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> If the CEO of a non-profit decides to quit abruptly, wouldn't that make everyone rightfully worried over the future of that entity? It feels very reasonable

> If the CEO of a non-profit decides to quit abruptly, wouldn't that make everyone rightfully worried over the future of that entity? It feels very reasonable to worry yet it is not totally impossible a person may happen to want to quit for no business-relevant reason. > Then, it's appropriate that the share price fall because the cost of transitioning leadership so abruptly will certainly affect the previously forecasted future earnings off of which the share price was established to begin with. Makes sense but can't the new leader be and seem much better so the prices could actually rise?

tathougies 8y ago
> It feels very reasonable to worry yet it is not totally impossible a person may happen to want to quit for no business-relevant reason. Indeed, but that does not change the fact that the practical matter of transitioning leadership means there is certain to be some dysfunction. Not to mention that some CEOs end up running their business into the ground and it's not always obvious which ones will succeed and which won't. The uncertainty also drives the stock price down. There is no way to fix this (IMO), and this incentivizes the shareholders (in the form of the board) to offer whatever compensation necessary to prevent this kind of unnecessary leadership change, leading to the CEO salaries that some label as exorbitant. > Makes sense but can't the new leader be and seem much better so the prices could actually rise? Yes, but people are invested in the market for all sorts of reasons. Someone with a shorter term horizon (like someone retiring imminently) is likely to have their money invested in larger companies, because it is expected that larger companies have fewer management shifts and thus fewer price fluctuations. Thus, while certainly a change in leadership can result in long term value increase, it has the effect of lowering the current value, and this can disproportionately affect some people. Of course, for those with a longer time horizon, this is an opportunity for arbitrage.
JetSpiegel 8y ago
> > Then, it's appropriate that the share price fall because the cost of transitioning leadership so abruptly will certainly affect the previously forecasted future earnings off of which the share price was established to begin with. > Makes sense but can't the new leader be and seem much better so the prices could actually rise? Companies are like dictatorships, there's no transition of power that can go smoothly. Of course, this kind of problem in institutions with similar scale (like governments) is mitigated by democracies, but corporations will never adopt something like this, it's anti-ethical to their values.
- qwerty456127 8y ago
  By the way, what if a new form corporation could be introduced (not to replace the classic but as an alternative): a democratic corporation governed by all the people who work there the same way democracies work. So every employee would vote to elect the board members or the CEO. Could it be viable?
  - tathougies 8y ago
    This is called a 'cooperative' and yes it's totally viable. Every corporation is a democracy, except the shareholders are not always the employees. In a coop, the shareholders (or at least the majority of shareholders) are employees (usually due to compensation schemes that give employees stock). There are several examples of large coops, such as Mondragon, Winco, Publix, etc. They do not require any extraordinary corporate structure, and are completely compatible with the kind of free market capitalism many 'Western' countries have today.
    - qwerty456127 8y ago
      Why are there no cooperatives of this kind in the IT industry?
- bgroat 8y ago
  This is largely obviated by most corporations having multiple classes of shares. However corporations ARE democracies. The citizens are the shareholders and our ministers/government officials are the board of directors. Our civil servants are the employees (including executive employees)
- tathougies 8y ago
  > Of course, this kind of problem in institutions with similar scale (like governments) is mitigated by democracies, but corporations will never adopt something like this, it's anti-ethical to their values. What? No. Even democracies have a single head of government. The choice of that head may be distributed, but the identity of that person is not, and yes, they almost invariably have hiccups when power transitions happen. Corporations are representative democracies, where the representatives are the board, and the voters the shareholders, although of course, you have to buy the ability to vote which changes the dynamics.

tathougies 8y ago

> It feels very reasonable to worry yet it is not totally impossible a person may happen to want to quit for no business-relevant reason. Indeed, but that does not change the fact that the practical matter of transitioning leadership means there is certain to be some dysfunction. Not to mention that some CEOs end up running their business into the ground and it's not always obvious which ones will succeed and which won't. The uncertainty also drives the stock price down. There is no way to fix this (IMO), and this incentivizes the shareholders (in the form of the board) to offer whatever compensation necessary to prevent this kind of unnecessary leadership change, leading to the CEO salaries that some label as exorbitant. > Makes sense but can't the new leader be and seem much better so the prices could actually rise? Yes, but people are invested in the market for all sorts of reasons. Someone with a shorter term horizon (like someone retiring imminently) is likely to have their money invested in larger companies, because it is expected that larger companies have fewer management shifts and thus fewer price fluctuations. Thus, while certainly a change in leadership can result in long term value increase, it has the effect of lowering the current value, and this can disproportionately affect some people. Of course, for those with a longer time horizon, this is an opportunity for arbitrage.

JetSpiegel 8y ago

> > Then, it's appropriate that the share price fall because the cost of transitioning leadership so abruptly will certainly affect the previously forecasted future earnings off of which the share price was established to begin with. > Makes sense but can't the new leader be and seem much better so the prices could actually rise? Companies are like dictatorships, there's no transition of power that can go smoothly. Of course, this kind of problem in institutions with similar scale (like governments) is mitigated by democracies, but corporations will never adopt something like this, it's anti-ethical to their values.

qwerty456127 8y ago
By the way, what if a new form corporation could be introduced (not to replace the classic but as an alternative): a democratic corporation governed by all the people who work there the same way democracies work. So every employee would vote to elect the board members or the CEO. Could it be viable?
- tathougies 8y ago
  This is called a 'cooperative' and yes it's totally viable. Every corporation is a democracy, except the shareholders are not always the employees. In a coop, the shareholders (or at least the majority of shareholders) are employees (usually due to compensation schemes that give employees stock). There are several examples of large coops, such as Mondragon, Winco, Publix, etc. They do not require any extraordinary corporate structure, and are completely compatible with the kind of free market capitalism many 'Western' countries have today.
  - qwerty456127 8y ago
    Why are there no cooperatives of this kind in the IT industry?
bgroat 8y ago
This is largely obviated by most corporations having multiple classes of shares. However corporations ARE democracies. The citizens are the shareholders and our ministers/government officials are the board of directors. Our civil servants are the employees (including executive employees)
tathougies 8y ago
> Of course, this kind of problem in institutions with similar scale (like governments) is mitigated by democracies, but corporations will never adopt something like this, it's anti-ethical to their values. What? No. Even democracies have a single head of government. The choice of that head may be distributed, but the identity of that person is not, and yes, they almost invariably have hiccups when power transitions happen. Corporations are representative democracies, where the representatives are the board, and the voters the shareholders, although of course, you have to buy the ability to vote which changes the dynamics.