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It seems like the "investor class" should love pensions. I'm not expert on accounting or law, but pensions sound a lot like a free loan and a borderline scam:
by Aunche 9y ago
It seems like the "investor class" should love pensions. I'm not expert on accounting or law, but pensions sound a lot like a free loan and a borderline scam:
A young company wants to hire 100 people, but from the market rate of salaries, they can only afford to pay hire 80 people. They also don't want to dilute their stock holdings so they opt for pensions instead. The extra 20 employees increase company profits and stock prices explode. The company's balance sheet looks good because they don't have to pay any pensions yet. The original investors can sell their stock long before pensions get paid out, and don't suffer any negative consequences.
- nostromo95 9y ago>The company's balance sheet looks good because they don't have to pay any pensions yet. Companies under GAAP accounting actually do have to carry their pension liabilities/assets on their balance sheet and have to report on the status of their pension fund. So investors can see if the pension is underfunded. Edit: for example, check GM’s last 10-K, note 16. [0] [0] http://phx.corporate-ir.net/phoenix.zhtml?c=231169&p=irol-secTextTest&TEXT=aHR0cDovL2FwaS50ZW5rd2l6YXJkLmNvbS9maWxpbmcueG1sP2lwYWdlPTEyMDI2NTgwJkRTRVE9MCZTRVE9MCZTUURFU0M9U0VDVElPTl9FTlRJUkUmc3Vic2lkPTU3 http://phx.corporate-ir.net/phoenix.zhtml?c=231169&p=irol-se...