United Technologies Corporation is an enormous multinational organization. In 2015, they had over $56 Billion in revenue, made over $6.5 Billion in profits, had over $7 Billion in cash and cash equivalents, along with another $10 Billion in Accounts Receivable they hadn’t collected yet. Their total assets were $87.5 Billion against total liabilities of $58.5 Billion.
Consider that they’re in the news of late over one of their subsidiaries, Carrier Corporation, moving one of their manufacturing plants to Mexico to save on labor costs and increase profits accordingly. American workers will lose their jobs, with the pay and benefits that go with the job, so that Carrier, and ultimately United Technologies can squeeze a few more bucks onto the bottom line profits. Now you may be thinking, well that’s just good business. Let’s look at a few details that don’t get as much press.
United Technologies is a publicly owned corporation. Its stock trades openly on the US markets and the stock price reflects investors current opinion on the value of the company overall, divided by the outstanding number of shares, and the company’s future prospects. To be a good investment, UTC’s stock needs to increase in value over time from the current market price. When more investors feel optimistic about the company’s prospects, they buy the stock and drive the price higher. Conversely, when investors get spooked by the outlook or see better opportunities elsewhere for investment dollars, they sell and the stock price declines. Basic stuff I know.
Continue reading “Corporate Profits and Stock Buybacks”
There are many things UTC, parent company of the now notorious Carrier company, could do to be a better corporate citizen. Instead of moaning about US Corporate income taxes, which they do everything possible to avoid paying, they could stand tall and proud and state that effective immediately, in order to decrease the heavy tax burden on American citizens, they will no longer accept any orders for goods and services, or contracts of any kind if the taxpayer is the unwitting customer. They can claim solidarity with the average working American and pull themselves by their own bootstraps and not accept any government money.
If they did this, they would lose almost $6,000,000,000 in annual sales revenue, their shareholders would revolt, their stock price would tank and the board would quickly seek to remove the CEO and probably the COO, CFO and any other executives complicit in this patriotic reduction in their revenue stream.
So while President-Elect Trump may be touting the success of his dealmaking ability, what he actually did was give United Technologies more taxpayer money as an incentive to stop them from making moves to avoid paying the same American citizens that fund their lucrative revenue stream, to which United Technologies responded by just laying off a few less Americans than they were originally planning to. But thanks for the $7,000,000 Mr. President-Elect. We’ll definitely spend it wisely, like buying back shares in our company so our wealthy shareholders get wealthier.
Capitalism: Ensuring the rich and connected stay rich and connected.