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CEOs pay is tied to the stock price. They will do whatever it takes to boost the stock price, until they are out with a golden parachute. From their perspective

CEOs pay is tied to the stock price. They will do whatever it takes to boost the stock price, until they are out with a golden parachute. From their perspective, the business is all about boosting the stock price. It doesn't matter if the boost comes from innovation, or from polluting the planet, or from unscrupulous addictive practices, or from culling the employees. Employees are merely, an often undesired, side-effect in the business of boosting stock prices.

mjevans 3y ago
Executive stock prices should vest at the first of 25 years from the date earned or 10 years after they've left the company. That would encourage long term strategies rather than pump and dump.
- nine_zeros 3y ago
  That would certainly be one way of attaining long term vision. But who will enforce this requirement? Only pension funds and other large shareholders have any (and often impractical) leverage over the board C-suite. Wall-street shareholders demand faster growth until they themselves can exit out. They don't care about the business or the services or the employees. They want a high growth return, year-over-year until their own investment carry continues to exist.
  - toomuchtodo 3y ago
    Stock buybacks used to be illegal. Lots of ways to use policy to encourage long-term shareholder value if boards and corporate bylaws won’t.
    - nine_zeros 3y ago
      Stock buyback is equivalent to paying a dividend. If stock buybacks are prevented, companies will continue to layoff and pay out dividends. It doesn't solve the root cause that employees don't have a seat at the decision-making table. At a minimum, if corporation laws were modified such that every laid off employee must be issued 1 year worth of shares as a golden parachute, the incentives will all get aligned very quickly and employees will not be abruptly thrown away.
      - mrcode007 3y ago
        It is not the same as a dividend. Not even close. By definition, one returns cash, the other doesn’t. The stock buyback also prevents market price discovery because of an artificial price floor. The buyback is also a subject to buyback tax, transaction fee at the broker, and the benefits of the buyback are not captured by the long term holders, only by short term holders, e.g. insiders, who often sell into the buyback guaranteeing a price floor and effectively an execution price.
    - s1artibartfast 3y ago
      Stock BuyBacks have nothing to do with long or short-term vision.
      - toomuchtodo 3y ago
        The previous restriction on them was an example of controlling capital markets with statute. That was the point. These are all just words on power and numbers in a database. We can change the rules whenever we collectively choose to.
- spacemanspiff01 3y ago
  [dead]
- kqr2 3y ago
  Some companies such as Toyota supposedly have 100 year business plans: http://www.gongol.com/research/economics/100yearplans/ http://www.gongol.com/research/economics/100yearplans/
kccqzy 3y ago
And frankly layoffs had almost no effect on their stock prices. Announcing new products, even if quite half-baked AI efforts, had much bigger impact on stock prices than layoffs.
- henry2023 3y ago
  Ask facebook
  - mertd 3y ago
    Meta stock performance is not really attributable to layoffs.
  - filoleg 3y ago
    Meta stock price is almost back to its all time high. 149% up since the beginning of the year, 249% up since its lowest point of the crash.
- nine_zeros 3y ago
  > And frankly layoffs had almost no effect on their stock prices. Announcing new products, even if quite half-baked AI efforts, had much bigger impact on stock prices than layoffs. This is true but you know what? Every action of the CEO is meant for the investors and large shareholders. The layoff is merely a signal that says "I am willing to do what it takes to give you your return. Buy more shares"
madballster 3y ago
That is a very narrow and frankly sweepingly incorrect description of "CEOs" or "companies". They're not all the same. I for one (alongside many other investors) carefully study incentive programs and compensation oversight executed by the board of directors. There are many thoughtful companies (and CEOs) who e.g. align over very long-term targets, such as '5 year return on capital". Investors have found out a long time ago that incentivizing by short-term measures such as share price (or revenues, or EPS) can bring about very adverse long-term investing outcomes.
- nine_zeros 3y ago
  Concurred but... Let's imagine that shareholders agree on a 5 year return on capital plan. Now let's say some missteps/economic circumstances make revenue go down in the 4th year. The CEO will get heat from the investors. This is especially true if the board contains an investor representative who can vote the CEO out. What choice does the CEO have at that time but to boost short term? Look at the same story from an employee perspective. Imagine that employee worked for 4 years and the downturn arrives. They invested a lot of time of their precious life, much like the shareholders invested their precious money. In the downturn, the CEO gets to make a choice and the choice ALWAYS is to boost the stock price for shareholders (and for themselves). Often, at the expense of employees.
  - Salgat 3y ago
    Exactly. It's more accurate to say "we look at long term as long as the short term stock price also looks good".
    - whimsicalism 3y ago
      Do you all not understand that the stock price reflects the long term prospects of the company? It’s literally priced in
      - somsak2 3y ago
        It's really crazy how just a few months ago Facebook's long-term prospects were worth just 1/3 of what they are now! What do you think changed so much during that time to warrant the 3x increase?
ChuckMcM 3y ago
And if you make them subject to "alternative minimum tax" where their stock based compensation is considered regular income for the year it is awarded based on the difference between the strike price and the market price, you "moderate" that process somewhat. But if you're a politician and your donors are all rich elites who really hated that aspect of AMT you get repeal it for them: https://www.bowlesrice.com/tax-cuts-and-jobs-act-2018-changes-Alternative-Minimum.html https://www.bowlesrice.com/tax-cuts-and-jobs-act-2018-change...
- sjs7007 3y ago
  > compensation is considered regular income for the year it is awarded based on the difference between the strike price and the market price Isn't that exactly how it works? Your grant price just determines your number of your shares. When your shares vest they get taxed as regular income for the entirety of the vest amount.
  - dmoy 3y ago
    > When your shares vest they get taxed as regular income for the entirety of the vest amount. This describes restricted stock units. Stock options are taxed differently.
s1artibartfast 3y ago
I disagree with pretty much everything you say except this. >Employees are merely, an often undesired, side-effect in the business of boosting stock prices. Employees are worse than a side effect, they're a cost center to be avoided if possible. You want to achieve your goals with as few employees as possible.
- mistrial9 3y ago
  it is truly a product of the computer age, to come up with self-centered ego BS like this. You do not acknowledge different industries or business models, distribution of physical goods or market brand activity, let along "things that take more that one person to do" .. This is a rote recital of an inner dialog of an ill "investor" CEO who might as soon throw his secretary off of a bridge than give a bonus for winter holidays. There are not enough words to scourge this infantile, Ayn Randian nonesense from the page.
  - s1artibartfast 3y ago
    Never in history have companies hired more employees for the sake of having more employees. This isn't a new modern or even libertarian hypothesis. Do you think people in 1000 bc hired more employees than they needed just maximize headcount. Of course not. You want enough to get the job done and not more.
    - sackbut 3y ago
      People in 1000 BC is maybe not the best example here considering practically the entire population of Egypt was tasked with building or supporting the building of the pyramids among many other projects.
      - s1artibartfast 3y ago
        I think that's just as good of an example as any. Do you think pharaohs hired and fed more slaves than they needed to build a pyramid just to maximize worker numbers, or so the extra could sit around and take it easy? Egypt had shops and Merchants too. Can you think of any time between then and now where things worked that way?
tootie 3y ago
Employees do work and that work is meant to be profitable. If it is, then great. More employees, more profit. If it isn't, they get cut. That's exactly what CEOs are responsible for determining.

