4 ms·

Dumb maybe question: Why couldn’t the companies with excess profits just pay they employees more in salaries?

nucleogenesis 1y ago
The only people who matter are shareholders. Employees are a means to the end of making money for the owners of the company whether through stocks or other kinds of ownership.
nyeah 1y ago
They could, but then they'd have to report lower profits by the same amount. I want to actually defend this though: Corporate profit is a very narrow measure, by design. It was never intended to capture how well the nation is doing.
Macha 1y ago
That would not make the share price number go up, which in turn means it doesn't make the leadership's net worth number go up, which means the leadership won't make that choice.
- fn-mote 1y ago
  The leadership’s net worth is going up based on their compensation plan including stock options, regardless. If you are more explicit about your assumptions it might be easier to believe or refute the argument.
ceejayoz 1y ago
That would set a precedent they don’t want. Investors and the Federal government have little interest in labor gaining power.
vladms 1y ago
Companies are controlled by shareholders who appoint the board who appoint the CEO. If the CEO decides to pay employees more, the board will change him because shareholder put money to get money out, not to give to employees. Companies can give "shares" to employees, which means excess profits can be made dividends out of which employees "touch a bit". If you would have your own company (privately own and full control) you are of course free to share the excess profit as you see fit. Edit: and of course, share buy back avoids some taxes that you must pay, which in other schemes would have to be paid.
- deleted 1y ago
  [deleted]
- pas 1y ago
  buyback defers tax incidence, but it doesn't avoid it, no? also boards rarely change CEOs for paying employees well, they change CEOs if the company is not growing labor's share of income usually falls during periods of growing output and rises otherwise (but apparently tech booms/bubbles are an exception, check the graph -- https://en.wikipedia.org/wiki/Labor_share#/media/File:FRED_graph_of_US_labor_share_1948%E2%80%932016.svg https://en.wikipedia.org/wiki/Labor_share#/media/File:FRED_g... ) an unexpected but welcome change is that real wages of low-income workers increased too during the recent years, but the historic trend obviously shows the enormous disparity (check figure C 1979-2019) https://www.epi.org/publication/strong-wage-growth-for-low-wage-workers-bucks-the-historic-trend/ https://www.epi.org/publication/strong-wage-growth-for-low-w... ... and for interesting context let's not forget that during this time a lot of immigrants started to work https://cis.org/Report/ForeignBorn-Number-and-Share-US-Population-AllTime-Highs-January-2025 https://cis.org/Report/ForeignBorn-Number-and-Share-US-Popul... and for context on the context, the size of the active population also increased - so fewer people age out of the workforce than how many started working https://tradingeconomics.com/united-states/active-population-aged-15-64-all-persons-for-the-united-states-fed-data.html https://tradingeconomics.com/united-states/active-population...
triceratops 1y ago
Why would they do that when they could pay shareholders and themselves?
- nyeah 1y ago
  Right now, in the US, we've given them no reason. But that's not a law of nature. For example a country might have an industrial policy.
  - nradov 1y ago
    Having an industrial policy has been disastrous for most countries that have tried it. Works fine for a few years and then everything falls apart as the grifting builds up and disruptive innovations destroy the underlying reasons for the original policy goals.
    - deleted 1y ago
      [deleted]
    - nyeah 1y ago
      I don't doubt your sincerity. But there's a big difference between believing something very sincerely and actually knowing whether it's true or not.
      - nradov 1y ago
        I actually know it's true that having an industrial policy has been a net negative in the majority of countries where it was tried.
        deleted 1y ago
        [deleted]
aleph_minus_one 1y ago
> Why couldn’t the companies with excess profits just pay they employees more in salaries? They could, but why should they? Which advantage get the shareholders from this? The only reason why a company with excess profits "should" pay the employees more is if i) for a given role, the expected results of potential applicants varies a lot (i.e. the company has an incentive "to hire the best of the best") ii) the market for these exceptional talents is tough (i.e. if the company does not hire the best, someone else will; additionally, if the company does not pay the employees really well, they will be poached)
insane_dreamer 1y ago
they don't want to the purpose of a company is to deliver maximum return to shareholders; if they're not doing that, then they're failing their fiduciary duty and the shareholders might try to force the company to change its ways the shareholders want the money coming to them, not to the employees (this is why the Public Benefit Corporation, "B-Corp" structure was invented, so that the company's stated purpose can be something other than simply generating value for its shareholders)
badpun 1y ago
For businesses, employees are a necessary evil and not company's beneficiaries.
barchar 1y ago
1. They don't have to 2. If employees want to be exposed to excess profit (and loss) they can buy shares like everyone else. (Not a super strong argument tbh) 3. It's impossible to measure how much any given employee/department really contributed and they don't want to create a culture of chasing fat bonus checks. 4. To some extent they do tend to. Profit sharing plans and ESOPs aren't that uncommon
- matwood 1y ago
  > 2. If employees want to be exposed to excess profit (and loss) It's funny that people tell me they want this because they'll see some of the sales outliers. But then I explain that 1/2 or more of their salary will be dependent on some type of performance metric and most clam up.
matwood 1y ago
The same reason you don't give a store $2 for something priced at $1 or write anything other than a zero in the box on your tax form that lets you pay more if you like.
eloisant 1y ago
You're thinking of companies as teams where employees are members, but c-staff just see their employees as expensive suppliers.
- andrewlgood 1y ago
  Have you ever been a c-staff? C-staff are employees as well. Usually more expensive employees. Well run companies are trying to figure out how to win in the marketplace. To do this they hire the employees they need to win. Investors do this with CEOs. I agree that it is much more difficult for a CEO to get fired than a line employee as CEOs have significant influence in picking their boarda. However, the consequences to a company of replacing a CEO are generally more significant as well.
andrewlgood 1y ago
Different markets. Companies are created to allow investors to create profits selling something (things, services, etc). Companies compete with other companies to attract capital. Companies which offer higher expected returns for comparable levels of risk will attract more capital. This reflects supply and demand for capital. Employees are part of a labor market. Supply and demand in the labor market drives compensation levels. When you have a rare skill that is perceived to be valuable, you can get higher compensation - e.g. Meta AI researchers getting $100M contracts or Juan Soto getting a $750M baseball contract. As mentioned elsewhere, some companies give stock to employees. In my experience this is for one of two reasons. 1) Employee retention - stock grants tend to have multiyear vesting periods designed to keep the employee at the company. 2) Start up companies that do not have the cash to pay employees. None of these explanations would lead to simply paying employees more with excess cash (unless the cash was created by a group of employees that you were trying to retain).
deleted 1y ago
[deleted]
creer 1y ago
> couldn’t the companies with excess profits just pay they employees more Would that improve productivity (for that company)? Do most people refuse to work for Apple because it doesn't pay enough? Is apple limited by lack of productivity? Is Apple limited by lack of R&D budget? Would Apple release on the world more, better stuff if it paid 10% more? Then too, most US Apple employees own a lot of Apple shares - they do get paid more when Apple pays dividends, buys back, increases the share price (/ shrinks the number of shares - same thing). Even recent Apple employees who did buy/ get the shares they could really did very well! They are shareholders. As it is, Apple has a large number of employees in the most expensive areas of the world. It's not exactly that it's desperately skimping on employee compensation. My impression is that Apple, still now, has a hard time finding worthwhile things to do with its profit. It generates a lot of cash, uses everything it can manage, and releases the rest productively.

