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A power-hungry CEO would rather hold on to the cash and use it to build a bigger empire. But it’s often in the best interest of shareholders to return cash via
by djakjxnanjak 7y ago
A power-hungry CEO would rather hold on to the cash and use it to build a bigger empire. But it’s often in the best interest of shareholders to return cash via a dividend or buyback (buyback is preferred for tax reasons). It’s good that the CEOs interests are aligned with the shareholders here.
- georgeecollins 7y agoPower hungry perhaps. But if his compensation is stock options his goal will be to raise the stock price. A risky wsy is to invest in growth. A safe way is to buy back stock.
- djakjxnanjak 7y agoIt’s good for investors that the company can provide a sure return. If they don’t want to sell in/after a buyback, they can enjoy their more concentrated ownership. The investors can use the cash value of this increased equity to invest in more speculative growth stocks if they want, but they don’t have to.