CEO pay and stock buybacks have soared at the largest low-wage corporations(ips-dc.org)
ips-dc.org
CEO pay and stock buybacks have soared at the largest low-wage corporations
https://ips-dc.org/report-executive-excess-2025/
262 comments
As a thought experiment, consider what it would take to make CEO pay gap even BIGGER, in addition to stock-based comp* and buybacks, which are mentioned in headline. Here's what one might do:
- Reduce unions
- Outsource and automate labor
- Slow minimum wage increases
- Consolidate power via M&A (you mentioned this)
- Cut back on benefits like healthcare, pensions and paid leave
- Promote "guru culture": indispensable, iconic leaders like Jack Welch, Steve Jobs etc
- Shift economy towards high-margin industries (tech, finance, pharma) and away from lower-margin ones (retail, manufacturing)
Turns out all of these have been happening since the 70s. So this result should not be surprising.
*Important note that the 1993 Clinton tax bill made it so corporations could no longer deduct the full amount of top executive salaries as a business expense. Only up to $1 million. UNLESS the amount beyond $1 million was performance-based (leading to stock option comp boom).
- Reduce unions
- Outsource and automate labor
- Slow minimum wage increases
- Consolidate power via M&A (you mentioned this)
- Cut back on benefits like healthcare, pensions and paid leave
- Promote "guru culture": indispensable, iconic leaders like Jack Welch, Steve Jobs etc
- Shift economy towards high-margin industries (tech, finance, pharma) and away from lower-margin ones (retail, manufacturing)
Turns out all of these have been happening since the 70s. So this result should not be surprising.
*Important note that the 1993 Clinton tax bill made it so corporations could no longer deduct the full amount of top executive salaries as a business expense. Only up to $1 million. UNLESS the amount beyond $1 million was performance-based (leading to stock option comp boom).
Sounds like you should start a company, name yourself CEO, and execute this strategy!
None of these issues are specific to CEO wages. This is essentially just a list of reasons why you don't like capitalism. ie if a CEO doesn't do these on their own accord, the shareholders might contact the CEO and tell them to take some of these measures. This mechanism isn't dependent on CEO pay, because the CEO is always beholden to the shareholders, and shareholders always want more money.
The solution to this isn't to get mad (or even do something about) CEO wages, but to make sure there are other good reasons why companies might not use these approaches to maximize shareholder returns (ie stronger government regulation, making these approaches illegal).
The solution to this isn't to get mad (or even do something about) CEO wages, but to make sure there are other good reasons why companies might not use these approaches to maximize shareholder returns (ie stronger government regulation, making these approaches illegal).
> This mechanism isn't dependent on CEO pay, because the CEO is always beholden to the shareholders, and shareholders always want more money
Legally the CEO has a fiduciary duty to the shareholders. In practice, can we honestly say that every CEO of a publicly traded corporation acted in the long term interests of EVERY shareholder and didn't just parasitically extract value from the company for themselves and a handful of LARGE shareholders? Facebook is essentially the personal property of Mark Zuckerberg
Legally the CEO has a fiduciary duty to the shareholders. In practice, can we honestly say that every CEO of a publicly traded corporation acted in the long term interests of EVERY shareholder and didn't just parasitically extract value from the company for themselves and a handful of LARGE shareholders? Facebook is essentially the personal property of Mark Zuckerberg
> Legally the CEO has a fiduciary duty to the shareholders
The CEO has two fiduciary duties:
1) To act with appropriate information; 2) To avoid usurping corporate opportunities
The duty to make money for the shareholders is distinctly not a thing.
The CEO has two fiduciary duties:
1) To act with appropriate information; 2) To avoid usurping corporate opportunities
The duty to make money for the shareholders is distinctly not a thing.
It's no longer a company it's an empire. Got it. But the executive layer didn’t shrink. You don’t just have one CEO now you have the CEO, presidents of divisions, business-unit heads, all pulling down compensation packages that in the 1970s would’ve looked like outliers even for the very top.
Is revenue per employee the best metric? Productivity gains don’t automatically justify higher executive pay. Most of those gains come from technology the CEO didn't invent or personally implement, supply-chain leverage, and cost-cutting at the bottom, not from some surge of genius at the top. Yet the financial rewards are heavily skewed upward, while median wages flatlined. Plus you know the rule about what you measure being what you get more of. All that would happens under your metric is CEOs push to move to 'contractors' to reduce the measured headcount to justify an even higher salary.
Changing the metric just masks things. Society is broken for those at the bottom, and if their numbers grow too large, it will become broken for everyone.
Is revenue per employee the best metric? Productivity gains don’t automatically justify higher executive pay. Most of those gains come from technology the CEO didn't invent or personally implement, supply-chain leverage, and cost-cutting at the bottom, not from some surge of genius at the top. Yet the financial rewards are heavily skewed upward, while median wages flatlined. Plus you know the rule about what you measure being what you get more of. All that would happens under your metric is CEOs push to move to 'contractors' to reduce the measured headcount to justify an even higher salary.
