Is Whirlpool the best example Industry Week can find?
I check into Industry Week’s site fairly often because I find good articles on a variety of topics relevant to manufacturing. I also sign up for their occasional free webinars. (In fact, I was the star of one of their webinars several years ago. Well…actually, I think I got called in off the bench when one of the headliners had to bow out. But, still…)
IW has an upcoming webinar, The State of US Manufacturing. (You can sign up at the link.) One of of the participants is a VP at Whirlpool. I think it’s interesting that IW should choose a presenter from Whirlpool for this particular webinar. I posted a recent article on LinkedIn, entitled “The System IS Rigged”. (I’d give you a link but I think it wouldn’t work because the link I have allows me to edit the post. Go to LinkedIn, and search the Posts, not People, using the title. You’ll find it listed there.) In that article, I talk about the state of US manufacturing. In particular, I discuss the fact that US companies 1.) have lots of cash, and 2.) are borrowing lots more cash. What are they doing with it all? Buying back their own stocks. As I say in my article, I have a big problem with this. The companies themselves will tell you, “Hey, it’s good for our shareholders,” and that’s not a bad thing. Of course, developing new products, improving existing products and processes, and hiring the best talent available are also good for shareholders. What the companies don’t tell you is that buybacks are especially good for short term shareholders and, most especially, company execs with stock options.
So, what does all this have to do with IW’s choice of a VP from Whirlpool? If you go to the signup page, you’ll see that Whirlpool has invested “$1 billion in Whirlpool’s U.S. facilities over the past 5 years”. That’s a good thing, of course. What it doesn’t mention is that Whirlpool has authorized the repurchase shares of its own stock. How much stock? $1 billion. Funny that the $1B investment in operations gets mentioned but the $1B stock buyback doesn’t. Maybe it’s because buybacks are a financial gimmick to reward senior execs and big investors looking to make a quick buck at the expense of operations, employees, and customers.
William Lazonick, professor of economics at University of Massachusetts Lowell has this to say:
“It really is an idiotic ideology, that you run the company for the people who matter least,” Lazonick said, referring to shareholders. “The people who can get in and out of the company quickest and for whom that is often their only goal.” (All Buy Myself…The Thinking Behind Stock Buybacks)
My guess is that that Whirlpool exec won’t say anything like: “We couldn’t really think of anything to do with that extra billion other than to line our own pockets and enrich short term investors.”