2 ms·

Why would investors consider overcompensating executives a buy signal?

• JetSpiegel 7y ago
  If you can waste money on worthless crap like executive compensation, your company must be flushing with cash.
  • devonkim 7y ago
    I’d argue “wasting money” with higher wages for employees is more of an indicator of being comfortable in its business model and margins rather than just a few people paid millions. For example, Costco seems a lot healthier than Walmart and last I checked the stock for the latter was underperforming against Costco (although Costco is also underperforming in comparison to broader indexes because of the Amazon fears by investors).
    • JetSpiegel 7y ago
      Agreed, but by "executive compensation" I did not mean wages only. Not even employees, most of them have non-trivial amounts of stock.
• inflatableDodo 7y ago
  Most investors are surprisingly low detail. They are looking for indications of confidence in comparison to competitors, as opposed to knowing a lot about the specific companies business. If company A in sector Z pays out a load of executive bonuses, or headhunts a new CEO at a higher rate than companies B, C & D, then the stock will usually rise at such news, unless there is some other very public news to cancel that out.
  • api 7y ago
    The low amount of thought that goes into investing tons of money blows my mind. When I was younger I assumed investors did tons and tons of homework and had all kinds of domain experts, etc., but then I too got out in the real world and saw how it really works.