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Are there studies that show a causal relationship between higher CEO pay and profits? Do buybacks cause profits to increase? Maybe from what I can see? But lon

Are there studies that show a causal relationship between higher CEO pay and profits? Do buybacks cause profits to increase? Maybe from what I can see? But long-term? If all we care about is short-term then that will lead to the continued financial cannibalization of the US economy. Where private equity firms buy companies and destroy them for short-term profit while loading them with the debt used to buy them. I think the obvious answer to both these questions is: no. CEO pay and buybacks don't focus on profits. At best short-term. Which isn't good. I think companies should focus on making good products that positively serve the countries they sell in, while secondly still aiming for a profit.

johnecheck 1y ago
If you measure 'profit' as 'how much does the net worth of our owners go up', stock buybacks make a lot of sense. This seems like a particularly terrible measure of success for everyone but those owners.
- simianwords 1y ago
  This is too circular. Profit is just revenue - cost. The stock values depend on current and future risk adjusted profit.
  - TylerE 1y ago
    In theory. In practice the stock prices of many large companies seems to be completely decoupled from any thing even resembling economic reality. Does anyone really think Tesla is worth more than every single other automaker combined? That’s what the stock price (market cap) is saying.
simianwords 1y ago
Why do you think the shareholders approve the CEO salaries if they don't get back profits in return? You can't have the short term long term argument because stock values already account for risk adjusted returns over time. If as you said, short term profits are prioritised over long term profits - the short term stock price would reflect that and it is not beneficial to shareholders.
- AtlasBarfed 1y ago
  You don't think CEOs have gamed the compensation committees? I think the major institutional investors don't get involved cuz they're major institutional investors, and other investors don't have enough power to influence the compensation committee.
  - simianwords 1y ago
    Yeah but why does the board approve those salaries if they don't expect to get more out of it?
    - sfifs 1y ago
      What makes you think a typical corporate board actually acts in the interest of its shareholders?
      - simonsarris 1y ago
        ??? Because the typical corporate board usually owns an awful lot of shares, and the c-suite is often largely paid in shares. The second part of this article is about stock buybacks for a reason. There is really no doubt that they are sensitive to shareholders here.
        AtlasBarfed 1y ago
        Go check out how the Tesla board functions, who is on it, how they got there, and how they could be removed. Musk has his cronies on the board, and the rules to replace someone on the board effectively require 80+% of the stock not owned by Elon to change. The members of this board got huge stock grants from Musk and are utterly beholden to him.
    - atmavatar 1y ago
      [dead]
LarMachinarum 1y ago
> Do buybacks cause profits to increase? They cause each (remaining) shareholder's part of the profits to increase (relative and absolute), because there are fewer shareholders left. So it does very really increase the value of each share.

johnecheck 1y ago

If you measure 'profit' as 'how much does the net worth of our owners go up', stock buybacks make a lot of sense. This seems like a particularly terrible measure of success for everyone but those owners.

simianwords 1y ago
This is too circular. Profit is just revenue - cost. The stock values depend on current and future risk adjusted profit.
- TylerE 1y ago
  In theory. In practice the stock prices of many large companies seems to be completely decoupled from any thing even resembling economic reality. Does anyone really think Tesla is worth more than every single other automaker combined? That’s what the stock price (market cap) is saying.

simianwords 1y ago

Why do you think the shareholders approve the CEO salaries if they don't get back profits in return? You can't have the short term long term argument because stock values already account for risk adjusted returns over time. If as you said, short term profits are prioritised over long term profits - the short term stock price would reflect that and it is not beneficial to shareholders.

AtlasBarfed 1y ago
You don't think CEOs have gamed the compensation committees? I think the major institutional investors don't get involved cuz they're major institutional investors, and other investors don't have enough power to influence the compensation committee.
- simianwords 1y ago
  Yeah but why does the board approve those salaries if they don't expect to get more out of it?
  - sfifs 1y ago
    What makes you think a typical corporate board actually acts in the interest of its shareholders?
    - simonsarris 1y ago
      ??? Because the typical corporate board usually owns an awful lot of shares, and the c-suite is often largely paid in shares. The second part of this article is about stock buybacks for a reason. There is really no doubt that they are sensitive to shareholders here.
      - AtlasBarfed 1y ago
        Go check out how the Tesla board functions, who is on it, how they got there, and how they could be removed. Musk has his cronies on the board, and the rules to replace someone on the board effectively require 80+% of the stock not owned by Elon to change. The members of this board got huge stock grants from Musk and are utterly beholden to him.
  - atmavatar 1y ago
    [dead]

LarMachinarum 1y ago

> Do buybacks cause profits to increase? They cause each (remaining) shareholder's part of the profits to increase (relative and absolute), because there are fewer shareholders left. So it does very really increase the value of each share.