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Should companies not return profits to their shareholders? CEO's should be in jail for doing so? Be serious.

mywittyname 7y ago
I'm not sure how you got to this post after reading the OP. Company leadership should focus on returning capital when appropriate. They should not be repurchasing shares at obviously inflated prices as a last-ditch effort to further raise share prices so they can cash out their bonuses. They should be using that money to improve the business. Basically, leadership needs to think about long-term health, instead of making poor business decisions to improve executive bonuses.
- SamReidHughes 7y ago
  They were repurchasing shares for years and years. If shareholders were unhappy about that, they had every opportunity to replace the board. Or if they are a minority, they can sell. If you’re not a shareholder, you’re free to mind your own business.
  - SolaceQuantum 7y ago
    Shareholders are not the ones who lose the most when the ravens come to roost.
ivalm 7y ago
They definitely should return profits, they shouldn't take on additional debts to increase share price.
- SamReidHughes 7y ago
  All debt is an alternative to raising capital by selling shares and diluting ownership. It doesn’t matter what order you do it in, and sometimes you get a good deal on a loan.
  - ivalm 7y ago
    There is a difference between debt as a way to raise capital for growth vs debt as a way to return unearned money to shareholders.
    - SamReidHughes 7y ago
      Who do you think is loaning the money?
      - ivalm 7y ago
        Capital market participants? Lots of people buy bonds... I am not sure where you are going
        cameronbrown 7y ago
        We are all loaning the money via fractional reserve banking and our pensions. "Shareholders" aren't just people in fancy suits.
        ivalm 7y ago
        I still don’t get your point? All I am saying companies shouldn’t debt finance buy backs. It doesn’t matter the source or target.
        SamReidHughes 7y ago
        If they were taking money out of the company by buying back stocks and sucking it dry, who are the people loaning them money to do this? Your story implies they're throwing billions into these companies without expecting to get their money back.
        ivalm 7y ago
        My story does not imply that at all. Prevailing interest rates are low so investors seeking returns are willing to take increased risks, especially if the bond is still prime (so as to match their mandate). Thus the rise of BBB. At the same time, bond ratings underestimate fragility of corporate debt (what's new, history is littered with "bond ratings underestimated fragility of X"). Combined with a bunch of moral hazard on the part of people packaging everything, you have the current situation. Basically, I fundamentally blame ultra low interest rates for creating incentives, but a more proximate cause is debt financing of buybacks.

I'm not sure how you got to this post after reading the OP. Company leadership should focus on returning capital when appropriate. They should not be repurchasing shares at obviously inflated prices as a last-ditch effort to further raise share prices so they can cash out their bonuses. They should be using that money to improve the business. Basically, leadership needs to think about long-term health, instead of making poor business decisions to improve executive bonuses.

SamReidHughes 7y ago
They were repurchasing shares for years and years. If shareholders were unhappy about that, they had every opportunity to replace the board. Or if they are a minority, they can sell. If you’re not a shareholder, you’re free to mind your own business.
- SolaceQuantum 7y ago
  Shareholders are not the ones who lose the most when the ravens come to roost.

ivalm 7y ago

They definitely should return profits, they shouldn't take on additional debts to increase share price.

SamReidHughes 7y ago
All debt is an alternative to raising capital by selling shares and diluting ownership. It doesn’t matter what order you do it in, and sometimes you get a good deal on a loan.
- ivalm 7y ago
  There is a difference between debt as a way to raise capital for growth vs debt as a way to return unearned money to shareholders.
  - SamReidHughes 7y ago
    Who do you think is loaning the money?
    - ivalm 7y ago
      Capital market participants? Lots of people buy bonds... I am not sure where you are going
      - cameronbrown 7y ago
        We are all loaning the money via fractional reserve banking and our pensions. "Shareholders" aren't just people in fancy suits.
        ivalm 7y ago
        I still don’t get your point? All I am saying companies shouldn’t debt finance buy backs. It doesn’t matter the source or target.
      - SamReidHughes 7y ago
        If they were taking money out of the company by buying back stocks and sucking it dry, who are the people loaning them money to do this? Your story implies they're throwing billions into these companies without expecting to get their money back.
        ivalm 7y ago
        My story does not imply that at all. Prevailing interest rates are low so investors seeking returns are willing to take increased risks, especially if the bond is still prime (so as to match their mandate). Thus the rise of BBB. At the same time, bond ratings underestimate fragility of corporate debt (what's new, history is littered with "bond ratings underestimated fragility of X"). Combined with a bunch of moral hazard on the part of people packaging everything, you have the current situation. Basically, I fundamentally blame ultra low interest rates for creating incentives, but a more proximate cause is debt financing of buybacks.