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Business is almost always all about share price for the shareholders, who are the ones who set a CEO's salary (via the board). A drop is share price can dimini

Business is almost always all about share price for the shareholders, who are the ones who set a CEO's salary (via the board). A drop is share price can diminish or even wipe out any dividends a company might pay out of profits. Many companies don't pay dividends at all (reinvesting profit for growth), so the only possible gain a shareholder has in those cases is through capital gains from selling stock.

gnaritas 9y ago
> Business is almost always all about share price for the shareholders And there's what wrong with the world in one short sentence. The market was supposed to be about raising capital so companies could go out and earn profits, the company shouldn't worry or care about its share price in the secondary market, it should be taking the capital and making good business decisions that lead to making profits. Letting the share price be the metric that decisions are made on is letting the tail wag the dog and leads to short term quarterly thinking and bad decisions all around; it's not how a good company is run. Profits lead to good companies which lead to good share prices, you aim for profits and good share prices are the result, not the other way around.
- mi100hael 9y ago
  > the company shouldn't worry or care about its share price in the secondary market But "the company" is literally owned by people who buy & sell portions of it in the second market. There are only two reasons to buy shares of a company: dividends and price gains. Owners of company first and foremost want their investment to appreciate not depreciate, ergo company cares about share price first and foremost.
  - gnaritas 9y ago
    And that's the problem of managing a public company, share holders care about the wrong thing; they've confused the tail with the dog which is what leads public companies to do stupid shit that hurts the business long term to pump up the share price short term. Look, I don't need you to explain how companies work, I'm fully aware, you don't seem to realize I'm critiquing how they work, I'm not lacking in understanding, I'm simply pointing out how the incentives are perverse and lead to companies doing the wrong thing.
- allannienhuis 9y ago
  well, I was trying to be specific :) - 'the shareholders'. It's not (usually) that way for 'regular' employees and customers, who typically care more about the mission of the venture (if they care at all :) ). But in the context of CEO/executive pay, the shareholders have an enormous influence - they're the ones providing the incentive and direction, in their own self-interest. That's the way the system is designed from bottom to top. Some companies controlled by a small number of investors (typically founders) may have other more socially constructive priorities, but I think in even many of those cases, it's lip service, and the real reason those things are priorities at all are because it's 'good business' (it will be better off for the shareholders financially).

gnaritas 9y ago

> Business is almost always all about share price for the shareholders And there's what wrong with the world in one short sentence. The market was supposed to be about raising capital so companies could go out and earn profits, the company shouldn't worry or care about its share price in the secondary market, it should be taking the capital and making good business decisions that lead to making profits. Letting the share price be the metric that decisions are made on is letting the tail wag the dog and leads to short term quarterly thinking and bad decisions all around; it's not how a good company is run. Profits lead to good companies which lead to good share prices, you aim for profits and good share prices are the result, not the other way around.

mi100hael 9y ago
> the company shouldn't worry or care about its share price in the secondary market But "the company" is literally owned by people who buy & sell portions of it in the second market. There are only two reasons to buy shares of a company: dividends and price gains. Owners of company first and foremost want their investment to appreciate not depreciate, ergo company cares about share price first and foremost.
- gnaritas 9y ago
  And that's the problem of managing a public company, share holders care about the wrong thing; they've confused the tail with the dog which is what leads public companies to do stupid shit that hurts the business long term to pump up the share price short term. Look, I don't need you to explain how companies work, I'm fully aware, you don't seem to realize I'm critiquing how they work, I'm not lacking in understanding, I'm simply pointing out how the incentives are perverse and lead to companies doing the wrong thing.
allannienhuis 9y ago
well, I was trying to be specific :) - 'the shareholders'. It's not (usually) that way for 'regular' employees and customers, who typically care more about the mission of the venture (if they care at all :) ). But in the context of CEO/executive pay, the shareholders have an enormous influence - they're the ones providing the incentive and direction, in their own self-interest. That's the way the system is designed from bottom to top. Some companies controlled by a small number of investors (typically founders) may have other more socially constructive priorities, but I think in even many of those cases, it's lip service, and the real reason those things are priorities at all are because it's 'good business' (it will be better off for the shareholders financially).