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> NB that "returning money to the shareholders" is ultimately what companies are for And here I thought companies are there to provide me, the consumer, and th

> NB that "returning money to the shareholders" is ultimately what companies are for And here I thought companies are there to provide me, the consumer, and the customer, with useful products and services. If the purpose is return of money to shareholders, then the best strategy is to over leverage the company, spend every penny on stock buybacks, then default on all obligations to suppliers, pension funds and customers. Because you can fund stock buybacks with debt, but you could not do that with dividends. We have made economic destruction profitable and it’s happening across our economy - water companies in UK are going bankrupt because they have huge debt that they took out just for stock buybacks, and not for anything else, and now interest rates are up. Same thing happened with airlines, and many other firms.

pjc50 3y ago
It's always been "both"? (specifically for the PLC-type company). People invest in the expectation of a return, to be achieved by doing business. It's usually phrased as "maximize shareholder value", which is ambiguous about the timeframe, but for most cases the value is understood to be over the indefinite future. Not that that stops people from taking short term decisions which can be bad in the long term. > Because you can fund stock buybacks with debt, but you could not do that with dividends. There are plenty of companies with large debs that pay dividends on the US market, such as Ford. The overleveraged self-destruction is bad, but that tends to be a feature of private equity deals where there is a single majority owner doing it on purpose (e.g. Maplin, Jaguar Land Rover). Harder to do with a publicly owned company where the investors can see what you are doing and may sue you. The UK water companies should never have been privatized in the first place. They're dysfunctional because water isn't a normal market and arguably can't be, so they're ripe for this kind of looting of the state by capital depletion.

pjc50 3y ago

It's always been "both"? (specifically for the PLC-type company). People invest in the expectation of a return, to be achieved by doing business. It's usually phrased as "maximize shareholder value", which is ambiguous about the timeframe, but for most cases the value is understood to be over the indefinite future. Not that that stops people from taking short term decisions which can be bad in the long term. > Because you can fund stock buybacks with debt, but you could not do that with dividends. There are plenty of companies with large debs that pay dividends on the US market, such as Ford. The overleveraged self-destruction is bad, but that tends to be a feature of private equity deals where there is a single majority owner doing it on purpose (e.g. Maplin, Jaguar Land Rover). Harder to do with a publicly owned company where the investors can see what you are doing and may sue you. The UK water companies should never have been privatized in the first place. They're dysfunctional because water isn't a normal market and arguably can't be, so they're ripe for this kind of looting of the state by capital depletion.