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How does the above principle apply to the common-stock value of Du Pont? The common-stock price is the accurate value of a company because that price represents the exact value that buyers are willing to pay for the company in a free market. Over time, a company is worth no more or no less than its free market price (its common-stock price). Executives are hired by the stockholders for one reason only...to enhance the long-range financial value of their business enterprise in order to increase profits and common-stock values. For long-term appreciation of stock values, an enterprise must increasingly deliver competitive values to society.
The value of an executive is judged by the extent that he generates values for the shareholders in exchange for his compensation. In order to enhance the long-range value of a business enterprise to its owners and society, an executive must implement the principles of competitive capitalism. The altruistic executive militates against the value of his company to the extent that he directs his company. That executive does not earn his pay. For, he diminishes rather than builds the long-term value of his company.
To survive, the altruistic executive must constantly draw on the future potential of his company in a turmoil of short-range pragmatic activities that conceal the long-range damage being done to the business. At first, such an executive may blame declining stock prices on "temporary" market conditions. As the corporate assets are consumed and return on investment diminishes, the executive will blame competition, inflation, deflation, "maturing business", the "inevitable", "hard luck", or a "changing reality" for the decline in stock prices.
As solutions, he may offer platitudes and schemes of short-range economies, "belt tightenings", "creative" accounting procedures, acquisitions, and other one-shot expediencies. Within the downward trend, the stock price may periodically fluctuate upward for durations of a few months or even years. But the downward trend always returns with ever-deepening losses.
When the company is finally destroyed, he will claim that events were beyond his control and the ruins were not his fault. He will plead that he had to be practical and cooperate with the altruistic "authorities". He will not identify that operating on competitive capitalistic principles is the only honest, sound way to build values and assets. He will not identify that altruism dishonestly destroyed the value of his company. He will not identify that altruism can never be used to benefit society. But he will secretly know that altruism has always been no more than a clever tool to covertly promote bogus livelihoods.
To repeat again the principle upon which this proposal rests:
The Proof
The following graph provides proof of the first assertion. The steady, long-term deterioration of Du Pont common-stock values is proof that the Company is not being managed in the best financial interest of its stockholders. That fact becomes especially obvious when the deteriorating stock price is superimposed against a composite of all other 1360 stocks on the New York Stock Exchange.
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