mjevans 3y ago

Executive stock prices should vest at the first of 25 years from the date earned or 10 years after they've left the company. That would encourage long term strategies rather than pump and dump.

nine_zeros 3y ago
That would certainly be one way of attaining long term vision. But who will enforce this requirement? Only pension funds and other large shareholders have any (and often impractical) leverage over the board C-suite. Wall-street shareholders demand faster growth until they themselves can exit out. They don't care about the business or the services or the employees. They want a high growth return, year-over-year until their own investment carry continues to exist.
- toomuchtodo 3y ago
  Stock buybacks used to be illegal. Lots of ways to use policy to encourage long-term shareholder value if boards and corporate bylaws won’t.
  - nine_zeros 3y ago
    Stock buyback is equivalent to paying a dividend. If stock buybacks are prevented, companies will continue to layoff and pay out dividends. It doesn't solve the root cause that employees don't have a seat at the decision-making table. At a minimum, if corporation laws were modified such that every laid off employee must be issued 1 year worth of shares as a golden parachute, the incentives will all get aligned very quickly and employees will not be abruptly thrown away.
    - mrcode007 3y ago
      It is not the same as a dividend. Not even close. By definition, one returns cash, the other doesn’t. The stock buyback also prevents market price discovery because of an artificial price floor. The buyback is also a subject to buyback tax, transaction fee at the broker, and the benefits of the buyback are not captured by the long term holders, only by short term holders, e.g. insiders, who often sell into the buyback guaranteeing a price floor and effectively an execution price.
  - s1artibartfast 3y ago
    Stock BuyBacks have nothing to do with long or short-term vision.
    - toomuchtodo 3y ago
      The previous restriction on them was an example of controlling capital markets with statute. That was the point. These are all just words on power and numbers in a database. We can change the rules whenever we collectively choose to.
spacemanspiff01 3y ago
[dead]
kqr2 3y ago
Some companies such as Toyota supposedly have 100 year business plans: http://www.gongol.com/research/economics/100yearplans/ http://www.gongol.com/research/economics/100yearplans/

kccqzy 3y ago

And frankly layoffs had almost no effect on their stock prices. Announcing new products, even if quite half-baked AI efforts, had much bigger impact on stock prices than layoffs.

