Hacker News Reader

Comment by whatisthiseven | Hacker News Reader

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.

View on HN

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.

This is too circular. Profit is just revenue - cost. The stock values depend on current and future risk adjusted profit.

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.

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.

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.

Yeah but why does the board approve those salaries if they don't expect to get more out of it?

What makes you think a typical corporate board actually acts in the interest of its shareholders?

??? 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.

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.

> 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.

Reply on news.ycombinator.com