Corporations, The Bane Of Our Existence?

Every time I hear the name Alibaba I think of forty thieves. Today, however, Alibaba is the name of a huge Chinese company that has just experienced the largest initial public offering ever. $22 Billion was just spent by US investors to buy up shares in this company, and the overall value of the IPO was $200 Billion. Not too shabby. But what are the facts that surround this company? How large is its market?

“The value of goods sold” for Alibaba is equal to Amazon and eBay, and with 600 million Chinese now using the Internet the potential market for this company is huge. Its mission is “to make it easy to do business anywhere.” Jack Ma has been quoted as saying “We want to help small businesses grow by solving their problems through internet technology. We fight for the little guy.” The Alibaba business model is very western, but as analysts have stated, “Alibaba’s smart business strategy and charismatic leadership comes with a massive risk.” China bans foreign ownership of companies it deems as strategically important. If this is the case then what did US investors buy with $22 Billion? They bought a “piece of a shell company in the Cayman Islands with a contractual right to a share of the profits.”

The risk associated with this company is immense. The US-China Economic and Security Review Commission has warned against this type of arrangement. “This intricate ruse is a way of making the business appear to be Chinese-owned to Chinese regulators while claiming to be foreign-owned business by foreign investors.” This according to the commission is illegal in China. Will the Chinese government come to a point where Jack Ma is to charismatic for its taste, or will Alibaba be considered too western for the good of China? This will be interesting as we watch this play out on the world stage. This investment may turn out to be completely worthless, or it could turn out to be very profitable. This is what investment is all about.

Alibaba is a huge company, but there are many other companies we invest in. I have a concern with these large global companies whose budgets are greater than many countries. The concern involves how they are managed. Who controls these companies when they are more powerful than the countries in which they operate? It turns out I am not the only one who feels that way.

The first CNBC/Burson-Marstellar Corporate Perception Indicator, resulting from a survey of 25,000 people and 1,800 top executives, tells us there is a disconnect between corporate leaders and the regular joe on the reputation of the corporation in our society. Business leaders view corporations as favorable, while the general publics view is somewhat lower. 82% of leaders see corporations as favorable, while 52% of the general public view them as favorable. These numbers are from leaders and people with the developed world. The results from the emerging world, such as China, are a little different. 72% of the general population see corporations as favorable.

In the United States the general public see corporations as a source of hope (36%) or fear (37%). While 84% of the Chinese people see corporations as a source of hope. More than 51% of the US general public see strong and influential corporations as bad.

There are more numbers that I could display here, but I think we need to ponder what these numbers mean. First, these numbers give an indication of what has occurred over the last two decades. In order the strengthen margins companies have moved a lot of work offshore. Of course the places where this work has moved to will have strong feelings of good for those companies. And the love affair the US general population has with low prices has helped foreign-owned corporations to provide opportunities for their countries. So these numbers don’t surprise me.
Should a CEO be concerned with how the public views their corporations? Or should they disconnect from people and make sure their employees are cowering somewhere? I think they should be concerned with the feelings of the consumer who make up their markets. 70% of these folks say that corporations play a positive role in creating economic growth, and 67% say they drive innovation. The fear that people have about these large entities is the lack of concern for the wellbeing of people. People see these large companies shutting down workplaces, driving high unemployment, and they are concerned. Therefore, CEO’s should pay attention to this.

I agree with Donald Baer’s comment “For business leaders, six years after the financial crisis and amid continuing economic uncertainty, the challenge is to show how they use their positions of power to contribute to the common good.” I know business is about profit, and I get that global risk is a part of the equation, but good business is about good relationships. And good relationships must be exercised with all stakeholders not just the shareholder. If these large companies, that have many resources, get this we can all win.

And that is my thought for the day!


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