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Matt Levine repeatedly writes about it with a very good explanation: it would be strange to think that companies should always grow - from time to time there ar

by zby 8y ago

Matt Levine repeatedly writes about it with a very good explanation: it would be strange to think that companies should always grow - from time to time there are better investment opportunities outside the company and it makes sense that in such circumstances the company returns money to the shareholders so that they can invest it somewhere else. That outflow of money from the company to the market is interpreted as short-termism - because buying shares by the company looks as if the company tried to increase its share prices instead of making investments.

dharma1 8y ago
If you are talking about share buybacks, I think they serve management with stock options exceptionally well. Sometimes that incentive is aligned with shareholders and people working at the said company, but not always. It would be interesting to look at new methods of corporate governance for making these type of decisions, that involves the investors and people working in the company more directly.
- zby 8y ago
  Dividend and stock buy backs are mostly the same thing - the company returning money to the market, but yeah in the specific case of management stock options they might have different effects. As for involving workers in the company governance - this is common in Europe, I know that at least in Germany and Norway at some size of the enterprise the workers elect representatives for the board.
  - dharma1 8y ago
    Yes, though dividends are taxed differently and usually share price rather than dividend issuance is linked to performance related options/bonuses for management. I think these two things create an artificial preference for share buybacks, and sometimes can influence short term gain seeking (management financial incentives especially are not always aligned with 5-10+ year time span). I think a board seat for employee representative is one way - I'm interested in broader direct democracy type approaches of corporate governance. Blockchain and DAOs feel like an interesting match for this, since many types of corporate activity - bookkeeping, shares (tokens) and token holder voting can be done on the blockchain. We are exploring this with https://Aragon.one https://Aragon.one

by zby 8y ago

dharma1 8y ago

If you are talking about share buybacks, I think they serve management with stock options exceptionally well. Sometimes that incentive is aligned with shareholders and people working at the said company, but not always. It would be interesting to look at new methods of corporate governance for making these type of decisions, that involves the investors and people working in the company more directly.

zby 8y ago
Dividend and stock buy backs are mostly the same thing - the company returning money to the market, but yeah in the specific case of management stock options they might have different effects. As for involving workers in the company governance - this is common in Europe, I know that at least in Germany and Norway at some size of the enterprise the workers elect representatives for the board.
- dharma1 8y ago
  Yes, though dividends are taxed differently and usually share price rather than dividend issuance is linked to performance related options/bonuses for management. I think these two things create an artificial preference for share buybacks, and sometimes can influence short term gain seeking (management financial incentives especially are not always aligned with 5-10+ year time span). I think a board seat for employee representative is one way - I'm interested in broader direct democracy type approaches of corporate governance. Blockchain and DAOs feel like an interesting match for this, since many types of corporate activity - bookkeeping, shares (tokens) and token holder voting can be done on the blockchain. We are exploring this with https://Aragon.one https://Aragon.one