The only people who matter are shareholders. Employees are a means to the end of making money for the owners of the company whether through stocks or other kinds of ownership.

nyeah 1y ago

They could, but then they'd have to report lower profits by the same amount. I want to actually defend this though: Corporate profit is a very narrow measure, by design. It was never intended to capture how well the nation is doing.

Macha 1y ago

That would not make the share price number go up, which in turn means it doesn't make the leadership's net worth number go up, which means the leadership won't make that choice.

fn-mote 1y ago
The leadership’s net worth is going up based on their compensation plan including stock options, regardless. If you are more explicit about your assumptions it might be easier to believe or refute the argument.

ceejayoz 1y ago

That would set a precedent they don’t want. Investors and the Federal government have little interest in labor gaining power.

vladms 1y ago

Companies are controlled by shareholders who appoint the board who appoint the CEO. If the CEO decides to pay employees more, the board will change him because shareholder put money to get money out, not to give to employees. Companies can give "shares" to employees, which means excess profits can be made dividends out of which employees "touch a bit". If you would have your own company (privately own and full control) you are of course free to share the excess profit as you see fit. Edit: and of course, share buy back avoids some taxes that you must pay, which in other schemes would have to be paid.

deleted 1y ago
[deleted]
pas 1y ago
buyback defers tax incidence, but it doesn't avoid it, no? also boards rarely change CEOs for paying employees well, they change CEOs if the company is not growing labor's share of income usually falls during periods of growing output and rises otherwise (but apparently tech booms/bubbles are an exception, check the graph -- https://en.wikipedia.org/wiki/Labor_share#/media/File:FRED_graph_of_US_labor_share_1948%E2%80%932016.svg https://en.wikipedia.org/wiki/Labor_share#/media/File:FRED_g... ) an unexpected but welcome change is that real wages of low-income workers increased too during the recent years, but the historic trend obviously shows the enormous disparity (check figure C 1979-2019) https://www.epi.org/publication/strong-wage-growth-for-low-wage-workers-bucks-the-historic-trend/ https://www.epi.org/publication/strong-wage-growth-for-low-w... ... and for interesting context let's not forget that during this time a lot of immigrants started to work https://cis.org/Report/ForeignBorn-Number-and-Share-US-Population-AllTime-Highs-January-2025 https://cis.org/Report/ForeignBorn-Number-and-Share-US-Popul... and for context on the context, the size of the active population also increased - so fewer people age out of the workforce than how many started working https://tradingeconomics.com/united-states/active-population-aged-15-64-all-persons-for-the-united-states-fed-data.html https://tradingeconomics.com/united-states/active-population...

