A Little Optimism for Sallie Mae

| About: SLM Corporation (SLM)

On April 6, 2009 Sallie Mae (NYSE:SLM) announced it would be moving 2000 jobs from abroad back to the United States. The something strange happened: its stock price went up.

CNBC.com reports that Sallie Mae moved jobs overseas quickly as part of a plan to save $300 million over a 12 month span. Furthermore, bringing the jobs to America will cost the company an estimated $35 million per year.

No doubt was this good news for America. And perhaps it showed a positive outlook by management. It could have been a goodwill move as many analysts believe, in order to preserve its market under the Obama Administration. Maybe the move was even made on some sort of government wink and nod.

Who cares why?

The important fact relies in the result. In a time where CEOs are chastised day in and day out for moving hard working American jobs abroad to save a buck. In his book Supercapitalism, Robert Reich discusses an era not so long ago where CEOs of major companies served as “corporate statesman” who believed they had the public responsibility of an elected official.

The economy was dominated by small oligopolies, Westinghouse and GE or GM, Chrysler, and Ford (NYSE:F) each led by these “corporate statesmen”. Competition among the firms was less fierce, highly predictable, and highly profitable. As workers demanded higher wages across industries the CEOs were able to accommodate them and still provide investors fair returns.

CEOs Under Pressure

As information became more abundant and capital movement became cheaper and faster investors paid more attention to returns and realized that they could hold CEOs strictly responsible for stock performance. Since payroll is one of the biggest expenses at most companies, CEOs found the most savings cutting jobs and moving jobs abroad.

Reich claims that most individuals are "of two minds" with the citizen battling with the investor/consumer. On one side we want the well being of our fellow man while on the other side we desire low prices and high returns. The CEO of SLM, Albert Lord stated that it was about bringing jobs back to the US, and despite plausible alternative explanations, I'd like to believe he's sincere in his statement.

Regardless of the reason, SLM has taken one small step in reversing the trend. The fact that the stock price did not take a beating yesterday is uplifting. Despite speculation of another motive, in a time of cost cutting and mounting job losses maybe a sense of corporate statesmanship can be revived.

Disclosure: Author is long GE and holds no position in any of the other companies mentioned in this article.

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