Friday, September 30, 2011

Can Facebook Succeed Where Ed Milliband Can't?

At this years Labour Party conference Ed Miliband launched a bitter attack on asset stripping companies citing Southern Cross Homes as one culprit. Saying that "We must learn the lesson that growth is built on sand if it comes from our predators and not our producers." He then went on to tell delegates: "We need the most competitive tax and regulatory environment we can for British business. But when I am Prime Minister, how we tax, what government buys, how we regulate, what we celebrate will be in the service of Britain's producers."

The next Labour government would favour charities and companies which could demonstrate a track record in health and "a social ethos underpinning how they are run and organised" said John Healey shadow health secretary. However the Labour Party is less forthcoming with details as to how this variable tax regime will be implemented and regulated.

It is possible to value producer companies more highly than predatory ones and one way to stop it is just a question of changing the way company accounts are drawn up. The way company's accounts are currently structured means there is a tremendous emphasis on current year earnings. This results in the short termist nature of our accounts, it also means that decisions are being made on the basis of those that purely enhance the current years earnings.

In order to stop this we need to bring in softer measures of companies success. Soft measures are often derided because they can't be reconciled, but they can be revealing if used as a comparative measure year-on-year.

One of the problems is that companies are neglecting customer satisfaction to gain quick short-term results. One scenario has been put forward that could solve this issue. Imagine a world where companies are accountable to customers through Facebook customer satisfaction surveys. Imagine a company such as BT having to survey just a tiny percentage of its customers every quarter where customers are given the chance to rate their experience with BT. Given the current state of technology and the percentage of the population signed into Facebook its only a relatively small step and an inexpensive one to survey several thousand customers. One of the best ways to influence a Company's behaviour is to change the items they have to report on in the statutory company reports. If Ed Miliband wishes to succeed then he must change the information companies have to gather when they prepare their reports. It would now be a simple matter to make companies survey customers each quarter when they prepare their earnings results. Independent surveys could be conducted anonymously on Facebook and just the final survey results passed on to the company.

This would mean that the stock exchange would be aware every quarter of these customer satisfaction surveys and so share prices would react immediately depending on the results. Companies would then be a lot more careful how they treated their customers and the market would get an early warning that customers were being treated badly.

For details of more ideas of how predator companies can be penalised and producer companies can be rewarded contact the author.

Mark G Brassington
Author Business Valuation Writer
Tel: 01772 313673

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