Changing the metric just masks things. Society is broken for those at the bottom, and if their numbers grow too large, it will become broken for everyone.
> Changing the metric just masks things.
Using only one metric is THE classic way to misunderstand a system.
> Society is broken for those at the bottom, and if their numbers grow too large, it will become broken for everyone.
It's difficult to capture my intention and perspective in a short comment. In my personal belief, if the future is going to be better than the present, we need to share resources more fairly.
However, money is an imperfect representation of resources. For instance, the extremely wealthy may eat more food or more quality food, but not anywhere near a proportionate excess. They may have a bit more housing, but generally not proportionate to their excess income. Etc etc etc for most things.
This is not excuse, or justification.
What I am saying is that focusing on the excess wealth can become a distraction.
I believe that the majority of harm relating to income inequality does not come from the inequality itself, or even excess resource (food, housing, etc) consumption.
I believe that the majority of harm comes from actions taken while attaining and defending wealth.
It's regulations bent and broken while growing a business.
It's not the housing per se, but the housing must retain value.
It's not the stock portfolio per se, it's the tax loopholes exploited.
----
Excess wealth is a correlation to harm. Beyond that, I feel that care must be taken.
Beware of easy narratives and blame.
Using only one metric is THE classic way to misunderstand a system.
> Society is broken for those at the bottom, and if their numbers grow too large, it will become broken for everyone.
It's difficult to capture my intention and perspective in a short comment. In my personal belief, if the future is going to be better than the present, we need to share resources more fairly.
However, money is an imperfect representation of resources. For instance, the extremely wealthy may eat more food or more quality food, but not anywhere near a proportionate excess. They may have a bit more housing, but generally not proportionate to their excess income. Etc etc etc for most things.
This is not excuse, or justification.
What I am saying is that focusing on the excess wealth can become a distraction.
I believe that the majority of harm relating to income inequality does not come from the inequality itself, or even excess resource (food, housing, etc) consumption.
I believe that the majority of harm comes from actions taken while attaining and defending wealth.
It's regulations bent and broken while growing a business.
It's not the housing per se, but the housing must retain value.
It's not the stock portfolio per se, it's the tax loopholes exploited.
----
Excess wealth is a correlation to harm. Beyond that, I feel that care must be taken.
Beware of easy narratives and blame.
Keep in mind that executive compensation is at the expense of the shareholders, not the workers.
Yes and no. Executive compensation, from one perspective, is the mechanism via which shareholders align executive behavior in their favor, to the detriment of workers.
Worker pay is determined by the Law of Supply & Demand, not by the amount of executive pay. I.e. worker pay is determined by the minimum wage the worker will accept and the maximum wage the company is willing to pay. The latter figure is based on the value the worker will provide.
Executive compensation is not part of that equation.
Executive compensation is not part of that equation.
Farmers in poor countries will plant low-yield traditional varietals, even when a high yield option is available.
They might have twice the yield with the new varietal, but if their crop fails: they risk destitution and might even loose their land. So they rationally choose the proven lower-yield varietal. Their risk appetite is proportional to their savings, if they have any. A catch-22.
For low wage workers in America, is it that much different? So many people stay in badly paying jobs because if they loose access to health insurance they could loose their home. Or get sued over a non-compete they cannot afford to fight.
Seems like below some threshold of wealth, supply and demand don't apply anymore. People are forced to choose the least risky option.
They might have twice the yield with the new varietal, but if their crop fails: they risk destitution and might even loose their land. So they rationally choose the proven lower-yield varietal. Their risk appetite is proportional to their savings, if they have any. A catch-22.
For low wage workers in America, is it that much different? So many people stay in badly paying jobs because if they loose access to health insurance they could loose their home. Or get sued over a non-compete they cannot afford to fight.
Seems like below some threshold of wealth, supply and demand don't apply anymore. People are forced to choose the least risky option.
In addition to the modern US structural labor concerns sibling highlighted,
> the maximum wage the company is willing to pay
This is the primary method I was thinking of. A company/CEO has a variety of reasons for paying its labor more than the minimum (retention, moral belief, working next to colleagues, etc). Shareholders really only have executive comp (and its structure) to discourage CEOs from paying labor more than the minimum necessary.
> the maximum wage the company is willing to pay
This is the primary method I was thinking of. A company/CEO has a variety of reasons for paying its labor more than the minimum (retention, moral belief, working next to colleagues, etc). Shareholders really only have executive comp (and its structure) to discourage CEOs from paying labor more than the minimum necessary.
