Tags: Bain | Capital | creative | destruction | profits | jobs

Bain Capital's Goal is to Increase Profitability, Not Create Jobs

Thursday, 12 January 2012 03:55 PM

Mitt Romney’s work with the investment firm Bain Capital shows that he, like many in the business world, is an advocate of the concept of creative destruction. Adherents to the concept believe that the new must replace the old so that companies can be more efficient, The Washington Post reported.

The goal of Bain investments was not job creation but to make companies more profitable and, thereby, more valuable to investors. To do so, layoffs could be necessary along with overseas expansion and higher wages for executives. One of the companies that Bain worked with was the office supply store Stapes, which the Post described as a textbook example of creative destruction.

As Staples succeeded, smaller stationery shops closed and the company soon expanded overseas; such business accounted for 21 percent of Staples’ revenue in 2010. As the company grew, its CEO went from making $4.7 million in 2006 to $10.8 million in 2010, while the average wage of a retail sales worker is about $25,000 a year, the Post reported.

Staples, which laid off workers during the recession, also has laid off workers when it has expanded through acquisitions. Nonetheless, Staples has grown to a $24.5 billion company with 89,000 employees around the globe. The Romney campaign says the experience at Staples and other companies gives Romney “the unique skills and capabilities to do what President Obama has failed to do: focus on job creation and turn around our nation’s faltering economy,” the Post reported.

However, Howard Anderson, a senior lecturer at MIT’s Sloan School of Management, told the Post, “I’ve got a lot of admiration for Bain Capital, but jobs were the byproduct of the mission, not the product. The product was to increase wealth, and in some cases it meant expanding the company. In some cases it meant contracting the company.”

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Thursday, 12 January 2012 03:55 PM
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