3 ms·

> Well, in contrast to other situations, this appears to be a zero-sum game. > A company has a certain revenue, which is used to pay employees, invest back int

by lapcat 2y ago

> Well, in contrast to other situations, this appears to be a zero-sum game. > A company has a certain revenue, which is used to pay employees, invest back into the business, etc. If you pay the CEO an exorbitant amount of money, it means it takes up a larger part of the income, which means you have to pay employees less, invest less, etc. This appears to be missing the crucial point of the article. The problem is not the amount the company spends on the CEO's compensation but rather the amount the company spends on financial schemes in order for the CEO to extract their compensation: "Divide Ellison's $18m among those workers and each of them would net a paltry $126/year. But if you were to share out the $43 billion Ellison had to piss up against a wall on stock buybacks among those workers, you'd be able to give every worker a $30,000 bonus, every year"

triceratops 2y ago
Compensation - executive compensation and worker compensation - is a cost. Buybacks return profits to shareholders. They are not the same. There's an argument to be made that buybacks benefit bigger shareholders disproportionately. To solve that problem, tax them differently.
- lapcat 2y ago
  > There's an argument to be made that buybacks benefit bigger shareholders disproportionately. That's not the issue. Non-founder CEOs are usually not among the biggest shareholders. The issue is a kind of conflict of interest: CEOs with stock-based compensation can directly increase their own compensation by directing the company to do stock buybacks. The CEO is the one who makes the decision about whether the company does buybacks or not.
  - triceratops 2y ago
    The board of directors authorizes buybacks and dividends, not the CEO.
    - lapcat 2y ago
      Boards of directors are rubber stamps. Corporate governance is a joke. Guess who sits on boards of directors? Other CEOs! CEOs get together (that is, conspire) to set their own compensation, which is exactly why, for example, they all get massive golden parachutes for failure. Even the largest institutional investor of a publicly owned corporation has less than 10% of the stock. Ownership is very diffuse, which is why management has so much power despite so little stock.
      - triceratops 2y ago
        Looks like you've arrived at the actual problem. And it's not buybacks themselves.
        lapcat 2y ago
        This is a dumb response and a false dilemma. They're both problems.
gruez 2y ago
>"Divide Ellison's $18m among those workers and each of them would net a paltry $126/year. But if you were to share out the $43 billion Ellison had to piss up against a wall on stock buybacks among those workers, you'd be able to give every worker a $30,000 bonus, every year" There's no plausible circumstance in which the $43B he spent on buybacks would have made it back to workers. Pretending that "paying $43B profit share bonus to workers" was even an option on the table is laughable.
- lapcat 2y ago
  > Pretending that "paying $43B profit share bonus to workers" was even an option on the table is laughable. I don't think the author is pretending that. The author is just trying to accurately measure the cost of a CEO to a company compared to the cost of workers to a company. But some of that $43B could go pay the workers more. And some of it could go toward investment in the future of the company. Some could even go to dividends, which reward stock ownership and long-term investing. Whereas stock buybacks only reward dumping the stock. The article discusses why CEOs prefer buybacks to dividends: it's a lot harder for a CEO to get a massive payday from dividends, because they'd have to sit on their stock for many decades rather than selling after it vests.
  - gruez 2y ago
    >I don't think the author is pretending that. The author is just trying to accurately measure the cost of a CEO to a company compared to the cost of workers to a company. The $43B for all intents and purposes, is profits waiting to be paid out to shareholders. Attributing it to being a "cost" associated with a CEO, makes as much sense as attributing the company's expenses as being a "cost" associated with the purchasing manager. >But some of that $43B could go pay the workers more. And some of it could go toward investment in the future of the company. Even if you take this handwavy argument at face value, it's stretch to imply that if it weren't for the CEO, every worker is going to get a $30k bonus. Moreover, by your own admission, paying it out as a dividend is an option, so that's the reasonable counterfactual to compare against. >Some could even go to dividends, which reward stock ownership and long-term investing. Whereas stock buybacks only reward dumping the stock. The article discusses why CEOs prefer buybacks to dividends: it's a lot harder for a CEO to get a massive payday from dividends, because they'd have to sit on their stock for many decades rather than selling after it vests. Buybacks are the same as dividends for all intents and purposes, except for some tax advantages. If you're a long term shareholder, you should be reinvesting any dividend you receive, not using it to fund this year's vacation or whatever.

