3 ms·

I don't know, but it seems pretty easy to come up with a theory here - a large portion of executive compensation is from company stock, and short term actions t

I don't know, but it seems pretty easy to come up with a theory here - a large portion of executive compensation is from company stock, and short term actions that drive up the value of that stock will always be preferred, because as long as they aren't holding the proverbial hot potato when the thing collapses, they'll be fine - (and likely even if they are left holding it, they'll be fine - golden parachutes and all that). So people making the decisions tend to incentivize the things that will maximize the return for their time.

drivebyhooting 2y ago
I don’t think a country club has publicly traded stock.
- BryanBigs 2y ago
  Yeah but that 15% food revenue growth might have gotten someone a bonus internally that year...
  - drivebyhooting 2y ago
    That’s not how small businesses work. If we’re going to speculate we can list many other scenarios; some which aren’t as accusatory towards the management.
    - ElevenLathe 2y ago
      In this case the "management" was theoretically answerable to the "customers" themselves, since it was a private club, but my understanding was that in practice the "board" basically just rubber-stamped whatever the management wanted (very similar to how "shareholders" in big public companies are treated). There were other reasons to think that the club was in trouble (elderly membership literally dying off, dilapidated facilities, laying off beloved long-time staff, rust-belt economy not minting a ton of new rich people) so my best guess is that it was as simple as that: they needed short-term cashflow to stay in business, so they took it from the waiters and bussers. Either this wasn't enough and they had to close up anyway, or it actually brought the ultimate failure point forward.
BryanBigs 2y ago
Exactly. Case in point: I worked on an investment team that had a product that at the time would close at $2b in assets. We were top 5% on 1/3yr performance, so we had incoming demand. The dept head was paid on sales per calendar year, so he forced us to accept the last $300m of assets in December at 0.60% fee. Our average fee on the existing $1.7b? 1.25%. If we had waited for the other pipeline biz to close in Jan-March, it would have been at least 1% fee. Many dumb buisness decisions are just logical decisions for a individual based on incentives that you can't see. They happen to be at odds with the goals of the firm as a whole.
ksec 2y ago
I wonder if we can change the incentive to have their bonus in stock options that can only be accessed via a minimum 10 years to 15 years.
mrcondorcet 2y ago
This is a pretty good explanation. I never thought about it like that. But the short term benefit of aggressive executive action is in tune with short term stock increase. It is not the market but the shareholder that decides. And short term the shareholder and the market are antagonists.

drivebyhooting 2y ago

I don’t think a country club has publicly traded stock.

BryanBigs 2y ago
Yeah but that 15% food revenue growth might have gotten someone a bonus internally that year...
- drivebyhooting 2y ago
  That’s not how small businesses work. If we’re going to speculate we can list many other scenarios; some which aren’t as accusatory towards the management.
  - ElevenLathe 2y ago
    In this case the "management" was theoretically answerable to the "customers" themselves, since it was a private club, but my understanding was that in practice the "board" basically just rubber-stamped whatever the management wanted (very similar to how "shareholders" in big public companies are treated). There were other reasons to think that the club was in trouble (elderly membership literally dying off, dilapidated facilities, laying off beloved long-time staff, rust-belt economy not minting a ton of new rich people) so my best guess is that it was as simple as that: they needed short-term cashflow to stay in business, so they took it from the waiters and bussers. Either this wasn't enough and they had to close up anyway, or it actually brought the ultimate failure point forward.

BryanBigs 2y ago

Exactly. Case in point: I worked on an investment team that had a product that at the time would close at $2b in assets. We were top 5% on 1/3yr performance, so we had incoming demand. The dept head was paid on sales per calendar year, so he forced us to accept the last $300m of assets in December at 0.60% fee. Our average fee on the existing $1.7b? 1.25%. If we had waited for the other pipeline biz to close in Jan-March, it would have been at least 1% fee. Many dumb buisness decisions are just logical decisions for a individual based on incentives that you can't see. They happen to be at odds with the goals of the firm as a whole.

ksec 2y ago

I wonder if we can change the incentive to have their bonus in stock options that can only be accessed via a minimum 10 years to 15 years.

mrcondorcet 2y ago

This is a pretty good explanation. I never thought about it like that. But the short term benefit of aggressive executive action is in tune with short term stock increase. It is not the market but the shareholder that decides. And short term the shareholder and the market are antagonists.