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> The stranglehold of this doctrine of “shareholder-value maximization” over corporate decision making has been a leading cause of ... sagging productivity. lo

by darawk 8y ago

> The stranglehold of this doctrine of “shareholder-value maximization” over corporate decision making has been a leading cause of ... sagging productivity. lol...maximizing shareholder value is a cause of sagging productivity? Do these people even read their own words before they publish them? This whole 'stock buybacks are evil' meme is beyond silly. The only difference between dividends and stock buybacks is tax efficiency. So yes, corporations are avoiding some tax burden by doing this, and that may be a bad thing - so change the tax policy. But there's no reason to expect stock buybacks are the cause of anything other than a slightly lower tax bill, and, predictably, this article doesn't even bother to try to make the actual case otherwise. It just makes a bunch of blanket, baseless and unsupported assertions. It's seriously irritating the absolute garbage that gets published in places like the NYT these days. This article doesn't even try to make its case. It just pushes a narrative with innuendo and bald assertions. How can something like this possibly get past their editors?

mlthoughts2018 8y ago
a naive pursuit of maximizing shareholder value outside of greater context could easily result in failing to maximize shareholder value, let alone worse productivity metrics. I’m not saying the article is faultless, but I don’t agree with the reaction to the quote you selected. It seems very reasonable to me.
- darawk 8y ago
  You could make a nuanced argument like that, sure. But if you did that, you'd have to actually flush it out, and making an argument like that actually work is quite hard. Which is why this article doesn't bother to attempt it. They just state it, and hope nobody is paying attention.
  - mlthoughts2018 8y ago
    Why is it hard to make such an argument? Intuitively, just from the basic operation observable of most large companies and the ubiquity of corporate dysfunction, it seems obvious. To the degree that the burden of proof would go the other way. It’s exceptional to me to say that companies pursue maximizing shareholder value in a way that generally accomplishes that goal, or to disagree with the conclusion that companies are mostly stagnant in terms of actual productivity measures and have been for a while (something that highlights the current extreme incongruity between aggregate financial metrics and societal productivity metrics). Those positions require extreme, special evidence since they are so at odds with reality.
    - darawk 8y ago
      Play the tape all the way through. You are proposing that there exists free money to be made by companies willing to invest more in their employees, right? And you are proposing that most companies are unwilling to pick that money up off the ground because their time horizon is too short. People make multi-decade investments all the time. The idea that business people are out there systematically avoiding any and all long term investments is patently false and completely unsupported by any evidence i'm aware of.
      - mlthoughts2018 8y ago
        > “You are proposing that there exists free money to be made by companies willing to invest more in their employees, right?“ No, I did not suggest that. > “People make multi-decade investments all the time.“ No, that’s a bonkers and ridiculous claim. Some extremely small group of people might make such long-term investments, usually real estate consortiums and mining rights consortiums, but it is an extreme minority of all investment activity, and even more extreme if weighted by dollar value. And even after all that, such investments are still usually made based on net present value calculations with short time horizons, combined with forecasts on the liquidity of the asset (e.g. secondary markets for long-term debt instruments or options or futures for rights-based initiatives). > “The idea that business people are out there systematically avoiding any and all long term investments is patently false and completely unsupported by any evidence i'm aware of.” This seems like a statement about what you’re aware of, and not a statement about long-term investing, which it seems by your own admission, you’re not aware of.
coltonv 8y ago
I think it's poor form to just refer to the opposing position in an argument as a "meme", then feel as though simply referring to it as a "meme" makes it so you don't need to actually make a counterargument. I see this a lot on the internet lately and I'm not sure why people think that different opinions can just be shrugged off and called "memes". That's not even what a meme is! The author makes the point that, when companies spend so much on stock buybacks they don't have reserves to keep things running in economic downturns, thus leaving them in grave danger should recession come around, and leaves their employees more exposed than they need to be. I think this is a point worth talking about, especially if you feel it's not true, because by calling it a meme and not countering it, you've given no chance to bat for your own opinion and offering counterpoints. On the subject of the first quote, I'm no economist, but it seems perfectly feasible that optimizing for shareholder value does not perfectly correlate to optimized productivity. For example, Musk wants to take Tesla private because he feels the quarterly stock review cycle restricts his ability to innovate and think long term. Musk is quite the capitalist, so I think the idea that optimizing for share price being bad for productivity is certainly worth presenting at the table.
- darawk 8y ago
