Employees are merely, an often undesired, side-effect in the business of boosting stock prices.
Let's imagine that shareholders agree on a 5 year return on capital plan. Now let's say some missteps/economic circumstances make revenue go down in the 4th year. The CEO will get heat from the investors. This is especially true if the board contains an investor representative who can vote the CEO out.
What choice does the CEO have at that time but to boost short term?
Look at the same story from an employee perspective. Imagine that employee worked for 4 years and the downturn arrives. They invested a lot of time of their precious life, much like the shareholders invested their precious money.
In the downturn, the CEO gets to make a choice and the choice ALWAYS is to boost the stock price for shareholders (and for themselves). Often, at the expense of employees.
>5 years
That is so laughably short sighted that you could not have given a better example as to why CEOs are all the same.
A dreadful thought, I know. Living like the proles do, ew.
But if you're a politician and your donors are all rich elites who really hated that aspect of AMT you get repeal it for them: https://www.bowlesrice.com/tax-cuts-and-jobs-act-2018-change...
Isn't that exactly how it works? Your grant price just determines your number of your shares. When your shares vest they get taxed as regular income for the entirety of the vest amount.
This describes restricted stock units. Stock options are taxed differently.
But who will enforce this requirement? Only pension funds and other large shareholders have any (and often impractical) leverage over the board C-suite. Wall-street shareholders demand faster growth until they themselves can exit out. They don't care about the business or the services or the employees. They want a high growth return, year-over-year until their own investment carry continues to exist.
At a minimum, if corporation laws were modified such that every laid off employee must be issued 1 year worth of shares as a golden parachute, the incentives will all get aligned very quickly and employees will not be abruptly thrown away.
By definition, one returns cash, the other doesn’t.
The stock buyback also prevents market price discovery because of an artificial price floor.
The buyback is also a subject to buyback tax, transaction fee at the broker, and the benefits of the buyback are not captured by the long term holders, only by short term holders, e.g. insiders, who often sell into the buyback guaranteeing a price floor and effectively an execution price.
>Employees are merely, an often undesired, side-effect in the business of boosting stock prices.
Employees are worse than a side effect, they're a cost center to be avoided if possible. You want to achieve your goals with as few employees as possible.
You do not acknowledge different industries or business models, distribution of physical goods or market brand activity, let along "things that take more that one person to do" .. This is a rote recital of an inner dialog of an ill "investor" CEO who might as soon throw his secretary off of a bridge than give a bonus for winter holidays.
There are not enough words to scourge this infantile, Ayn Randian nonesense from the page.
Do you think people in 1000 bc hired more employees than they needed just maximize headcount. Of course not. You want enough to get the job done and not more.
Egypt had shops and Merchants too.
Can you think of any time between then and now where things worked that way?
If your company is run well, you're incentivized to do more with less. If not, then the opposite.
Shareholders want the CEO and Company to do the best job they can, and do it with the lowest employee cost possible
At the least, don’t hire thousands of people over 1-2 years and then lay them all off. That shows poor ethical, leadership and management skills.
I do think hiring a bunch of people and then firing a bunch of people is indicative of some sort of mistake. Nobody can perfectly predict the future. That said, when someone takes a job they know it's not a lifetime tenure position and has some risk.
This is true but you know what? Every action of the CEO is meant for the investors and large shareholders. The layoff is merely a signal that says
"I am willing to do what it takes to give you your return. Buy more shares"