Got Milk?

As usual, have to lay down some groundwork first.

Shareholder Value

When you own common stocks of a company, you are an owner of the company. Not that you can sit in the boardroom, but you are a owner.

The CEO, COO, and other C-and-Os works for the company on compensations. Since you own part of the company (no matter how tiny it is), technically those guys work for you. This is called the Principal-Agency relationship, which mean the management of the company have a contract with you to serve your interest by maximizing shareholder value.

That's why the major decisions have to be approved by the board, who's the representative of the shareholders.

牛根生's Bad Luck

牛根生(LaoNiu, thereafter) is my idol. I found him adorable not only because he's one of the most successful self-made entrepreneurs in short supply in China, he's also been around and outspoken, and he pays himself a million RMB salary.

He recently ran into some cash flow problems, caused by melamine. Mengniu, the milk business he built was like a child to him, seeing it on the verge of collapse must've been excruciating. So LaoNiu wrote a long letter, and he cried.

The Chinese business society, a well built harmonious society rides into rescue:

"据牛根生的信件内容，在得知蒙牛所处的窘境后，已经企业家出手相助。牛根生在信件中写到：柳传志连夜召开董事会，48小时之内就将2亿元钱打到了“老牛投资”的账户上；俞敏洪闻讯，火速送来5000万元。傅成玉先生打来电话说，中海油备了2.5亿元，什么时候需要什么时候取。牛根生还提到，田溯宁、江南春、马云、郭广昌、虞峰、王玉锁等人都打来电话，表示随时随地可以伸手援助。"

First of all, I have to say that Chinese big enterprises seems very cash abundant. More appallingly, they spend it as their own money.

I mean, Mengniu is a good business (though profit is a bit thin), LaoNiu is a good manager. So I think he will surely get out of it. But what if, in the worst case, the loan goes bad? Whose loss will it be?

Shareholder value, ring any bells?