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CEO pay and stock buybacks have soared at the largest low-wage corporations

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Re: CEO pay and stock buybacks have soared at the largest low-wage corporations

#91

Post by slashdave »

tw04 wrote: post #86
slashdave wrote: post #78

Inequity is a real thing, but I am confused about why the CEO of a company that consists primarily of low wage earners deserves a lower compensation for that reason alone. If you follow this logic to extremes, the compensation of a CEO of a company of a dozen people earning 100,000 should be higher than one with with tens of thousands of employees earning 30,000. Not all businesses are the same.

What’s the motivation of the CEO to increase employee wages if his compensation isn’t tied to theirs? There’s this perverse belief that companies should exist to enrich the wealthy shareholders at the expense of the workers and it’s put us dangerously close to a complete collapse of the social contract.

The motivation? A healthy and productive workforce. The greater good.

Not sure why you would tie pure compensation (a greedy concept) with goals that align exactly to the opposite.

Re: CEO pay and stock buybacks have soared at the largest low-wage corporations

#92

Post by beezle »

missedthecue wrote: post #22
nielsbot wrote: post #10

Stock buybacks used to be illegal. It's a loophole way of paying employees at a lower tax rate than salary. HBR discusses some downsides of buybacks: https://hbr.org/2020/01/why-stock-buybacks-are-dangerous-for...

Stock buybacks were never illegal. Stock buybacks were how Buffett took control of a small textile mill called Berkshire Hathaway in the 1960s. What was not allowed was at-the-market buybacks in the open market. Corporations had to do tender offers at a fixed price, usually well above market price, in order to attract sellers to mail in their certificates. I'm not sure why that is necessarily better or helps anyone,…

If one does not think that buy backs are good to begin with, making them as difficult as possible (as was the case before the mid 80s) is preferable to the situation today.

Re: CEO pay and stock buybacks have soared at the largest low-wage corporations

#93

Post by whatisthiseven »

simianwords wrote: post #57
nostrademons wrote: post #8

It’s entirely possible that this is causal ABs deliberate, ie the reason why boards of these companies have approved large CEO pay packages is so that the CEO will align themselves with the shareholders paying them rather than the workers working for them and cut wages so the money can be returned to shareholders as buybacks.

Yeah pretty much.. but this is a good thing. Companies should focus on improving profits and not wages.

Are there studies that show a causal relationship between higher CEO pay and profits?

Do buybacks cause profits to increase? Maybe from what I can see? But long-term? If all we care about is short-term then that will lead to the continued financial cannibalization of the US economy. Where private equity firms buy companies and destroy them for short-term profit while loading them with the debt used to buy them.

I think the obvious answer to both these questions is: no. CEO pay and buybacks don't focus on profits. At best short-term. Which isn't good.

I think companies should focus on making good products that positively serve the countries they sell in, while secondly still aiming for a profit.

Re: CEO pay and stock buybacks have soared at the largest low-wage corporations

#94

Post by mullingitover »

necubi wrote: post #47
nielsbot wrote: post #10

Stock buybacks used to be illegal. It's a loophole way of paying employees at a lower tax rate than salary. HBR discusses some downsides of buybacks: https://hbr.org/2020/01/why-stock-buybacks-are-dangerous-for...

Buybacks are just a more tax-efficient way to issue dividends to shareholders (dividend issuance is a taxable event and at short-term rates, buybacks raise the stock price and those gains aren't taxable until you sell, at which point it may be long-term cap gains). It's reasonable to be upset about the fact that this is arguably a tax dodge! But all of the other criticism of buybacks apply equally to dividends which…

> buybacks raise the stock price and those gains aren't taxable until you sell

They temporarily raise the stock price for the people who are the counterparties to the stock purchase, but isn't that also creating a taxable event for them?

Once the buyback is done, what's keeping that share price from sliding right back down to earth? The shareholders who support the company and hold watch a group who bet against the company by selling shares reap a profit, in a tax advantaged way, while their own dividends are effectively stolen. The buybacks are actually a crap deal for anyone who is a responsible buy and hold investor.

Re: CEO pay and stock buybacks have soared at the largest low-wage corporations

#95

Post by Aunche »

I'd likely be progressive if American progressivism wasn't so economically illiterate (as opposed to say Piketty). The vindictive themes make me think that it's motivated more by envy than a genuine desire to improve society.

The CEO to worker compensation ratio is a useless metric. There is absolutely no reason why Starbucks should be punished for hiring more workers over a company like Nvidia that hires relatively few very well paid workers. If you want raise taxes, just increase taxes across the board.

If you really think that stock buybacks are meant to "pump up short term share prices", you should test your theory in the market and you'll be a billionaire in no time.

Re: CEO pay and stock buybacks have soared at the largest low-wage corporations

#96

Post by missedthecue »

mullingitover wrote: post #94
necubi wrote: post #47

Earlier quoted context omitted.

