4 ms·

The conflict-of-interest and self-dealing problems at the c-suite and board level are absolutely pervasive at this point. I don't think much will change until

The conflict-of-interest and self-dealing problems at the c-suite and board level are absolutely pervasive at this point. I don't think much will change until investors finally throw in the towel on the capital gains lottery and start demanding dividends at the point of pitchforks.

WalterBright 12y ago
A simpler, and effective, approach is if you don't like what a CEO is doing, don't invest in the company. I recall years ago a CEO stating that he was adjusting the accounting to reflect numbers "that stock analysts were looking for." He underestimated the investors - they weren't fooled, the stock price tanked and he went out the door.
- Osiris 12y ago
  I wouldn't consider buying a company's stock really as investing in that company, because 1) the company doesn't receive any benefit from your purchase except at IPO, and 2) your only incentive is to wait for the price to go up and sell. Larger investors that buy up significant percentages of a company may be more invested, but again their goal is just for an increase in stock price, but for the long-term stability and growth as a company. If a company is privately owned, the owners and employees have an incentive for the company to grow over the long term and focus on stability rather than quick wins and short-term financials.
  - WalterBright 12y ago
    > the company doesn't receive any benefit from your purchase except at IPO This is incorrect: 1. corporations often issue more stock and sell it in order to raise working capital 2. employee compensation often comes in the form of stock in one way or another 3. a rising stock price means a company needn't pay out dividends in order to satisfy investors 4. without a rising stock, a company will find it much, much harder to attract investors, employees, borrow money, attract customers, etc. Few want to get on board with a loser company.
- carsongross 12y ago
  I don't regard that as a particularly viable option: interest rates are low so the natural alternative investment isn't worthwhile and the problem is pervasive so it's true in almost all companies large enough to be listed on a stock exchange. I'm lucky in that I can invest money in my own business, and afford to take riskier bets on alternative investments, but that isn't relevant for your average investor. Until capital gain return to their appropriate position relative to dividends (and sane tax law would help here), the shareholder beatings at the hands of the c-suite and boards will continue.
  - WalterBright 12y ago
    > almost all companies Meaning there are some you can reward with your investment. > shareholder beatings I've done reasonably well simply investing in SPY and holding it long term. Badly managed companies get dropped from SPY because their cap evaporates, and well managed companies get on it and stay on it. SPY is extremely relevant to the average investor, and even more so to the below average investor.
    - carsongross 12y ago
      I find is extremely difficult to determine which large companies are self-dealing, since executive and board compensation is not split out in most financial statements. (I can't help but think that this is by design.) So, broadly, I assume all of them are engaged in it unless proven otherwise, which no companies I'm aware of bother to do.
      - WalterBright 12y ago
        > is not split out in most financial statements. I hate to belabor the obvious, but that means there are companies that disclose this information, and you can choose (or not) to reward them with your investment.
        carsongross 12y ago
        No, please, belabor. So, I do do that, by investing in equity (as much as I do) with high dividends, since that is orders of magnitude easier to dig up than to find the few companies that are both interesting as a business and also have sufficiently transparent quarterly statements. Time is valuable, after all. However, to get back to the original point, the current environment of board and c-suite self-dealing will not change until many, many more people invest and think the way I do. For that to happen, the current bias towards capital gains, which your generation grew up on, will need to be wiped out conclusively. We shall see if that happens.
alexeisadeski3 12y ago
>>I don't think much will change until investors finally throw in the towel on the capital gains lottery and start demanding dividends at the point of pitchforks. No public company should pay dividends in the current US tax regime. To do so is to leave money on the table.

WalterBright 12y ago

A simpler, and effective, approach is if you don't like what a CEO is doing, don't invest in the company. I recall years ago a CEO stating that he was adjusting the accounting to reflect numbers "that stock analysts were looking for." He underestimated the investors - they weren't fooled, the stock price tanked and he went out the door.

Osiris 12y ago
I wouldn't consider buying a company's stock really as investing in that company, because 1) the company doesn't receive any benefit from your purchase except at IPO, and 2) your only incentive is to wait for the price to go up and sell. Larger investors that buy up significant percentages of a company may be more invested, but again their goal is just for an increase in stock price, but for the long-term stability and growth as a company. If a company is privately owned, the owners and employees have an incentive for the company to grow over the long term and focus on stability rather than quick wins and short-term financials.
- WalterBright 12y ago
  > the company doesn't receive any benefit from your purchase except at IPO This is incorrect: 1. corporations often issue more stock and sell it in order to raise working capital 2. employee compensation often comes in the form of stock in one way or another 3. a rising stock price means a company needn't pay out dividends in order to satisfy investors 4. without a rising stock, a company will find it much, much harder to attract investors, employees, borrow money, attract customers, etc. Few want to get on board with a loser company.
carsongross 12y ago
I don't regard that as a particularly viable option: interest rates are low so the natural alternative investment isn't worthwhile and the problem is pervasive so it's true in almost all companies large enough to be listed on a stock exchange. I'm lucky in that I can invest money in my own business, and afford to take riskier bets on alternative investments, but that isn't relevant for your average investor. Until capital gain return to their appropriate position relative to dividends (and sane tax law would help here), the shareholder beatings at the hands of the c-suite and boards will continue.
- WalterBright 12y ago
  > almost all companies Meaning there are some you can reward with your investment. > shareholder beatings I've done reasonably well simply investing in SPY and holding it long term. Badly managed companies get dropped from SPY because their cap evaporates, and well managed companies get on it and stay on it. SPY is extremely relevant to the average investor, and even more so to the below average investor.
  - carsongross 12y ago
    I find is extremely difficult to determine which large companies are self-dealing, since executive and board compensation is not split out in most financial statements. (I can't help but think that this is by design.) So, broadly, I assume all of them are engaged in it unless proven otherwise, which no companies I'm aware of bother to do.
    - WalterBright 12y ago
      > is not split out in most financial statements. I hate to belabor the obvious, but that means there are companies that disclose this information, and you can choose (or not) to reward them with your investment.
      - carsongross 12y ago
        No, please, belabor. So, I do do that, by investing in equity (as much as I do) with high dividends, since that is orders of magnitude easier to dig up than to find the few companies that are both interesting as a business and also have sufficiently transparent quarterly statements. Time is valuable, after all. However, to get back to the original point, the current environment of board and c-suite self-dealing will not change until many, many more people invest and think the way I do. For that to happen, the current bias towards capital gains, which your generation grew up on, will need to be wiped out conclusively. We shall see if that happens.

alexeisadeski3 12y ago

>>I don't think much will change until investors finally throw in the towel on the capital gains lottery and start demanding dividends at the point of pitchforks. No public company should pay dividends in the current US tax regime. To do so is to leave money on the table.