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Comment by madballster | Hacker News Reader

That is a very narrow and frankly sweepingly incorrect description of "CEOs" or "companies". They're not all the same. I for one (alongside many other investors) carefully study incentive programs and compensation oversight executed by the board of directors. There are many thoughtful companies (and CEOs) who e.g. align over very long-term targets, such as '5 year return on capital". Investors have found out a long time ago that incentivizing by short-term measures such as share price (or revenues, or EPS) can bring about very adverse long-term investing outcomes.

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Concurred but...

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.

Exactly. It's more accurate to say "we look at long term as long as the short term stock price also looks good".

Do you all not understand that the stock price reflects the long term prospects of the company? It’s literally priced in

It's really crazy how just a few months ago Facebook's long-term prospects were worth just 1/3 of what they are now! What do you think changed so much during that time to warrant the 3x increase?

Did you just learn this in Finance 101? The real stock market is priced based on many factors including interest rates, future growth expectations, etc, but the biggest factor of all is psychological.

That's only for very broad things; as long as there's no red flags, short term takes priority.

Yes, but I think that is because investors rationally realize that the future is extremely uncertain and complex so it is better to weight towards shorter term more predictable outcomes.

Are you a CEO of a public company or still private? There is a huge difference in incentives from institutional shareholder pressure.

private companies can also have institutional shareholders.

>Very long term

>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.

Average CEO tenure is less than 7 years, not sure how you'd practically be able to accomplish any kind of compensation plan on a longer time horizon. What is the person supposed to do in the meantime, life off of savings?

They will have to live off of a salary, like all their employees below.

A dreadful thought, I know. Living like the proles do, ew.

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