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> Many companies have been ruined and continue to be ruined You say "ruined", I say "fulfilled their ultimate purpose as disposable wealth-extraction machines

> Many companies have been ruined and continue to be ruined You say "ruined", I say "fulfilled their ultimate purpose as disposable wealth-extraction machines enriching executives". I totally agree that the stock market's design encourages short-termism. But this is entirely appropriate in service of the idea that heroic individuals are chiefly responsible for company outcomes.

tim333 7y ago
Though of course in traditional theory the company should be run for the shareholders rather than the executives. It's a bit of a flaw in the system if they can extract large bonuses while tanking the stock. Maybe the government could write some laws that bonuses have to be held in escrow for a while to check the company survives. (And in more modern views maybe you should worry about the other stakeholders too.)
- rectang 7y ago
  I disagree that it's a "flaw". It is the natural consequence of an ideology, where we ascribe proportionate value to the contributions of executives and marginal value to the contributions of everyone else. Since we believe that executives are the ones creating the wealth, it is just that the wealth flows out of the company and towards them. Executives giveth and executives taketh away.
  - tim333 7y ago
    >Since we believe that executives are the ones creating the wealth I wonder how many people actually believe that.
- nradov 7y ago
  Shareholders are free to impose deferred compensation schemes on executives. In fact many companies have done so. No new laws are needed.
  - mcguire 7y ago
    Which companies? Most shares in most companies I've seen have been owned or controlled by executives or by institutional investors (mutual funds, insurance cos., pensions) that tend to vote with executives' recommendations. Without high-level executive support, shareholders are free to do whatever they want, but the important ones typically don't want.
- marcosdumay 7y ago
  Active shareholders are happy to see their stock value rise to unsustainable levels and then selling them to the next suckers. Passive shareholders, well, don't participate on decision making. Expect this feature to get worse with increased share of index funds. But not by much, because most people never were active anyway.
  - mcguire 7y ago
    "Expect this feature to get worse with increased share of index funds." How so? Index funds buy when the shares are high and sell when they're low.
  - icebraining 7y ago
    > Passive shareholders, well, don't participate on decision making. That's not true, fund managers vote on behalf of those shareholders, and not always go along with the board's position. See for example Vanguard's voting record: https://about.vanguard.com/investment-stewardship/how-our-funds-voted/ https://about.vanguard.com/investment-stewardship/how-our-fu...

tim333 7y ago

Though of course in traditional theory the company should be run for the shareholders rather than the executives. It's a bit of a flaw in the system if they can extract large bonuses while tanking the stock. Maybe the government could write some laws that bonuses have to be held in escrow for a while to check the company survives. (And in more modern views maybe you should worry about the other stakeholders too.)

rectang 7y ago
I disagree that it's a "flaw". It is the natural consequence of an ideology, where we ascribe proportionate value to the contributions of executives and marginal value to the contributions of everyone else. Since we believe that executives are the ones creating the wealth, it is just that the wealth flows out of the company and towards them. Executives giveth and executives taketh away.
- tim333 7y ago
  >Since we believe that executives are the ones creating the wealth I wonder how many people actually believe that.
nradov 7y ago
Shareholders are free to impose deferred compensation schemes on executives. In fact many companies have done so. No new laws are needed.
- mcguire 7y ago
  Which companies? Most shares in most companies I've seen have been owned or controlled by executives or by institutional investors (mutual funds, insurance cos., pensions) that tend to vote with executives' recommendations. Without high-level executive support, shareholders are free to do whatever they want, but the important ones typically don't want.
marcosdumay 7y ago
Active shareholders are happy to see their stock value rise to unsustainable levels and then selling them to the next suckers. Passive shareholders, well, don't participate on decision making. Expect this feature to get worse with increased share of index funds. But not by much, because most people never were active anyway.
- mcguire 7y ago
  "Expect this feature to get worse with increased share of index funds." How so? Index funds buy when the shares are high and sell when they're low.
- icebraining 7y ago
  > Passive shareholders, well, don't participate on decision making. That's not true, fund managers vote on behalf of those shareholders, and not always go along with the board's position. See for example Vanguard's voting record: https://about.vanguard.com/investment-stewardship/how-our-funds-voted/ https://about.vanguard.com/investment-stewardship/how-our-fu...