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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

#161

Post by AtlasBarfed »

simianwords wrote: post #119
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…

Why do you think the shareholders approve the CEO salaries if they don't get back profits in return? You can't have the short term long term argument because stock values already account for risk adjusted returns over time. If as you said, short term profits are prioritised over long term profits - the short term stock price would reflect that and it is not beneficial to shareholders.

You don't think CEOs have gamed the compensation committees?

I think the major institutional investors don't get involved cuz they're major institutional investors, and other investors don't have enough power to influence the compensation committee.

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

#162

Post by simianwords »

woooooo wrote: post #120
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…

Thats 3600 for a family of four. 5% of median household income in a country where most have zero savings.

The impact of the whole C suite of top 20,000 companies in USA would be much reduced incentives. These are the same companies that are making products that workers purchase from. Sure 5% extra money per family.

Do you really think 5% increase in income would change the savings scenario? The median real disposable income increased by more than 20% over the years. I don't think savings have changed.

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

#163

Post by WalterBright »

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?

Maybe this is the self correction. Consider the various CEOs of Apple. Some drove it to near bankruptcy, Jobs drove it to the richest company in the world.

Same company, same employees.

The only difference was leadership.

Consider also what happened to MSFT when Nadella took over. Same company, same employees, dramatically different results.

As a shareholder of Microsoft and Apple, I am happy with their CEO compensation. They earned it. And after all, CEO compensation comes out of the pockets of the shareholders, not the pockets of the employees.

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

#164

Post by AtlasBarfed »

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…

What if the stock buyback is done to trigger stock options with artificial stock price inflation?

And maybe I don't understand the stock option game and stock BuyBacks don't count towards the strike price for options. But I doubt it

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

#165

Post by whimsicalism »

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.

> What’s the motivation of the CEO to increase employee wages if his compensation isn’t tied to theirs?

To pay the asking price for the needed labor?

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

#166

Post by WalterBright »

Aurornis wrote: post #154
FollowingTheDao wrote: post #18

Earlier quoted context omitted.

[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.

The usual arc is a reign of terror after the revolution.

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

#167

Post by koolba »

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.

> What’s the motivation of the CEO to increase employee wages if his compensation isn’t tied to theirs?

Wages are a cost. Profits are revenue minus costs. Share price is driven by profits. The job of a CEO is to maximize share price.

The only reason to raise wages is if you think it will lead to a net gain of profit during your tenure. Say do to efficiency or simply retaining better talent. There’s no gain for simply raising employee wages. Quite the opposite.

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

#168

Post by drewbug01 »

echelon wrote: post #89
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, and it's giving the money back to its owners to more productively invest. Before tech companies demonstrated the principle of infinite growth, the purpose of a company was to generate revenue (paid as dividends) for its shareholders. So much growth hasn't really been possible before. If a company can keep gro…

> Before tech companies demonstrated the principle of infinite growth

Perhaps we have different definitions of “infinite,” but either way I’m pretty sure nobody’s demonstrated that yet.

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

#169

Post by simianwords »

AtlasBarfed wrote: post #161
simianwords wrote: post #119

Earlier quoted context omitted.

Why do you think the shareholders approve the CEO salaries if they don't get back profits in return? You can't have the short term long term argument because stock values already account for risk adjusted returns over time. If as you said, short term profits are prioritised over long term profits - the short term stock price would reflect that and it is not beneficial to shareholders.

You don't think CEOs have gamed the compensation committees? I think the major institutional investors don't get involved cuz they're major institutional investors, and other investors don't have enough power to influence the compensation committee.

Yeah but why does the board approve those salaries if they don't expect to get more out of it?

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

#170

Post by WalterBright »

thrance wrote: post #21
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]

> no one cares about the long-term anymore.

Every shareholder does, because you cannot make a quick buck off of a stock if the other shareholders are looking for the quick buck as well.

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