  > I think it's poor form to just refer to the opposing position in an argument as a "meme", then feel as though simply referring to it as a "meme" makes it so you don't need to actually make a counterargument. If you read my comment, i'm applying Hitchen's razor: That which can be asserted without evidence, can be dismissed without evidence. They didn't make an argument. > I see this a lot on the internet lately and I'm not sure why people think that different opinions can just be shrugged off and called "memes". That's not even what a meme is! First of all, yes, it is exactly what a meme is. A meme is a socially transmitted idea with virality. That is precisely what I am asserting this "buybacks are evil" idea is. > The author makes the point that, when companies spend so much on stock buybacks they don't have reserves to keep things running in economic downturns, thus leaving them in grave danger should recession come around, and leaves their employees more exposed than they need to be. The author does try to make that throwaway point, though of course, provides no evidence that it was in any way related to buybacks. Just think through the idea you're asserting here: In the interest of maximizing shareholder value the company is going to make itself more likely to go bankrupt in the future? How does that maximize shareholder value? Secondly, even if they were doing that, which there is no evidence that they are: if you ban buybacks, they'll just switch to dividends. If you ban dividends, you've now banned all mechanisms by which investors may be remunerated for their capital investment, and thereby effectively banned the stock market.
nradov 8y ago
We should eliminate corporate income tax completely, and raise taxes on individual investors to make the change revenue neutral. That would encourage economic growth by simplifying corporate accounting and reducing the incentive to engage in pointless financial engineering.
- darawk 8y ago
  I'd tentatively agree with that. I don't think corporate taxation is particularly valuable, and corporations are much harder to effectively tax. Wealth inequality matters at the individual level anyway, not the corporate level.
- WalterBright 8y ago
  Actually, we should eliminate the corporate income tax, and replace it with taxing pollution (such as taxing plastic).
  - darawk 8y ago
    Pigouvian taxes ftw.
  - WalterBright 8y ago
    I'm curious what peoples' objections to taxing pollution are.
    - nradov 8y ago
      I didn't down vote you, but many people think that cap and trade systems are more effective than taxes at reducing pollution. I don't necessarily object to taxing pollution but that seems like a totally separate issue than whether to tax income.
      - WalterBright 8y ago
        I don't know why cap&trade should be more effective, it is almost certainly less efficient. For example, a cap implies that polluting X amount is bad, polluting X-epsilon is good, and then sets a market around that. But taxing pollution means the less one pollutes, the less one pays, with the idea that less is better. The other advantage of taxing pollution is it provides revenue to the government, while regulations and caps do not.
aslkdjaslkdj1 8y ago
>lol...maximizing shareholder value is a cause of sagging productivity? Here's the longer paper the author wrote a couple years ago that explains his reasoning. You may disagree with his argument, but to dismiss it outright as having no merit says more about you than it does about the author or the NYT. https://www.brookings.edu/wp-content/uploads/2016/06/lazonick.pdf https://www.brookings.edu/wp-content/uploads/2016/06/lazonic... >Once the problems of strategic control have been addressed, the process of taking back the corporation can turn to the critical role of organizational integration. Productivity in an advanced economy depends on the extent to which members of the labor force have the opportunity to engage in collective and cumulative learning over the course of careers that may span 40 years or more. Under the Old Economy business model, major corporations supported this social condition through the norm of a career with one company, albeit almost exclusively for white males. It is unrealistic to assume that in a world of open-systems technologies and intense global competition the norm of a career with one company could, or should, be restored. That does not, however, lessen the need for collective and cumulative careers as the employment foundation of a highly productive economy. It is reasonable to believe that in the provision of lifelong learning through on-the-job experience, government agencies and civil society organizations, including universities, will have to continue to play important, and perhaps even growing, roles. The business corporation, however, will have to anchor a national system of career employment through a retain-and-reinvest resource-allocation regime. Jettison the downsize-and-distribute ideology of MSV, and U.S. business corporations can focus on becoming learning organizations once again. >If hundreds of billions of dollars annually stop flowing out of the nation’s major corporations to do buybacks, then vast amounts of resources will become available to provide the financial commitment that innovation requires.84 Ban buybacks, and companies will be able to use these funds not only, or even primarily, to finance capital expenditures but more importantly to attract, train, retain, and motivate their career employees. In high-tech companies a significant proportion of these employees will be engaged in R&D, but the innovative enterprise needs experienced and motivated employees in a range of other functions as well. And some of the funds made available by a buyback ban can flow to the government as tax revenues to enable it to invest in physical infrastructure and human knowledge that can underpin the next generation of innovation.
- darawk 8y ago

