In the entire history of corporations, has there ever been one whose CEO\u00a0said something like\u00a0the following\u00a0to his shareholders?\u00a0<\/p>\n
Your company is in a declining industry.\u00a0 Your company is currently profitable and will remain profitable for some time. But eventually, the forces that are causing the decline of the industry will catch up with it. While we could attempt to keep the company alive by trying to make a new product or catering to a different market, we have determined that it would be exceedingly difficult to do so, and attempting it would be a waste of your money. Your interests would be much better served by liquidating the assets of the company in an orderly fashion and returning your money to you. This we will do over a period of 10-15 years. Our employee strength will decrease over time, we will make every attempt to provide for a reasonable career transition for all of them. While they are at it, our employees will be judged, not by how much they contribute to the growth of the company, but by how well they manage its decline.<\/p>\n
<\/p><\/blockquote>\n
I hope you see what I am getting at. I know that many companies go bankrupt. When bankruptcy is inevitable, experts in liquidating the company and stripping its assets take over. I am not referring to that.\u00a0 I am looking for an example where a company planned its own orderly retirement over a period of time.\u00a0<\/p>\n
Take the example of music companies or a newspaper in the US. They are facing adverse market conditions. They are declining. But why should they fight so hard against it, rather than accept the situation and that their companies will decline over a period?<\/p>\n
One objection to my suggestion could be that in these cases, while the market for CDs and for news papers <\/em>has declined, there is still a market for music and for news. That is a fair point, and many companies would do well to try to explore the market. But the law of probability tells me that there will be some<\/em> companies which, because of the way they are structured, will never be able to adapt to the changed conditions. Statistically, of so many companies, there should be at least one company with an enlightened CEO who manages to convince his shareholders that they are better off with a planned decline.<\/p>\n
After all, companies do go bankrupt. Autopsies of most of those companies will reveal mismanagement or incorrect choices that could have staved off the ruin. But surely, there ought to be one or two cases where the autopsy will reveal that nothing at all could have been done about the decline, and the company would have done well to plan its closure than fight desperately against it?<\/p>\n
It is puzzling to me why people plan their retirements much better than companies do. A person has\u00a0emotional investment in himself. He cannot bail out of that. Employees of a company, on the other hand, have life outside their company. A CEO who manages the decline of his company well should still be able to find a job elsewhere with this on his resume?<\/p>\n
I am not sure if much academic work has been done on this subject. Of course, I know of the BCG matrix, which talks of managing declining companies as part of a portfolio, but do we have anything else?<\/p>\n","protected":false},"excerpt":{"rendered":"
In the entire history of corporations, has there ever been one whose CEO\u00a0said something like\u00a0the following\u00a0to his shareholders?\u00a0 Your company is in a declining industry.\u00a0 Your company is currently profitable and will remain profitable for some time. But eventually, the forces that are causing the decline of the industry will catch up with it. While […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[2],"tags":[],"_links":{"self":[{"href":"https:\/\/www.ravikiran.com\/blog\/wp-json\/wp\/v2\/posts\/2930"}],"collection":[{"href":"https:\/\/www.ravikiran.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.ravikiran.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.ravikiran.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.ravikiran.com\/blog\/wp-json\/wp\/v2\/comments?post=2930"}],"version-history":[{"count":0,"href":"https:\/\/www.ravikiran.com\/blog\/wp-json\/wp\/v2\/posts\/2930\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.ravikiran.com\/blog\/wp-json\/wp\/v2\/media?parent=2930"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.ravikiran.com\/blog\/wp-json\/wp\/v2\/categories?post=2930"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.ravikiran.com\/blog\/wp-json\/wp\/v2\/tags?post=2930"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}