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Eating the future seed corn in the hopes of higher profits now has been the business model of choice for most companies for the past 40 years, ever since compen

Eating the future seed corn in the hopes of higher profits now has been the business model of choice for most companies for the past 40 years, ever since compensation for senior management became directly linked to stock prices. Allowing executives to walk away with short-term gains but stick shareholders (and/or the public) with long-term losses broke many, many things in corporate governance and society in general. It's no coincidence that quality of life measures began to stagnate when this became the normal way to do business.

lotsofpulp 6y ago
How is compensation in equity short term? It usually comes with a vesting period so that the reward is in the future. https://www.investopedia.com/terms/s/stockcompensation.asp https://www.investopedia.com/terms/s/stockcompensation.asp https://www.equilar.com/reports/3-equity-vesting-schedules.html https://www.equilar.com/reports/3-equity-vesting-schedules.h... The only thing that could incentivize more long term performance would be even longer vesting periods, but that comes with downsides too.
- marvin 6y ago
  In one sense it’s sort of a moot point, as companies that hire this type of executive will in the long term be driven out of business by those who don’t. But I don’t think you can properly incentivize people to avoid this class of mistake (short-term thinking) unless top leadership are themselves long-term owners. Long-term owners would be very interested in avoiding this mistake, though. But it does present a bit of a tax on e.g. public companies with fragmented ownership.
p_l 6y ago
Shareholders are happy on it, considering that for public shares the horizon of future thought is "next quarter". Short term share price gains are utilised in trading. It's only the long term shareholders that get burned on this, whether they own actual shares or just share the consequences

lotsofpulp 6y ago

How is compensation in equity short term? It usually comes with a vesting period so that the reward is in the future. https://www.investopedia.com/terms/s/stockcompensation.asp https://www.investopedia.com/terms/s/stockcompensation.asp https://www.equilar.com/reports/3-equity-vesting-schedules.html https://www.equilar.com/reports/3-equity-vesting-schedules.h... The only thing that could incentivize more long term performance would be even longer vesting periods, but that comes with downsides too.

marvin 6y ago
In one sense it’s sort of a moot point, as companies that hire this type of executive will in the long term be driven out of business by those who don’t. But I don’t think you can properly incentivize people to avoid this class of mistake (short-term thinking) unless top leadership are themselves long-term owners. Long-term owners would be very interested in avoiding this mistake, though. But it does present a bit of a tax on e.g. public companies with fragmented ownership.

p_l 6y ago

Shareholders are happy on it, considering that for public shares the horizon of future thought is "next quarter". Short term share price gains are utilised in trading. It's only the long term shareholders that get burned on this, whether they own actual shares or just share the consequences