If you read this week’s issue of the Business Journal, you may think we accidentally republished some articles from the 1980s.
Privatization and poison pills common terms from 20 years ago are the subjects of two articles in this issue. Both seem to be making a bit of a comeback.
It would be heartening to see a true revival of privatization. Outgoing City Controller Laura Chick floated the notion of leasing out or contracting out some city functions.
Think about it: Is there really any philosophical justification for the city of Los Angeles, or any city or any county or state for that matter, to operate golf courses and parking lots?
After all, it is indisputable that governments operate inefficiently. That’s not because government workers are slothful but because governments do not live or die under the profit motive and therefore their managers aren’t driven day and night to cut costs and boost revenues. (A great way to boost revenues is through outstanding customer service. Quick, name a government-run agency that truly goes above and beyond to treat customers with respect and gratitude.)
As a result, most every function that could be done by the private sector but is done by the public sector is a burden on taxpayers. But that’s only the start. It is also a burden on neighboring businesses because they have a hard time competing with an agency that doesn’t much care if it operates at a loss. Heck, it’s even a burden on the economy, since a government-run agency robs the private sector of a wealth-creating enterprise.
Politics is the prime motivator that keeps driving governments to take over the work of businesses. In this city, that means unions get jobs and enjoy the political paybacks, at the expense of taxpayers.
It will be interesting to see if the city’s driving need to save money or even make money by privatizing some of its functions will be great enough to overcome the resistance from the powerful unions. The City Council may feel compelled to contract out some of its functions to save money but may compromise by, for example, making the contractor keep the old employees and pay their workers the higher “living wage” or even more. The downside is that would make the contract less valuable for the company, which means the city may get less money from the company.
To read more about Chick’s idea it’s not really a proposal see the article on page 1.
On page 3 is an article about the suddenly renewed popularity of poison pills. It seems the swoon in stock prices has made business managers fearful their companies may get bought for a buck, so they’re rushing to adopt takeover defenses.
Drat. I thought poison pills were a relic of the past. Maybe not as quaint as the word “drat,” but pretty old nonetheless.
Poison pills may have their use in certain situations, such as when a hostile raider stages a two-tier takeover attempt by offering big dollars to the first 51 percent of shareholders who tender, then pennies to the last 49 percent.
But, let’s face it, poison pills are usually ways for bad managers to keep their jobs or score an obscene payoff to ride into the sunset.
You’d think shareholders would vote down poison pills. After all, we’ve been learning about them since the 1980s.
Charles Crumpley is editor of the Business Journal. He can be reached at
[email protected].
