Quoted from pinengineer77:
My point is that the world financial system is built in a way that forces continual cost cutting and methods of increasing profit. Public companies don't have a choice - the only way they can increase return for investors is to increase sales (tough if you sell bleach - how do you get more people to buy your brand when it is a commodity), decrease cost (decrease the quality, lay people off to lower your overhead or decrease the amount you deliver for the same price).
You bring up some excellent points. The only three reasons to buy stock in a publicly traded company are:
1) that it is a young company in a new industry that is growing and you get a share of that growth. (Computers: Microsoft-1986, Apple-1980 ).
2) A company that has found a new way to do business and crush the competition ( Amazon).
3) A mature company in a mature industry that pays dividends, even if it has to borrow money and take on debt to pay you that dividend.
( Railroads. Breakfast cereal. Razor blades. Car tires. ). Apple's growth phase has past and it now pays dividends.
The pressure for a public company to grow, or pay dividends, has to be enormous. And sometimes/ many times the customer get lost in that shuffle of raising prices and smaller packaging. The company may tell you that you are its most important asset---right before it lays you off. Layoffs are good for the company's stock price. ABC announces 1000 layoffs; ABC stock was up 2% on the news. ABC CEO gets year end bonus of $6 million for company performance.
Some companies even resort to (Oh, bite my tongue for even thinking this) cheating.
Witness Beech-Nut Nutrition in the 1980s .
" The Federal indictment, announced a year ago, charged that Beech-Nut and other defendants had intentionally shipped adulterated and misbranded juice to 20 states, Puerto Rico, the Virgin Islands and five foreign countries with the intent to defraud and mislead. The pleas covered acts committed from December 1981 to March 1983.
It said that the product that Beech-Nut had been marketing as 100 percent apple juice was actually made from beet sugar, cane sugar syrup, corn syrup and other ingredients, with little if any apple juice in the mixture. Prosecutors said at the time of the indictment that the bogus apple juice cost about 20 percent less to make than real apple juice."
Beech-Nut is not an isolated case of corporate malfeasance.
More recently, consider GM and its faulty ignition switch.
" The company continued to recall more of its cars over the next several months, resulting in nearly 30 million cars worldwide recalled and paid compensation for 124 deaths. The fault had been known to GM for at least a decade prior to the recall being declared."
Cheating the customer is not new. I laugh when the politicians start braying about how we have too many rules and regulations. And how we need to get rid of these regulations that are a drag to the economy. The regulations were put in place for a reason. Sometimes the reasons have been lost to history.
" During the 18th and 19th centuries, as the United States shifted from an agricultural to an industrial economy and urbanization disconnected people from food production, the debasement of food for profit became rampant. Milk was often watered down and colored with chalk or plaster—substances which were also added to bulk up flour...
...In 1902, Dr. Harvey W. Wiley, chief chemist in what is now the Department of Agriculture, organized a group of volunteers to test the effects of ingesting some of the most common food preservatives in use at the time, such as borax, copper sulfate, sulfuric acid and formaldehyde. Known as the Poison Squad, this group of men agreed to eat increasing amounts of each chemical while carefully tracking its impact on their bodies. The shocking reports garnered widespread attention and, in 1906, Congress passed both the Meat Inspection Act and the original Food and Drugs Act, prohibiting the manufacture and interstate shipment of adulterated and misbranded foods and drugs. It wasn’t until 1958, however, that manufacturers were required to conduct the testing necessary to prove a substance’s safety prior to being introduced to the public."