Buybacks are just a more tax-efficient way to issue dividends to shareholders (dividend issuance is a taxable event and at short-term rates, buybacks raise the stock price and those gains aren't taxable until you sell, at which point it may be long-term cap gains). It's reasonable to be upset about the fact that this is arguably a tax dodge! But all of the other criticism of buybacks apply equally to dividends which…

> buybacks raise the stock price and those gains aren't taxable until you sell They temporarily raise the stock price for the people who are the counterparties to the stock purchase, but isn't that also creating a taxable event for them? Once the buyback is done, what's keeping that share price from sliding right back down to earth? The shareholders who support the company and hold watch a group who bet against the c…

The dividends aren't stolen. A company with 1m shares outstanding buys back 100k of them. Now there are 900k shares outstanding. All long term shareholders who support the company own an extra 10% of the firm with nothing out of pocket. Imagine steady buybacks at reasonable prices over a long period of time... this has an incredible effect.

Warren Buffett bought a couple percent of American Express, and now owns 22% of the company despite not buying a share in decades. It really becomes apparent over time. American Express just carefully repurchased shares over the years and Buffett's stake became greater and greater.

Re: CEO pay and stock buybacks have soared at the largest low-wage corporations

#97

Post by nitwit005 »

tyleo wrote: post #6

It’s interesting to me this doesn’t self correct. I’d love to know if someone can explain why. E.g. presumably companies can pay people more if they capture less value themselves. Why can’t a company do that and just hire the best talent?

If you want a fun exercise, try to estimate how many more Chipotle stores they could open if they didn't have to pay their executive salaries.

Re: CEO pay and stock buybacks have soared at the largest low-wage corporations

#98

Post by abdullahkhalids »

bofadeez wrote: post #62
nostrademons wrote: post #8

It’s entirely possible that this is causal ABs deliberate, ie the reason why boards of these companies have approved large CEO pay packages is so that the CEO will align themselves with the shareholders paying them rather than the workers working for them and cut wages so the money can be returned to shareholders as buybacks.

Wages are not set by a company, they're set by the supply and demand of the market. Adding a minimum wage just criminalizes hiring anyone who is not productive enough to economically justify the minimum. It hurts unskilled poor people the most.

Minimum wage is supposed to represent the minimum wage necessary for a worker to meet their basic human needs.

If you don't have a minimum wage, some people get paid below this level, and they somehow struggle along in poverty. But there is no real incentive for the state to help them.

Establish a minimum wage. Now these people are unemployed. Which contributes to the unemployment percentage. Causes the government to lose votes. The state has to pay out unemployment benefits to these people. The govt+state now have real incentives to change the structure of economy to ensure jobs are created for these people that are productive enough to justify the minimum wage.

Re: CEO pay and stock buybacks have soared at the largest low-wage corporations

#99

Post by chronia739 »

missedthecue wrote: post #96
mullingitover wrote: post #94

Earlier quoted context omitted.

> buybacks raise the stock price and those gains aren't taxable until you sell They temporarily raise the stock price for the people who are the counterparties to the stock purchase, but isn't that also creating a taxable event for them? Once the buyback is done, what's keeping that share price from sliding right back down to earth? The shareholders who support the company and hold watch a group who bet against the c…

The dividends aren't stolen. A company with 1m shares outstanding buys back 100k of them. Now there are 900k shares outstanding. All long term shareholders who support the company own an extra 10% of the firm with nothing out of pocket. Imagine steady buybacks at reasonable prices over a long period of time... this has an incredible effect. Warren Buffett bought a couple percent of American Express, and now owns 22%…

> All long term shareholders who support the company own an extra 10% of the firm with nothing out of pocket.

They own an extra 11%. Not 10%.

1/100 versus 1/90

Re: CEO pay and stock buybacks have soared at the largest low-wage corporations

#100

Post by NoahZuniga »

missedthecue wrote: post #80
necubi wrote: post #47

Earlier quoted context omitted.

Buybacks are just a more tax-efficient way to issue dividends to shareholders (dividend issuance is a taxable event and at short-term rates, buybacks raise the stock price and those gains aren't taxable until you sell, at which point it may be long-term cap gains). It's reasonable to be upset about the fact that this is arguably a tax dodge! But all of the other criticism of buybacks apply equally to dividends which…

But the buyback involves buying from sellers. Why don't the sellers of the shares owe tax? Don't see how that's a tax-dodge. The fundamental purpose of a buyback is not to raise the stock price. The purpose of a buyback is to reduce the amount of outstanding shares, which makes every existing owner own an increased percentage. If a company buys back 10% of its stock, each long term shareholder now owns 10% more of th…

capital gains tax (selling for a higher price) is lower than income tax (getting dividends)
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