henry2023 3y ago
Ask facebook
- mertd 3y ago
  Meta stock performance is not really attributable to layoffs.
- filoleg 3y ago
  Meta stock price is almost back to its all time high. 149% up since the beginning of the year, 249% up since its lowest point of the crash.
nine_zeros 3y ago
> And frankly layoffs had almost no effect on their stock prices. Announcing new products, even if quite half-baked AI efforts, had much bigger impact on stock prices than layoffs. This is true but you know what? Every action of the CEO is meant for the investors and large shareholders. The layoff is merely a signal that says "I am willing to do what it takes to give you your return. Buy more shares"

madballster 3y ago

That is a very narrow and frankly sweepingly incorrect description of "CEOs" or "companies". They're not all the same. I for one (alongside many other investors) carefully study incentive programs and compensation oversight executed by the board of directors. There are many thoughtful companies (and CEOs) who e.g. align over very long-term targets, such as '5 year return on capital". Investors have found out a long time ago that incentivizing by short-term measures such as share price (or revenues, or EPS) can bring about very adverse long-term investing outcomes.

nine_zeros 3y ago
Concurred but... Let's imagine that shareholders agree on a 5 year return on capital plan. Now let's say some missteps/economic circumstances make revenue go down in the 4th year. The CEO will get heat from the investors. This is especially true if the board contains an investor representative who can vote the CEO out. What choice does the CEO have at that time but to boost short term? Look at the same story from an employee perspective. Imagine that employee worked for 4 years and the downturn arrives. They invested a lot of time of their precious life, much like the shareholders invested their precious money. In the downturn, the CEO gets to make a choice and the choice ALWAYS is to boost the stock price for shareholders (and for themselves). Often, at the expense of employees.
- Salgat 3y ago
  Exactly. It's more accurate to say "we look at long term as long as the short term stock price also looks good".
  - whimsicalism 3y ago
    Do you all not understand that the stock price reflects the long term prospects of the company? It’s literally priced in
    - somsak2 3y ago
      It's really crazy how just a few months ago Facebook's long-term prospects were worth just 1/3 of what they are now! What do you think changed so much during that time to warrant the 3x increase?

ChuckMcM 3y ago

And if you make them subject to "alternative minimum tax" where their stock based compensation is considered regular income for the year it is awarded based on the difference between the strike price and the market price, you "moderate" that process somewhat. But if you're a politician and your donors are all rich elites who really hated that aspect of AMT you get repeal it for them: https://www.bowlesrice.com/tax-cuts-and-jobs-act-2018-changes-Alternative-Minimum.html https://www.bowlesrice.com/tax-cuts-and-jobs-act-2018-change...

sjs7007 3y ago
> compensation is considered regular income for the year it is awarded based on the difference between the strike price and the market price Isn't that exactly how it works? Your grant price just determines your number of your shares. When your shares vest they get taxed as regular income for the entirety of the vest amount.
- dmoy 3y ago
  > When your shares vest they get taxed as regular income for the entirety of the vest amount. This describes restricted stock units. Stock options are taxed differently.

s1artibartfast 3y ago

I disagree with pretty much everything you say except this. >Employees are merely, an often undesired, side-effect in the business of boosting stock prices. Employees are worse than a side effect, they're a cost center to be avoided if possible. You want to achieve your goals with as few employees as possible.

mistrial9 3y ago
it is truly a product of the computer age, to come up with self-centered ego BS like this. You do not acknowledge different industries or business models, distribution of physical goods or market brand activity, let along "things that take more that one person to do" .. This is a rote recital of an inner dialog of an ill "investor" CEO who might as soon throw his secretary off of a bridge than give a bonus for winter holidays. There are not enough words to scourge this infantile, Ayn Randian nonesense from the page.
- s1artibartfast 3y ago
  Never in history have companies hired more employees for the sake of having more employees. This isn't a new modern or even libertarian hypothesis. Do you think people in 1000 bc hired more employees than they needed just maximize headcount. Of course not. You want enough to get the job done and not more.
  - sackbut 3y ago
    People in 1000 BC is maybe not the best example here considering practically the entire population of Egypt was tasked with building or supporting the building of the pyramids among many other projects.
    - s1artibartfast 3y ago
      I think that's just as good of an example as any. Do you think pharaohs hired and fed more slaves than they needed to build a pyramid just to maximize worker numbers, or so the extra could sit around and take it easy? Egypt had shops and Merchants too. Can you think of any time between then and now where things worked that way?

tootie 3y ago

Employees do work and that work is meant to be profitable. If it is, then great. More employees, more profit. If it isn't, they get cut. That's exactly what CEOs are responsible for determining.