by lapcat 2y ago

triceratops 2y ago

Compensation - executive compensation and worker compensation - is a cost. Buybacks return profits to shareholders. They are not the same. There's an argument to be made that buybacks benefit bigger shareholders disproportionately. To solve that problem, tax them differently.

lapcat 2y ago
> There's an argument to be made that buybacks benefit bigger shareholders disproportionately. That's not the issue. Non-founder CEOs are usually not among the biggest shareholders. The issue is a kind of conflict of interest: CEOs with stock-based compensation can directly increase their own compensation by directing the company to do stock buybacks. The CEO is the one who makes the decision about whether the company does buybacks or not.
- triceratops 2y ago
  The board of directors authorizes buybacks and dividends, not the CEO.
  - lapcat 2y ago
    Boards of directors are rubber stamps. Corporate governance is a joke. Guess who sits on boards of directors? Other CEOs! CEOs get together (that is, conspire) to set their own compensation, which is exactly why, for example, they all get massive golden parachutes for failure. Even the largest institutional investor of a publicly owned corporation has less than 10% of the stock. Ownership is very diffuse, which is why management has so much power despite so little stock.
    - triceratops 2y ago
      Looks like you've arrived at the actual problem. And it's not buybacks themselves.
      - lapcat 2y ago
        This is a dumb response and a false dilemma. They're both problems.

gruez 2y ago

>"Divide Ellison's $18m among those workers and each of them would net a paltry $126/year. But if you were to share out the $43 billion Ellison had to piss up against a wall on stock buybacks among those workers, you'd be able to give every worker a $30,000 bonus, every year" There's no plausible circumstance in which the $43B he spent on buybacks would have made it back to workers. Pretending that "paying $43B profit share bonus to workers" was even an option on the table is laughable.

lapcat 2y ago
> Pretending that "paying $43B profit share bonus to workers" was even an option on the table is laughable. I don't think the author is pretending that. The author is just trying to accurately measure the cost of a CEO to a company compared to the cost of workers to a company. But some of that $43B could go pay the workers more. And some of it could go toward investment in the future of the company. Some could even go to dividends, which reward stock ownership and long-term investing. Whereas stock buybacks only reward dumping the stock. The article discusses why CEOs prefer buybacks to dividends: it's a lot harder for a CEO to get a massive payday from dividends, because they'd have to sit on their stock for many decades rather than selling after it vests.
- gruez 2y ago
  >I don't think the author is pretending that. The author is just trying to accurately measure the cost of a CEO to a company compared to the cost of workers to a company. The $43B for all intents and purposes, is profits waiting to be paid out to shareholders. Attributing it to being a "cost" associated with a CEO, makes as much sense as attributing the company's expenses as being a "cost" associated with the purchasing manager. >But some of that $43B could go pay the workers more. And some of it could go toward investment in the future of the company. Even if you take this handwavy argument at face value, it's stretch to imply that if it weren't for the CEO, every worker is going to get a $30k bonus. Moreover, by your own admission, paying it out as a dividend is an option, so that's the reasonable counterfactual to compare against. >Some could even go to dividends, which reward stock ownership and long-term investing. Whereas stock buybacks only reward dumping the stock. The article discusses why CEOs prefer buybacks to dividends: it's a lot harder for a CEO to get a massive payday from dividends, because they'd have to sit on their stock for many decades rather than selling after it vests. Buybacks are the same as dividends for all intents and purposes, except for some tax advantages. If you're a long term shareholder, you should be reinvesting any dividend you receive, not using it to fund this year's vacation or whatever.