L.A. Dodgers’ Theory of Business Management

September 2nd, 2010

According to the article in today’s Los Angeles Times (“Dodger Blue Running Deep in Red,” by Bill Shaikin and E.Scott Reckard), The Los Angeles Dodgers franchise of the Major League Baseball monopoly seems to have subscribed to the likely misguided yet seemingly prevailing thought of Corporate America. It would seem that the prevailing thought in the American corporate world as well as the Dodger organization is to view debt as a good thing – after all, the reasoning apparently goes for such a viewpoint, that debt is a positive cash flow and the greater the debt, the greater the positive cash flow from this debt. Add to this perception, that through recent ‘reform’ legislation, the U.S. Federal Government has apparently agreed to bolster any “too large to fail” corporation through tax-payer funds and would thereby prevent the failure of any major corporate entity that was determined to be vital to the nation’s economy, one can surmise that we will see many other major corporation’s follow this L.A. Dodgers’ Theory of Business Management and leverage their corporations to the maximum level possible; knowing all the while that the U.S. government and tax-payer is holding a safety net for any major corporation’s financial recklessness and ineptitude (regardless of anti-trust status and not to mention bankruptcy possibilities which typically only ‘screw’ those owed money and not the company seeking bankruptcy protection - stock holders not withstanding, of course). Not to insinuate that the Federal government would save the Dodger organization from financial ruin; but the point being that there appears only minimal repercussions to those corporate entities that care not about balance sheets, maintain unrealistic debt levels, and only appear to care about lining their pockets with cash, regardless of whether the cash emanates from a cannibalization of assets which subsequently leads to the demise of their corporation.

Adam Trotter / AVT