if you're talking about profit maximisation then well, if you set one mrt ride = $1million
you won't get many riders, would you?
well it's hard to say depending on the company la; but frankly the apparent growth in profits, as someone did point out, while present undisputably; let's remember that $5 yesterday is very different from $5 today. net profits should be taken with a tiny pinch of salt too.
Can you name a company that paid its CEO US$100M excluding stock options? All the obscene incomes I recall reading about are including stock options, and even then stockholders are not happy with it.
besides, justification.. well, anything can be justifiable by anyone's standards, whether it's.. sufficient by others' standards, is another thing though, as you can see here in kopitiam.
maybe reposession by the government is a way out. someone brought it up in conversation and we had an argument and i think that suggestion has some merits.
Come to think of it, Steve Jobs did get a jet as a bonus not too long ago, and Apple also paid for the tax on it (and the tax on the tax they paid for him and so on). That's got to be worth multiple millions, and it is not stock.
Anyway, this is seriously OT regarding SMRT profit. My apologies.
Back on topic, not having lived here for multiple years, I didn't realize (or forgot) that SMRT is a public listed company. Lots of interesting reading on its website. As a public listed company, shouldn't their priority be to maximize profit for its shareholders?
barry diller qualifies too. but you're right, we're ot. that was a list for 05 though, i'm pretty sure more and more will hit that list, there were none in 04, if i remember correctly, at least when excluding stock options.
tell me, who in this world, if given a choice, doesn't want free education, free health services, free insurance, free transportation, free libraries? this is called the tragedy of the commons, alluding to overgrazing in villages when there was no control, in case some get me wrong.
can always absorb it and throw it to another division and divide up the pie. not easy, but well, i can't see any other workable plan.
during my discussion as mentioned earlier, i wanted to bring up the point of externalities, i.e. the fact that beyond certain limits, people start to take away the value of what the particular good or service is to each other. for example, you would certainly be more willing to pay $3 for a train ride where you can sit as opposed to $3 for a train ride where there is litter all over the floor, noisy kids, and everybody is packed like sardines.
but it just doesn't seem right, even though in an entirely rational world, certainly there is some merit to that line of thought.
1. It's a bit strange, isn't it? Singtel makes billions and no one complains, but smrt makes a fraction of that and there's so much noise.
Everywhere around the world, govts are privatising services because invariably they can't do as good or as efficient a job as the private sector. So everything from telcos to power plants to public transport are now run by companies. Govts now focus on what they do best, which is to govern and regulate, and let the private sector build and operate.
In management terms they have gone back to their core competencies.
2. How much profit should smrt be allowed to make?
You can read the ptc statements if you want. They consider the projected roi when approving fare increases.
However, in a wider context, that question does not make sense in a free market. Govts do not control your salary, why should they control how much companies make?
3. There's a notion that public transport is a public service, so the companies should make very little profit.
That's old thinking. It was no longer a public service the day the govt privatised it. So they have a right to make as much money as they can provided they meet the service standards.
Anyway, anyone who does accounting knows how fluid the concept of profit is, and really the figure is whatever the company wants to estimate. That's why analysts look at cash flow a lot more than profit.
If a company wants to make less profit, there's so many ways-- you can pay your staff more, pay more allowances and incentives, pay your CEO a lot more, pay more for director's fees, hire more consultants to do useless studies, spend more on unnecessary things, take more "charges" and "writeoffs", charge less for shop space rentals, etc... Just to reach your profit target. Does that change anything? In fact, it makes things worse because the company just becomes less efficient so that it can meet the public's lowered profit expectations.
It's very easy to make less money. It's a lot harder to make more money. And far more harder to make more money and to meet or exceed regulatory standards.
4. There's also the notion that smrt shouln't be listed, because then it will only serve its shareholders.
Anyone who understands business knows that makes no difference. A private company serves its shareholders too. And what is worse, you won't know if they made 150m or 1.5b.
The profit motivation of a company does not depend on its listing or non listing status.
5. So really, it's unfair to say smrt should not make money or too much money. What is fair to criticise is whether the fares are affordable, whether the service standards are acceptable, relative to the prices charged. How much money they make is really their own business if they meet the stds. And what's worse is when people who don't understand financial analysis make sensationalist statements based on single figures in isolation, playing to the gallery like demagogues.
Last edited by waileong; 7th May 2008 at 09:14 AM.
i hope we're not going to go into some silly capitalism good or bad debate, whatever system was best well capitalism, i.e. the pursuit of profits has stood out and proved itself the most; the capitalist countries, sadly, far excel their counterparts - though there are exceptions. there is nothing much to discuss about that unless you wish to be utopian.
and you can't just measure values. can you measure how much a father will be willing to be paid before he gives his daughter away? for some yes, for some, no. it depends. so many situations, so many instances, so many deviations, even if taken to a much lesser extent compared to my example.
or do i misconstrue what you're trying to say?
Personally 150 million profit to me is still ok but I always worry. Greed has no bounds. The fact that town councils can invest our HDB S&C charges to make profit already set alarm bells in my mind. Do these get reinvested or lessen our costs if they make a profit? Last I checked the costs just keep increasing.
f**k lah...do we even have a CHOICE?
Every time we talk about transportation in SG here, there'll always be arguement, suggestion, etc. But what we really need is efficient service at a low price which even the poorest can afford!
Talking about profits in transportation companies, forget them lah...they're just there to make sure they earn as much as possible for their shareholders. If they really care and wanted to make it happen, they would have 10 years ago! Look at buses and MRTs, they're still as crowded and packed. People still complaining as such. What they have done is installed TVs on buses so that they can earn advertisement fees out of it, tell the public that due to high oil prices and labour cost, they have no choice but to increase the fares. Look at how they got their drivers from China? Increase in labour cost?
Life sucks...really, when we talk about transportation here.
different people has different expectations for transportation.
My gripe is the CTE which has been jamming for over 10 years. What have the government done to improve it other than adding ERP? I don't mind ERP BUT they have to expand and improve the roads too right?
it isn't so easy to just say that "oh, let's expand this road"
there is going to be stuff like - oops it's moving closer to the hdb blocks along the place.
oh, eh, the IR construction site is beside it
or something as simple as, cost not justified, will have to reclaim land to do it.
1. Are you the govt? If not, how can you predict what they will do?
2. SMRT is not a monopoly per se, there's also SBS Transit, although they serve different routes.
3. I think the rail operations are just about break even, the main money spinner is the shop rentals and advertising. Suppose SMRT makes lots of money from that, because they are smarter than Capitaland or Mediacorp-- should the govt punish them for being profitable?
4. Competition drives down prices? Petrol stations is a good counterexample.
5. Excess cash is always invested in short-term money market instruments-- that's basic cash management and treasury function in any company. What's wrong with town councils doing that? Are they supposed to keep the cash under their mattresses?
2. They can twist it however they want. SMRT and TransitLink are monopolies. Period. They are just private in name.
3. I can also think that it's the other way around. Just like I cannot predict the govt neither can you predict SMRT costs of operations. Who give them the chance to sublet? Was a tender given to other property developers?
4. What competition? We'll never know would we?
5. Once again it is a monopoly. You dun have a choice. At least if you are in private property or those condos you still get a say. HDB town councils wun even bother to ask you before raising charges. At the end of the day it is my money. It is for our collective interests. I'm not against them making money but to this day I have yet to see how it benefits the collective.
Last edited by takethree; 7th May 2008 at 05:35 PM.