triceratops 1y ago

Why would they do that when they could pay shareholders and themselves?

nyeah 1y ago
Right now, in the US, we've given them no reason. But that's not a law of nature. For example a country might have an industrial policy.
- nradov 1y ago
  Having an industrial policy has been disastrous for most countries that have tried it. Works fine for a few years and then everything falls apart as the grifting builds up and disruptive innovations destroy the underlying reasons for the original policy goals.
  - deleted 1y ago
    [deleted]
  - nyeah 1y ago
    I don't doubt your sincerity. But there's a big difference between believing something very sincerely and actually knowing whether it's true or not.
    - nradov 1y ago
      I actually know it's true that having an industrial policy has been a net negative in the majority of countries where it was tried.
      - deleted 1y ago
        [deleted]

aleph_minus_one 1y ago

> Why couldn’t the companies with excess profits just pay they employees more in salaries? They could, but why should they? Which advantage get the shareholders from this? The only reason why a company with excess profits "should" pay the employees more is if i) for a given role, the expected results of potential applicants varies a lot (i.e. the company has an incentive "to hire the best of the best") ii) the market for these exceptional talents is tough (i.e. if the company does not hire the best, someone else will; additionally, if the company does not pay the employees really well, they will be poached)

insane_dreamer 1y ago

they don't want to the purpose of a company is to deliver maximum return to shareholders; if they're not doing that, then they're failing their fiduciary duty and the shareholders might try to force the company to change its ways the shareholders want the money coming to them, not to the employees (this is why the Public Benefit Corporation, "B-Corp" structure was invented, so that the company's stated purpose can be something other than simply generating value for its shareholders)

badpun 1y ago

For businesses, employees are a necessary evil and not company's beneficiaries.

barchar 1y ago

1. They don't have to 2. If employees want to be exposed to excess profit (and loss) they can buy shares like everyone else. (Not a super strong argument tbh) 3. It's impossible to measure how much any given employee/department really contributed and they don't want to create a culture of chasing fat bonus checks. 4. To some extent they do tend to. Profit sharing plans and ESOPs aren't that uncommon

matwood 1y ago
> 2. If employees want to be exposed to excess profit (and loss) It's funny that people tell me they want this because they'll see some of the sales outliers. But then I explain that 1/2 or more of their salary will be dependent on some type of performance metric and most clam up.

matwood 1y ago

The same reason you don't give a store $2 for something priced at $1 or write anything other than a zero in the box on your tax form that lets you pay more if you like.

eloisant 1y ago

You're thinking of companies as teams where employees are members, but c-staff just see their employees as expensive suppliers.

andrewlgood 1y ago
Have you ever been a c-staff? C-staff are employees as well. Usually more expensive employees. Well run companies are trying to figure out how to win in the marketplace. To do this they hire the employees they need to win. Investors do this with CEOs. I agree that it is much more difficult for a CEO to get fired than a line employee as CEOs have significant influence in picking their boarda. However, the consequences to a company of replacing a CEO are generally more significant as well.

andrewlgood 1y ago

Different markets. Companies are created to allow investors to create profits selling something (things, services, etc). Companies compete with other companies to attract capital. Companies which offer higher expected returns for comparable levels of risk will attract more capital. This reflects supply and demand for capital. Employees are part of a labor market. Supply and demand in the labor market drives compensation levels. When you have a rare skill that is perceived to be valuable, you can get higher compensation - e.g. Meta AI researchers getting $100M contracts or Juan Soto getting a $750M baseball contract. As mentioned elsewhere, some companies give stock to employees. In my experience this is for one of two reasons. 1) Employee retention - stock grants tend to have multiyear vesting periods designed to keep the employee at the company. 2) Start up companies that do not have the cash to pay employees. None of these explanations would lead to simply paying employees more with excess cash (unless the cash was created by a group of employees that you were trying to retain).

deleted 1y ago

[deleted]

creer 1y ago

> couldn’t the companies with excess profits just pay they employees more Would that improve productivity (for that company)? Do most people refuse to work for Apple because it doesn't pay enough? Is apple limited by lack of productivity? Is Apple limited by lack of R&D budget? Would Apple release on the world more, better stuff if it paid 10% more? Then too, most US Apple employees own a lot of Apple shares - they do get paid more when Apple pays dividends, buys back, increases the share price (/ shrinks the number of shares - same thing). Even recent Apple employees who did buy/ get the shares they could really did very well! They are shareholders. As it is, Apple has a large number of employees in the most expensive areas of the world. It's not exactly that it's desperately skimping on employee compensation. My impression is that Apple, still now, has a hard time finding worthwhile things to do with its profit. It generates a lot of cash, uses everything it can manage, and releases the rest productively.