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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

#151

Post by justin66 »

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…

> But all of the other criticism of buybacks apply equally to dividends which no one seems to get upset about.

I don't know what planet you're living on, where nobody's ever been upset about dividends.

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

#152

Post by beambot »

stickfigure wrote: post #108
beezle wrote: post #92

Earlier quoted context omitted.

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.

As has been pointed out elsewhere, buybacks are morally equivalent to shareholder dividends; the only effective difference is the tax treatment. If you think returning money to investors is bad, I have to ask: Why would anyone invest in the first place?

Forced liquidity and the tax implications can absolutely be bad for investors.

If my option is a 5% dividend or a 5% share buy-back, the net-of-taxes benefit of the 5% dividend is 15%-20% less due to capital gains taxes than the share buy-back. The effect with annual compounding over many years is quite material...

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

#153

Post by WalterBright »

CGMthrowaway wrote: post #54
csours wrote: post #25

I'm not sure how to phrase this, so please be patient and try to understand what I intend to say. CEO pay relative to median employee pay has soared since the 1970s. That is, a CEO may be paid $10,000,000 vs the median employee at $70,000 (arbitrary numbers), where before 1970 the numbers may have been $150,000 and $20,000 Using only one set of numbers can be deceiving though. For instance, through mergers and acquis…

As a thought experiment, consider what it would take to make CEO pay gap even BIGGER, in addition to stock-based comp* and buybacks, which are mentioned in headline. Here's what one might do: - Reduce unions - Outsource and automate labor - Slow minimum wage increases - Consolidate power via M&A (you mentioned this) - Cut back on benefits like healthcare, pensions and paid leave - Promote "guru culture": indispensabl…

Sounds like you should start a company, name yourself CEO, and execute this strategy!

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

#154

Post by Aurornis »

FollowingTheDao wrote: post #18
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?

[flagged]

I don’t believe they do, because people tend to do rather poorly in the years following these revolutions.

They only appeal to people who fantasize about their own outcomes rather than interpreting from history.

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

#155

Post by simianwords »

Aurornis wrote: post #150
simianwords wrote: post #133

Earlier quoted context omitted.

Fair, lets then count income tax which makes it more like $500 assuming net taxes around 40%. I'm ignoring salary increase due to stock valuation going up because it complicates things and there is equal force from both sides of the argument. So you decide: 20,000 companies running with a CEO being paid like an average person. And every citizen gets $500 in their account per year. Edit: its not just a CEO but the C s…

> So you decide: 20,000 companies running with a CEO being paid like an average person. And every citizen gets $500 in their account per year In these contrived scenarios people will always choose the anti-CEO scenario. You could restructure your hypothetical scenario such that the money was lit on fire instead of being paid to executives and you’d still find support from people who are just angry at executives getti…

I agree but funnily enough - lighting it on fire will have the same consequence as every citizen being paid $500 (assuming similar spending patterns of CEO's and workers which is an exaggeration).

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

#156

Post by drunner »

simianwords wrote: post #133
drunner wrote: post #118

Earlier quoted context omitted.

As shown by the covid payments. $900 a year is a lot of money to a lot of folks. Heck annual social security average is 24k a year, so you are talking about nearly 4% more money for just those people alone.

Fair, lets then count income tax which makes it more like $500 assuming net taxes around 40%. I'm ignoring salary increase due to stock valuation going up because it complicates things and there is equal force from both sides of the argument. So you decide: 20,000 companies running with a CEO being paid like an average person. And every citizen gets $500 in their account per year. Edit: its not just a CEO but the C s…

I don't think tax is that high for that income bracket but your point still stands for the rules of the current system. I agree with your sentiment there are way better ways to redistribute wealth.

Just dont discount what several hundred bucks means to way too many people in such a prosperous country.

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

#157

Post by AtlasBarfed »

abdullahkhalids wrote: post #98
bofadeez wrote: post #62

Earlier quoted context omitted.

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…

But available labor is available labor, for new businesses.

I don't understand why people sit around saying oh the minimum wage is going to increase unemployment and therefore treat minimum wage legislation as apostasy, but some radical new technology which results in a lot of unemployment is just the economy getting more efficient and it will absorb all the excess labor with new enterprises.

Is there something about minimum wage legislation that makes the labor completely unusable? Wouldn't it be equally as temporary as some large efficiency gain in the economy?

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

#158

Post by FredPret »

JKCalhoun wrote: post #125
FredPret wrote: post #45

Earlier quoted context omitted.

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?

If you had a $100B asset, like Starbucks Inc, how much would you pay to search for and keep the right guy to run it?

The Venn diagram of people who have the diversity and depth of skills to pull off a major CEO role has a very small overlapped area.

If you choose your CEO well, you turn Apple in 1997 into Apple in 2010. If you choose poorly, your investment stagnates or evaporates.

So a couple of tens of millions in stock options are a bargain for investors. The value-add of any particular minimum wage employee, despite their equal human dignity and worth, is never going to even be in the same league.

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

#159

Post by Aurornis »

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…

> As a French, it's funny seeing references to the French revolution as some kind of rebellion against the rich

As an American with basic history knowledge I find it funny as well.

The internet angry mob ideal of the French Revolution has become a meme in itself. It’s not actually about improving conditions or raising wages, it’s just an outlet for impotent internet rage.

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

#160

Post by missedthecue »

conradev wrote: post #130
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…

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

There aren't always infinity positive return ideas to invest in. Sometimes there really aren't any. Garrett Motion is a company that manufactures turbochargers and sells them to the big three automakers. It's a decently steady and profitable business but it's slowly on the way out. EVs don't need turbochargers. They have a small R&D division looking into EV inverters, and they'll continue to make turbochargers for non-auto applications, but for the most point, they are a melting ice cube and their CEO tells you this in plain terms on earnings calls.

But their stock is priced like it too, so they are plowing most of their free cash flow into buying back shares, and it more than offsets the melt. The result? Their shares are steady and up about 95% over the past 5 years despite overall revenue decline across this period.

Sure, you could have this sleepy turbocharger factory start investing in real estate, or get into uranium mining, or begin trying to write and sell cloud computing software. But their strategy is to keep making a good product and regularly eat up stock to overcome declining earnings per share, and it's working rather nicely.

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