Tags: carr | Corporate | Cash | Stockpiles

Corporate Cash Stockpiles Show Strong Leadership

By    |   Wednesday, 12 Oct 2011 09:03 AM

Given the popular idea that corporations pursue profits over people, it seems odd that corporations have increased their cash holding to $2 trillion since the beginning of 2009.

Corporate chieftains, the target of protestors all around the country, generally use cash to exploit workers and make more money. Over the past couple years, they instead chose to sit on cash which would indicate that they are sacrificing the additional profits that could come from new investments.

This is not a decision that corporate America would take lightly.

Managers working at large companies are continuously evaluating projects that require investments and there are always new business options available to the largest companies.

Business schools teach them to select the option that has the highest long-term return on investment. The large cash stockpiles indicate that after the analysis has been completed, the zero return available from holding cash is the best alternative they can find.

Managers running large corporations truly face few consequences for overinvesting in new projects or even for failing. In many cases, the largest corporate failures lead to incredibly large personal rewards with eight or nine-figure golden parachutes.

The fact that they are finding nothing that beats zero percent, even when personal risks are small, demonstrates how bad the economic uncertainty has become and shows that corporate executives have become strong leaders.

It will take a change in government policies, less regulation and less demonization of business success, before corporate investment will recover and push economic growth higher.

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MichaelCarr
Given the popular idea that corporations pursue profits over people, it seems odd that corporations have increased their cash holding to $2 trillion since the beginning of 2009. Corporate chieftains, the target of protestors all around the country, generally use cash to...
carr,Corporate,Cash,Stockpiles
249
2011-03-12
Wednesday, 12 Oct 2011 09:03 AM
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