Even though I often write about economic issues at my sucky little blog, you can fill up a library of books with what I don’t know about economics, especially as presented by conventional wisdom. One area that especially confounds me is the notion of “Goodwill Equity.” Oh, I understand the basic concept well enough and I can even find definitions of negative equity. It just seems to this ol’ country boy that like so many other concepts that once had meaning, this is one that has gone past its useful shelf life.
In a micro sense, it probably still has some validity. I know that in the small town I grew up in, there were many situations where a local business changed hands and part of the price was the goodwill built by the seller based on reputation and good service.
Today however, we have someone like Donald Trump claiming to be worth $7B, with $3B of that being his “brand.” Yeah, that’s right. The guy whose combover has been likened to a dead raccoon claims a worth nearly double the generous estimates provided by Forbes. I guess The Donald must subscribe to the “there’s no such thing as bad publicity” theory since a recent Fox Poll (via Media Matters) showed a Trump endorsement would be received positively by 6% of those polled versus negatively by 31% of those polled.
Doonesbury has this take on Trump.
It’s not just Trump though, although he is probably one of the worst offenders in this. Thursday the NY Times had this blog post discussing the PR hits Netflix, Cisco, and Hewlett-Packard all had to contend with due to decisions made by their then CEOs. Or at least decisions announced by CEOs. The comments in the Times blog post also had folks bringing up Bank of America’s $5 debit card fee as another example (the blog post was looking at technology companies only). I wonder how much the hit against Goodwill Equity for these firms was?
We know that HP paid a few million dollar golden parachute to Leo Apotheker for his less than a year “service” as CEO. Netflix CEO Reed Hastings was proclaimed Worst CEO of 2011. Bank of America was already being touted as taking a “Goodwill” hit back in July, prior to the debit fee debacle.
Any wagers as to how large the bonuses for these CEOs? Even though it doesn’t take all that much for a CEO to achieve blunders, they always seem to get paid their millions whether they do good things for their shareholders or drive their companies into the ground. Back in June 2010, I offered my services to the shareholders at BP as CEO, reasoning I couldn’t be worse or more clueless than Tony Hayward. I would now like to extend this offer to the folks at Netflix, BoA, or even HP, should e-Meg turn out to not be the savior after all. I can’t do worse and I’m a lot less expensive. But I’ll let The Donald continue on his own path to delusion.
And because I can: