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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

#121

Post by JKCalhoun »

FredPret wrote: post #51
missedthecue wrote: post #31

Earlier quoted context omitted.

No. If keeping worker wages as low as possible was the goal, they wouldn't award stock or healthcare benefits to part time workers in their kitchens. The point is that poaching a new CEO from another company (in this case, Chipotle), and awarding him a pile of stock options if he hits certain metrics is not pay, is not comparable to W2 income, does not hit his bank account, and does not make anyone else poorer, excep…

This is a point always missed in debates about CEO pay. The money doesn't rain from the sky onto his yacht. Shareholders have to shell it out, and they'd prefer the CEO works for free. That CEO has to add billions to their bottom line in order to get paid millions.

Nice if CEO was something like an election — with competing CEO's listing their qualifications, how much they expect in compensation. Shareholders could vote for the CEO + pay package they prefer.

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

#122

Post by ravivooda »

simianwords wrote: post #112

I did an exercise here: the average CEO salary of S&P 500 is around $20M. That's around $10B totally. Assume there are three executives - so thats around $30B annually. Lets go much further, lets multiply this by 10 to account for top 5000 companies (in practice it would be more like top 20,000 because the lower companies have much lower CEO salaries). There are around 300 million people in USA. By redistributing the…

Beginning of game:

CEO = 0$ value Employee = 0$ value

---

Round 1 Year

CEO = $20M Employee = $0.5M (generous)

--

Round 5 Years

CEO = $100M (if pay remained the same, and they did not create new companies, which I'm sure they will).

Employee = $3M (let's give them promo) etc. Cost of living is increasing with employee's wage, nothing for a CEO.

----

Tell me who is more secure, who has the flexibility to take risks, and create new value.

It's not about the 900$ every human being gets. It's how much differentiation 5 years makes, which is 1/4 of value generation timespan of adults.

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

#123

Post by shortrounddev2 »

simianwords wrote: post #112

I did an exercise here: the average CEO salary of S&P 500 is around $20M. That's around $10B totally. Assume there are three executives - so thats around $30B annually. Lets go much further, lets multiply this by 10 to account for top 5000 companies (in practice it would be more like top 20,000 because the lower companies have much lower CEO salaries). There are around 300 million people in USA. By redistributing the…

You're only looking at salary, and not equity based compensation?

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

#124

Post by jjmarr »

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…

Dividends create a taxable event for everyone that owns the stock.

Buybacks only create a taxable event for the shareholders that wish to sell.

And the share price doesn't slide down because there are now less shares on the open market. Theoretically the market capitalization decreases by the amount of money spent on the buyback.

Also, if you issue a dividend the market expects that dividend to be ongoing, hell or high water. Share buybacks do not have that social expectation, so the "temporary" nature of them is an asset for companies that don't want to go from a growth stock to an income stock.

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

#125

Post by JKCalhoun »

FredPret wrote: post #45
Hikikomori wrote: post #24

Earlier quoted context omitted.

Is part of the performance keeping worker wages as low as possible?

You're not asking this in good faith, but I'll give my answer anyway: companies have an interest in paying workers market wages, not more, and not much less. Too much over the market rate, and you're not maximally efficient at converting economic inputs into larger economic outputs. Too much under the market rate, and you'll see increased employee churn, leading to all sorts of other problems. If you want workers to…

Could you explain then why CEO's are not paid at "market rate"? Or is market rate for CEO's basically hundreds of millions or billions of dollars?

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

#126

Post by simianwords »

johnecheck wrote: post #117
whatisthiseven wrote: post #93

Earlier quoted context omitted.

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 thi…

If you measure 'profit' as 'how much does the net worth of our owners go up', stock buybacks make a lot of sense. This seems like a particularly terrible measure of success for everyone but those owners.

This is too circular. Profit is just revenue - cost. The stock values depend on current and future risk adjusted profit.

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

#127

Post by simianwords »

shortrounddev2 wrote: post #123
simianwords wrote: post #112

I did an exercise here: the average CEO salary of S&P 500 is around $20M. That's around $10B totally. Assume there are three executives - so thats around $30B annually. Lets go much further, lets multiply this by 10 to account for top 5000 companies (in practice it would be more like top 20,000 because the lower companies have much lower CEO salaries). There are around 300 million people in USA. By redistributing the…

You're only looking at salary, and not equity based compensation?

It accounts for equity based compensation.

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

#128

Post by _carbyau_ »

m00x wrote: post #69
goyagoji wrote: post #4

Earlier quoted context omitted.

[flagged]

As a French, it's funny seeing references to the French revolution as some kind of rebellion against the rich. Most people don't realize that the revolution was led by the nouvelle bourgeoisie ( new nobles) who were tired of paying taxes to the royals. They sacrificed thousands of commoners to reach their goals akin to how Russia is sending in soldiers into the meat grinder, and France was a much worse place afterwar…

Most people think of Napoleon as a military genius.

But damn, he had a hand (not always positively supporting but often) in many elements of a modern developed nation. Things like standardised measures - metric system - science, education, nation level finances, military logistics and so much more. I'd argue that his greatest achievements was non-military administration.

Throw in the military stuff too and historically he seems like the kind of person that FAANG founders look at and say "Damn, what am I doing with my life?"

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

#129

Post by shortrounddev2 »

nitwit005 wrote: post #71
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.

There's no plan. CEO salaries have just crept up steadily. If anything, they're paying CEOs so much in some cases that the rational thing for the CEO to do is as little work as possible. Why work hard if you'll get enough to retire comfortably on regardless of your performance?

> Why work hard if you'll get enough to retire comfortably on regardless of your performance?

... Sundar Pichai, is that you?

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

#130

Post by conradev »

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…

  Fundamentally this is the corporation saying it doesn't have a market-beating way to reinvest this capital
Isn’t that the crux of it, though? Running a company into the ground by not investing in growth or R&D? We give tax credits to corporations to incentivize R&D spending
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