Monday, February 11, 2013

Should Stewardship Investors Take the US out of GM?

In the midst of the Financial Crisis of 2008, the US Government invested some $49.5 Billion in General Motors to save an estimated 1 million jobs.

Much of that investment has been recovered, but as of December 19, 2012, the US still owned some 500 million shares.  On that date, the Government announced its plan to sell 200 million shares back to the company, and committed to sell its remaining shares within the next 15 months (by the end of 2013).

In an article published on that date in, "Treasury to Sell G.M. Stake Within 15 Months", it was reported that the final sales would result in a loss to the taxpayers estimated to be in excess of $12 Billion.

In the article, Micelle Krebs, an analyst with the car research, was quoted as saying “The key [to the future of GM] is to watch and see if the company falls back into old habits.”

If the company is falling back into playing the game of "maximizing shareholder value" as a public company, what makes us think it won't fall back into its old habits?

As Roger Martin, retiring Dean of the Rotman School of Business at the University of Toronto, points out, managing a business to "maximize shareholder value" is inauthentic.  The authentic purpose of business is to successfully balance the conflicting interests of multiple constituencies, including customers, suppliers, organizers, the government, and the community more genially, as well as investors. Putting the interests of one of these constituencies above those of all the others through the theory of maximizing share price is widely associated with numerous undesirable outcomes.

What if the US, instead of selling its shares back to the public markets, sold them privately, to a consortium of stewardship investors, who negotiated directly with the company to recover invested capital and realize minimum threshold returns by participating on an agreed split formula in revenues to be generated by the company over time through commercial activities?

That would not be the old way the company was funded.  Maybe it would prove to be a new way of keeping them from falling back into the old way of running the business.

Think about that.

No comments:

Post a Comment