Privatisations-Gravy Trains For Senior Management

Posted on: 11/10/2013

I must first confess myself to be an expert witness. I have been the benificiary of share options.

My only defence is that I did not want to be a recipient.When I involved Private Equity in my business,I had dreams only of taking the company public and working in it forever.As has happened to many with such dreams, mine hit the rocks of Private Equity short termism and naked greed.

Anyway,those are my credentials.I am "in the know".

All-yes,ALL- of the Privatisations of Public Assets in the UK AND the demutualisations of Building Societies have lead to windfalls for senior management.Usually these windfalls have come in the shape of laughably cheap share options.

Such share options give management a huge focus on 3 to 5 year share prices.They want to cash in their options and, in many cases,escape to catch the next gravy train or simply retire on the profits.

The problem with this is that Public Assets have been sold off cheaply (which helps create immediate share price growth) and then managed mainly for short-term profit.How can that be good for power,water,transport and other undertakings which require long-term capacity planning and investment? IT CAN'T!

So nearly all of the Privatised businesses, including the Building Societies,have changed hands again since their initial sell-off.Happy senior management have often left with their share option generated wealth and the rest of us are left to wonder why all the prices are going up.Easy answer:to help the new owners pay for the wealth they have just delivered to the old management!

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