How high can you rise?

In the last 24 hours HSBC Bank has announced net profit of $16.8 billion for 2011 and Apple shares are trading at $240 taking its market capitalisation over $500 billion which puts it among a very select few. Apple is paying $7 billion in dividend. So how high can companies rise? Every share has a face value and dividend is declared on this amount. So if a share has a face value of Rs 100 and the company pays Rs 40 as dividend that is 40% return which is excellent. The price of the share will rise immediately in the secondary market. So if someone buys the same share for Rs 1000 and the company pays Rs 40 his return will be just 4%, much less than what banks pay on fixed deposits. Hence shareholders, especially investments funds with millions of shares, exert pressure for higher dividend giving them better returns and the rising price of shares will earn them capital gains when they sell. The pressure on fund managers to increase returns for investors forces them to indulge in insider trading in which they obtain prior information about the profits or merger activity of a company before it is publicly announced and make a killing when the news comes out. Raj Rajaratnam, founder of the Galleon Group, a hedge fund, is serving 11 years in New York for insider trading. Or they create complicated financial products which no one understands. The subprime crisis was a prime example. CEOs of companies are under greater pressure to perform because their bonuses depend on rising shareholder value. So they resort to 1. Reducing employee numbers to increase productivity in which employees are made to work harder and monitored strictly to reduce time wasting. This is what resulted in strikes at Maruti last year when employees claimed they had to run to the bathroom and back. 2. Buying or merging with a company with similar products so as to create synergy. This allows greater production with fewer people, raising profits. Mergers of AOL with Time Warner in 2000 and Daimler Benz with Chrysler in 1998 went spectacularly wrong and had to be broken up. 3. Shift production overseas where salaries are low, as in China. To take one country's money abroad to create jobs in another country seems particularly vile. 4. Use contractors to supply employees. Since these are on temporary contracts they have no rights. Suicides at Foxconn, which manufactures Apple products in China, last year highlighted how these employees are virtual slaves. 5. Try to cover up losses with lies as happened at Japanese camera maker Olympus where the former CEO is facing criminal charges. Thus the more profits a company makes the higher its share price and it has to make even more to increase shareholder value. Question is, can it go on rising infinitely before gravity pulls it down? Seems to be a mug's game.