by darawk 8y ago

mlthoughts2018 8y ago

a naive pursuit of maximizing shareholder value outside of greater context could easily result in failing to maximize shareholder value, let alone worse productivity metrics. I’m not saying the article is faultless, but I don’t agree with the reaction to the quote you selected. It seems very reasonable to me.

darawk 8y ago
You could make a nuanced argument like that, sure. But if you did that, you'd have to actually flush it out, and making an argument like that actually work is quite hard. Which is why this article doesn't bother to attempt it. They just state it, and hope nobody is paying attention.
- mlthoughts2018 8y ago
  Why is it hard to make such an argument? Intuitively, just from the basic operation observable of most large companies and the ubiquity of corporate dysfunction, it seems obvious. To the degree that the burden of proof would go the other way. It’s exceptional to me to say that companies pursue maximizing shareholder value in a way that generally accomplishes that goal, or to disagree with the conclusion that companies are mostly stagnant in terms of actual productivity measures and have been for a while (something that highlights the current extreme incongruity between aggregate financial metrics and societal productivity metrics). Those positions require extreme, special evidence since they are so at odds with reality.
  - darawk 8y ago
    Play the tape all the way through. You are proposing that there exists free money to be made by companies willing to invest more in their employees, right? And you are proposing that most companies are unwilling to pick that money up off the ground because their time horizon is too short. People make multi-decade investments all the time. The idea that business people are out there systematically avoiding any and all long term investments is patently false and completely unsupported by any evidence i'm aware of.
    - mlthoughts2018 8y ago
      > “You are proposing that there exists free money to be made by companies willing to invest more in their employees, right?“ No, I did not suggest that. > “People make multi-decade investments all the time.“ No, that’s a bonkers and ridiculous claim. Some extremely small group of people might make such long-term investments, usually real estate consortiums and mining rights consortiums, but it is an extreme minority of all investment activity, and even more extreme if weighted by dollar value. And even after all that, such investments are still usually made based on net present value calculations with short time horizons, combined with forecasts on the liquidity of the asset (e.g. secondary markets for long-term debt instruments or options or futures for rights-based initiatives). > “The idea that business people are out there systematically avoiding any and all long term investments is patently false and completely unsupported by any evidence i'm aware of.” This seems like a statement about what you’re aware of, and not a statement about long-term investing, which it seems by your own admission, you’re not aware of.

coltonv 8y ago

I think it's poor form to just refer to the opposing position in an argument as a "meme", then feel as though simply referring to it as a "meme" makes it so you don't need to actually make a counterargument. I see this a lot on the internet lately and I'm not sure why people think that different opinions can just be shrugged off and called "memes". That's not even what a meme is! The author makes the point that, when companies spend so much on stock buybacks they don't have reserves to keep things running in economic downturns, thus leaving them in grave danger should recession come around, and leaves their employees more exposed than they need to be. I think this is a point worth talking about, especially if you feel it's not true, because by calling it a meme and not countering it, you've given no chance to bat for your own opinion and offering counterpoints. On the subject of the first quote, I'm no economist, but it seems perfectly feasible that optimizing for shareholder value does not perfectly correlate to optimized productivity. For example, Musk wants to take Tesla private because he feels the quarterly stock review cycle restricts his ability to innovate and think long term. Musk is quite the capitalist, so I think the idea that optimizing for share price being bad for productivity is certainly worth presenting at the table.

