price, customers will go elsewhere (in Boeing's case Airbus). It will not be immediate, but it will happen...and it did. If you make customers feel that they are getting value at a price that exceeds your cost, you are likely to be successful. If you instead just try to cut costs to the point that you are cutting value, you are likely to be unsuccessful.
Reading ‘Flying Blind’ last month really shook the way I feel about Boeing. The transition from being a world class engineering firm to some shareholder value machine was saddening.