Shareholder Pressure

I was going to write about advertising but I think maybe tomorrow I will. Today is all about shareholder value. Reading my normal plethora (pleth·o·ra noun \ˈple-thə-rə\ : a very large amount or number : an amount that is much greater than what is necessary of ) of randomness that fills up my day I came across an article in linked in from Simon Sinek, from his TED talk  called Great Managers Don't Lay Off Employees. I was impressed with the sentiment he expressed, but really it was just another corporate guy talking about how in a perfect world we would keep jobs forever, he notes one company that hires you for life and you can never get fired, if you aren't performing then your manager has to invest their time and resources to fix you. I applaud the effort, I wish when I got laid off with 1500 of my peers we all had managers that cared for us. I was stuck with a boss that couldn't see the coming wave and the myriad of ideas that me and the team proposed to her that would possible save us from the unforgiving red pen slashing across our names but she had bought a ranch, had some horses and plenty of money set aside so she said it was too much work to accomplish and we should just accept our fate. Bad managers exist, yeah they always will, blah blah blah, but the thing that really hit home was when he quoted that shareholders wouldn't stand for companies to do this. I am a share holder, I owned shares in many companies, hundreds of them probably but never once did I feel that the CEO or the board of directors gave a crap about what I wanted. I really wanted one of the companies to stop sending all of their technical support overseas, I felt that it was a bad idea that would eventually lead to the company losing their edge and sales would start to suffer which they did, now they are trying to recover, or the company that decided that getting out of their bread and butter construction business and diving head first into the ultra cutting edge technology of rail roads. The CEO said that it would be the best move for the company since construction was boring and railroads were cool. Needless to say he was wrong, but he got a really sweet golden parachute for like 20 million and my stock became worthless.
 So I guess the question is what do shareholders really want, well in a perfect world they would want their investment to quadruple every day until the 1 dollar they invest was worth one hundred million billion dollars, but since that probably isn't going to happen, unless you got in really early with Bernie, you probably expect a decent return on your investment, most people think you should get 15 to 20 percent returns, which, year over year isn't going to happen. Bonds the normal "safe" investment only returned 2 to 5 percent, so lets say as a normal everyday investor, as a shareholder, I want a 10 percent return. "One of the most popular valuation measures is the price to earnings ratio or P/E. The P/E is the price of a stock divided by its EPS from the trailing four quarters. For example, a stock trading at $20 a share with earnings of $1 per share during the past 12 months has a P/E of 20. The P/E ratio gives a rough idea of what investors are paying for a stock relative to its underlying earnings. It is a quick way to gauge how cheap or expensive a stock may be. Generally, the higher the P/E ratio the more investors are willing to pay for dollar's worth of earnings. Higher P/E stocks tend to have a higher growth rate or the expectation of a profit turnaround. Lower P/E stocks have a lower growth rate and lessor future prospects."
Seems good, if I have a million dollars I would make 100k a year, before taxes. So for a company to return that they need to grow their business by 10 percent, keep costs in line, not go crazy. Seems pretty easy to do, 10 percent, that means a company that is selling 100 million a year needs to sell another 10 million to achieve that. Of course, there are a variety of factors that make up the stock price, i would say made up because it really is made up, the stock price has nothing to do with the financials. What you say??? heresy, I know, burn me as a witch, but I float, I think that makes me a duck, or a witch I can't remember I need to re-watch some Monty Python, but I digress. Here is a list of some companies, I tried to put a couple together that are in similar businesses.

Company	Price	P/E (ttm):
Amazon.com Inc. (AMZN)	360.62	611.22
Wal-Mart Stores Inc. (WMT)	76.1	15.55
Google Inc. (GOOG)	1,183.04	31.12
Twitter, Inc. (TWTR)	50.92	N/A
Facebook, Inc. (FB)	67.24	110.05
General Electric Company (GE)	25.4	20.09
Hewlett-Packard Company (HPQ)	31.95	11.7
Apple Inc. (AAPL)	532.87	13.24

So what does this show? Well other than Amazon is way over priced, it shows that stock prices have very little to do with the fundamentals of a business. So with that in mind, are shareholders super unhappy at HP vs. Walmart and are the shareholders at Apple looking longingly at Amazon going, "You know even though Amazon is in the almost exact same business as Walmart, even though they don't have a colorful website the mocks the way their customers dress (I tend to shop at Amazon in my underwear but thank god my dog and cat haven't figured out how to share pictures on their smart phones) should I be happy that we are blowing HP out of the water and our stock is so high"? I don't know but from what I have heard their shareholders aren't super happy. Does the CEO of Apple care? I don't think so, he has figured out how to make a cheaper iphone because nothing makes you the industry leader like selling a product super cheap so everyone can afford it and then everyone buys it. Oh wait, I don't think that was what Steve Jobs wanted.
To say shareholder value is the driver for anything in this day and age is asinine (:  extremely or utterly foolish <an asinine excuse> 2:  of, relating to, or resembling an ass ). CEO's have no idea how any policy they implement will affect their stock price, other than giving shit away or overcharging for stuff that some kid puts together in China.. Wait, I guess I can't say that... Well either way shareholder's are idiots just as the guy they are paying millions of dollars to run the company is an idiot. They have no clue what they can do to make the shareholder happy since in most cases the shareholders are millions of people that bought some mutual fund that some dude told them to buy what they can say is that we have a few really powerful people that own or control most of our stock and even though they don't represent the masses, they are powerful enough to make the CEO lose his job so we are going to do what they tell us to do because they aren't really shareholders they just want the people that bought their mutual funds to be happy. Because if the people that bought the mutual funds leave their money in that fund then that fund manager gets a nice bonus based on his return and he can convince more people to invest in his mutual fund so that he can tell CEO's what to do so the mutual fund manager can get a bigger bonus next year, but hey the mutual fund is kind of a shareholder, but then again they aren't.