darawk 8y ago
> I think it's poor form to just refer to the opposing position in an argument as a "meme", then feel as though simply referring to it as a "meme" makes it so you don't need to actually make a counterargument. If you read my comment, i'm applying Hitchen's razor: That which can be asserted without evidence, can be dismissed without evidence. They didn't make an argument. > I see this a lot on the internet lately and I'm not sure why people think that different opinions can just be shrugged off and called "memes". That's not even what a meme is! First of all, yes, it is exactly what a meme is. A meme is a socially transmitted idea with virality. That is precisely what I am asserting this "buybacks are evil" idea is. > The author makes the point that, when companies spend so much on stock buybacks they don't have reserves to keep things running in economic downturns, thus leaving them in grave danger should recession come around, and leaves their employees more exposed than they need to be. The author does try to make that throwaway point, though of course, provides no evidence that it was in any way related to buybacks. Just think through the idea you're asserting here: In the interest of maximizing shareholder value the company is going to make itself more likely to go bankrupt in the future? How does that maximize shareholder value? Secondly, even if they were doing that, which there is no evidence that they are: if you ban buybacks, they'll just switch to dividends. If you ban dividends, you've now banned all mechanisms by which investors may be remunerated for their capital investment, and thereby effectively banned the stock market.

nradov 8y ago

We should eliminate corporate income tax completely, and raise taxes on individual investors to make the change revenue neutral. That would encourage economic growth by simplifying corporate accounting and reducing the incentive to engage in pointless financial engineering.

darawk 8y ago
I'd tentatively agree with that. I don't think corporate taxation is particularly valuable, and corporations are much harder to effectively tax. Wealth inequality matters at the individual level anyway, not the corporate level.
WalterBright 8y ago
Actually, we should eliminate the corporate income tax, and replace it with taxing pollution (such as taxing plastic).
- darawk 8y ago
  Pigouvian taxes ftw.
- WalterBright 8y ago
  I'm curious what peoples' objections to taxing pollution are.
  - nradov 8y ago
    I didn't down vote you, but many people think that cap and trade systems are more effective than taxes at reducing pollution. I don't necessarily object to taxing pollution but that seems like a totally separate issue than whether to tax income.
    - WalterBright 8y ago
      I don't know why cap&trade should be more effective, it is almost certainly less efficient. For example, a cap implies that polluting X amount is bad, polluting X-epsilon is good, and then sets a market around that. But taxing pollution means the less one pollutes, the less one pays, with the idea that less is better. The other advantage of taxing pollution is it provides revenue to the government, while regulations and caps do not.

aslkdjaslkdj1 8y ago

>lol...maximizing shareholder value is a cause of sagging productivity? Here's the longer paper the author wrote a couple years ago that explains his reasoning. You may disagree with his argument, but to dismiss it outright as having no merit says more about you than it does about the author or the NYT. https://www.brookings.edu/wp-content/uploads/2016/06/lazonick.pdf https://www.brookings.edu/wp-content/uploads/2016/06/lazonic... >Once the problems of strategic control have been addressed, the process of taking back the corporation can turn to the critical role of organizational integration. Productivity in an advanced economy depends on the extent to which members of the labor force have the opportunity to engage in collective and cumulative learning over the course of careers that may span 40 years or more. Under the Old Economy business model, major corporations supported this social condition through the norm of a career with one company, albeit almost exclusively for white males. It is unrealistic to assume that in a world of open-systems technologies and intense global competition the norm of a career with one company could, or should, be restored. That does not, however, lessen the need for collective and cumulative careers as the employment foundation of a highly productive economy. It is reasonable to believe that in the provision of lifelong learning through on-the-job experience, government agencies and civil society organizations, including universities, will have to continue to play important, and perhaps even growing, roles. The business corporation, however, will have to anchor a national system of career employment through a retain-and-reinvest resource-allocation regime. Jettison the downsize-and-distribute ideology of MSV, and U.S. business corporations can focus on becoming learning organizations once again. >If hundreds of billions of dollars annually stop flowing out of the nation’s major corporations to do buybacks, then vast amounts of resources will become available to provide the financial commitment that innovation requires.84 Ban buybacks, and companies will be able to use these funds not only, or even primarily, to finance capital expenditures but more importantly to attract, train, retain, and motivate their career employees. In high-tech companies a significant proportion of these employees will be engaged in R&D, but the innovative enterprise needs experienced and motivated employees in a range of other functions as well. And some of the funds made available by a buyback ban can flow to the government as tax revenues to enable it to invest in physical infrastructure and human knowledge that can underpin the next generation of innovation.

darawk 8y ago