TVA p3 00 CONCENTRATION OF ECONOMIC POWER

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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.

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TVA p3 00 CONCENTRATION OF ECONOMIC POWER

  1. 1. CONCENTRATION OF ECONOMIC POWER TRUE VALUE ACCOUNTING File: TVA-p3-00-CONCENTRATION-OF-ECONOMIC-POWER-151120.odp Peter Burgess (c) All rights reserved
  2. 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
  3. 3. CONCENTRATION is good for PROFITS … MULTI DIMENSION IMPACT ACCOUNTING
  4. 4. BUT … how good is concentration for SOCIETY (people) and the ENVIRONMENT (planet)? MULTI DIMENSION IMPACT ACCOUNTING
  5. 5. Great fortunes have been made by entrepreneurs who have managed to concentrate the industry and monopolize their markets … MULTI DIMENSION IMPACT ACCOUNTING
  6. 6. John D. Rockefeller 1839 - 1937 … who built the Standard Oil monopoly in the late 19th century MULTI DIMENSION IMPACT ACCOUNTING
  7. 7. Bill Gates … who built the Microsoft operating system monopoly in the late 20th century MULTI DIMENSION IMPACT ACCOUNTING
  8. 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. 9. From the perspective of investors it seems that bigger is better … MULTI DIMENSION IMPACT ACCOUNTING
  10. 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. 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. 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. 13. Many very big companies will not tolerate Union representation for their employees … MULTI DIMENSION IMPACT ACCOUNTING
  14. 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. 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. 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. 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. 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. 19. VERY BIG also means less competition which is good for PROFIT but bad for PEOPLE … the consumer. MULTI DIMENSION IMPACT ACCOUNTING
  20. 20. VERY BIG also means more RISK MULTI DIMENSION IMPACT ACCOUNTING
  21. 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. 22. How many companies make 80% of the world's aircraft? MULTI DIMENSION IMPACT ACCOUNTING
  23. 23. How many companies distribute 80% of the world's grain? MULTI DIMENSION IMPACT ACCOUNTING
  24. 24. How many companies produce 80% of the world's oil and gas? MULTI DIMENSION IMPACT ACCOUNTING
  25. 25. How many companies represent 80% of global Internet traffic? MULTI DIMENSION IMPACT ACCOUNTING
  26. 26. How many companies dominate in the Internet segment of the economy? MULTI DIMENSION IMPACT ACCOUNTING
  27. 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. 28. I like this quote from Adam Smith … writing in the 18th century. MULTI DIMENSION IMPACT ACCOUNTING
  29. 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. 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. 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. 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. 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. 34. The issue of concentration will be addressed in the various SECTOR specific sections of the TVM-MDIA initiative. MULTI DIMENSION IMPACT ACCOUNTING
  35. 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 More about the True Value Metrics initiative is at: http://www.truevaluemetrics.org/DBadmin/DBtxt001.php?vv1=list0100-MainNav FEEDBACK is welcome. Please email to Peter Burgess … peterbnyc@gmail.com … with a catchy phrase in the subject line so that it gets attention, and please identify the specific slideset(s) or webpage involved. TRUE VALUE ACCOUNTING
  36. 36. THANK YOU Some links and contact information: Email Peter Burgess … peterbnyc@gmail.com Peter Burgess LinkedIn profile https://www.linkedin.com/in/peterburgess1 Link to TrueValueMetrics.org website http://www.truevaluemetrics.org/ Link to navigation to other resources: http://www.truevaluemetrics.org/DBadmin/DBtxt001.php?vv1=list0100-MainNav#1 TRUE VALUE ACCOUNTING

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