Concentration ... becoming bigger ... is a widely adopted policy to achieve more corporate profit and increase stock value. But while the impact on profit is good, the impact of concentration on society and the environment is not. Concentration results in less competition and while the big company gains, the consumer loses. Monopoly and oligopoly are the antithesis of efficient markets.
2. CONTEXT
This slideset is a Work-in-Progress
and will be updated from time to time.
It is part of a series that aims to
enable better metrics for the complex
socio-enviro-economic system that
we all live in. Metrics are powerful,
but they must be the right metrics.
TRUE VALUE ACCOUNTING
4. BUT … how good is concentration
for SOCIETY (people) and the
ENVIRONMENT (planet)?
MULTI DIMENSION IMPACT ACCOUNTING
5. Great fortunes have been made
by entrepreneurs who have
managed to concentrate the
industry and monopolize their
markets …
MULTI DIMENSION IMPACT ACCOUNTING
6. John D. Rockefeller
1839 - 1937 … who built
the Standard Oil monopoly
in the late 19th century
MULTI DIMENSION IMPACT ACCOUNTING
7. Bill Gates … who built
the Microsoft operating
system monopoly in the
late 20th century
MULTI DIMENSION IMPACT ACCOUNTING
8. Strong anti-trust legislation was
passed early in the 20th century
in the USA and Europe … but all
of this seems to be less effective
in the past few decades than it
was a century ago …
MULTI DIMENSION IMPACT ACCOUNTING
9. From the perspective of investors
it seems that bigger is better …
MULTI DIMENSION IMPACT ACCOUNTING
10. From the employee perspective
bigger usually means that the
employee is simply a smaller cog
in a bigger machine …
MULTI DIMENSION IMPACT ACCOUNTING
11. From the environmental
perspective bigger usually means
that the damage is bigger, and
often also means damage is more
remote and away from prying
eyes …
MULTI DIMENSION IMPACT ACCOUNTING
12. Investors are represented in the
very big organization by a Board
of Directors and the C-level
management who understand the
relationship between profit and
investor satisfaction …
MULTI DIMENSION IMPACT ACCOUNTING
13. Many very big companies will not
tolerate Union representation for
their employees …
MULTI DIMENSION IMPACT ACCOUNTING
14. Very big global supply chains
facilitate a 'race to the bottom' for
worker remuneration, benefits
and even workplace safety …
MULTI DIMENSION IMPACT ACCOUNTING
15. Accountability has been
compromised by concentration …
it is easier to hide bad practices in
a very large organization than in
one that is small and relatively
simple.
MULTI DIMENSION IMPACT ACCOUNTING
16. Accountability has also been
compromised by concentration in
the assurance (audit) industry
which is now dominated by very
few large firms … and worse,
these firms also earn substantial
fees from various forms of
consulting.
MULTI DIMENSION IMPACT ACCOUNTING
17. Accountability is compromised
further by a system of accounting
and its associated rules that only
works for investors, but not for the
other stakeholders in the modern
global socio-enviro-economic
environment.
MULTI DIMENSION IMPACT ACCOUNTING
18. VERY BIG does enable economies
of scale … most of the time … but
not all of the time … and this can
be good for PROFIT.
MULTI DIMENSION IMPACT ACCOUNTING
19. VERY BIG also means less
competition which is good for
PROFIT but bad for PEOPLE …
the consumer.
MULTI DIMENSION IMPACT ACCOUNTING
20. VERY BIG also means more RISK
MULTI DIMENSION IMPACT ACCOUNTING
21. VERY BIG companies usually
have the data to optimize for
maximum profit … but few are
organized so that they are able to
optimize for minimum risk … and
especially risks that impact on
society and the environment.
MULTI DIMENSION IMPACT ACCOUNTING
22. How many companies make 80%
of the world's aircraft?
MULTI DIMENSION IMPACT ACCOUNTING
23. How many companies distribute
80% of the world's grain?
MULTI DIMENSION IMPACT ACCOUNTING
24. How many companies produce
80% of the world's oil and gas?
MULTI DIMENSION IMPACT ACCOUNTING
25. How many companies represent
80% of global Internet traffic?
MULTI DIMENSION IMPACT ACCOUNTING
26. How many companies dominate
in the Internet segment of the
economy?
MULTI DIMENSION IMPACT ACCOUNTING
27. Concentration is very good for
companies (profit) and investors
(stock value) … but there is no
accounting for how bad this same
concentration is for society
(people) and the environment
(planet).
MULTI DIMENSION IMPACT ACCOUNTING
28. I like this quote from Adam Smith
… writing in the 18th century.
MULTI DIMENSION IMPACT ACCOUNTING
29. MULTI DIMENSION IMPACT ACCOUNTING
Sun
Economic Foundations
Sun
BOP
Financial
Capital
Human
Capital
Man Built
Capital
Natural
Capital
Sun SunSun
Financial
Capital
Human
Capital
Man Built
Capital
Natural
Capital
Sun
EOP
30. … nothing wrong with market
based capitalist economics if this
is the foundation … but very
much wrong when performance is
ONLY about making maximum
profit.
MULTI DIMENSION IMPACT ACCOUNTING
31. Big … concentration … is not bad
per se … but very bad when it is
used simply to make more profit.
Being big and efficient with good
impact for all components of the
socio-enviro-economic system is
fine …
MULTI DIMENSION IMPACT ACCOUNTING
32. … and for this to become the
norm, it is essential that
conventional accounting is
enhanced to include impact on
society (people) and environment
(planet) as effectively as it exists
for organizational performance
(profit)
MULTI DIMENSION IMPACT ACCOUNTING
33. A FINAL OBSERVATION …
History seems to suggest that
bigger is better when an industry
is emerging … but when an
industry has matured, being big
may mean lack of agility and first
step towards failure.
MULTI DIMENSION IMPACT ACCOUNTING
34. The issue of concentration will be
addressed in the various SECTOR
specific sections of the TVM-MDIA
initiative.
MULTI DIMENSION IMPACT ACCOUNTING
35. REMINDER
This slideset is A WORK-IN-PROGRESS. It will be
upgraded periodically. It is part of a series of more than
100 slidesets. Navigation to these is available here:
http://www.truevaluemetrics.org/DBadmin/DBtxt001.php?vv1=N1-Slidesets-p3
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peterbnyc@gmail.com … with a catchy phrase in the
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36. THANK YOU
Some links and contact information:
Email Peter Burgess … peterbnyc@gmail.com
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