The company with the lowest median pay, Aptiv, I had to look up, and what a darling of a company this is:
Citations here: https://en.m.wikipedia.org/wiki/Aptiv
- guilty of systemic accounting fraud from 1999-2004
- manufactured a (allegedly known-to-be) faulty ignition switch that led to the deaths of 124 people and injured 275 others
- currently forcing 20,000 former employees to fight a decades-long legal battle for their earned pension benefits
- gleefully dumps massive quantities of carcinogens and poisons into the environment, including: lead compounds, chromium compounds, sulfuric and hydrochloride acid (lol), and glycol ethers
Citations here: https://en.m.wikipedia.org/wiki/Aptiv
It’s entirely possible that this is causal ABs deliberate, ie the reason why boards of these companies have approved large CEO pay packages is so that the CEO will align themselves with the shareholders paying them rather than the workers working for them and cut wages so the money can be returned to shareholders as buybacks.
There's no plan. CEO salaries have just crept up steadily.
If anything, they're paying CEOs so much in some cases that the rational thing for the CEO to do is as little work as possible. Why work hard if you'll get enough to retire comfortably on regardless of your performance?
If anything, they're paying CEOs so much in some cases that the rational thing for the CEO to do is as little work as possible. Why work hard if you'll get enough to retire comfortably on regardless of your performance?
> Why work hard if you'll get enough to retire comfortably on regardless of your performance?
... Sundar Pichai, is that you?
... Sundar Pichai, is that you?
After the Pixel announcement (Jimmy Fallon? Cringe) recently and the bafflingly bad fumble with LLMs, I’m surprised people think he works at all.
Now the question is how the efficient market hypothesis plays out here in the long term. Counterexamples like Costco exist and are doing extremely well, when and how do their asset prices reflect this?
Do you have an iPhone? Mine is constantly turning “and” into “ABs” when I type with swipe.
Yes, posted that from an iPhone. Didn't even notice the typo at the time.
The iPhone swipe keyboard is crap. I have much better luck with GBoard, but then I have to install GBoard, and have all sorts of issues with app unresponsiveness or crashes whenever either GBoard or iPhone updates.
The iPhone swipe keyboard is crap. I have much better luck with GBoard, but then I have to install GBoard, and have all sorts of issues with app unresponsiveness or crashes whenever either GBoard or iPhone updates.
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weird, I'm running into this with IOS 26 beta as well
I've noticed too. Idk what it is about iOS's autocorrect that has made it go to absolute shit over the last few years.
Android's too. For some reason, it randomly changes plurals into possessives by adding apostrophes from time to time with no rule I can infer and avoid, but often enough to be annoying.
Google up "CEO fiduciary duty" - that's very much within the definition of a CEO role.
Yeah pretty much.. but this is a good thing. Companies should focus on improving profits and not wages.
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.
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.
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 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.
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.
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.
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.
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.
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.
Yes, crush the bottom 99.9% under the jackboots of the 0.1% even harder! That's what we need!
Wages are not set by a company, they're set by the supply and demand of the market. Adding a minimum wage just criminalizes hiring anyone who is not productive enough to economically justify the minimum. It hurts unskilled poor people the most.
Minimum wage is supposed to represent the minimum wage necessary for a worker to meet their basic human needs.
If you don't have a minimum wage, some people get paid below this level, and they somehow struggle along in poverty. But there is no real incentive for the state to help them.
Establish a minimum wage. Now these people are unemployed. Which contributes to the unemployment percentage. Causes the government to lose votes. The state has to pay out unemployment benefits to these people. The govt+state now have real incentives to change the structure of economy to ensure jobs are created for these people that are productive enough to justify the minimum wage.
If you don't have a minimum wage, some people get paid below this level, and they somehow struggle along in poverty. But there is no real incentive for the state to help them.
Establish a minimum wage. Now these people are unemployed. Which contributes to the unemployment percentage. Causes the government to lose votes. The state has to pay out unemployment benefits to these people. The govt+state now have real incentives to change the structure of economy to ensure jobs are created for these people that are productive enough to justify the minimum wage.
But available labor is available labor, for new businesses.
I don't understand why people sit around saying oh the minimum wage is going to increase unemployment and therefore treat minimum wage legislation as apostasy, but some radical new technology which results in a lot of unemployment is just the economy getting more efficient and it will absorb all the excess labor with new enterprises.
Is there something about minimum wage legislation that makes the labor completely unusable? Wouldn't it be equally as temporary as some large efficiency gain in the economy?
I don't understand why people sit around saying oh the minimum wage is going to increase unemployment and therefore treat minimum wage legislation as apostasy, but some radical new technology which results in a lot of unemployment is just the economy getting more efficient and it will absorb all the excess labor with new enterprises.
Is there something about minimum wage legislation that makes the labor completely unusable? Wouldn't it be equally as temporary as some large efficiency gain in the economy?
If people are working full time yet still in poverty, they will need government services like food stamps. In this scenario your tax dollars subsidize businesses that pay poverty wages. Wal Mart is the top employer of SNAP and Medicaid recipients. You would rather subsidize Wal Mart’s margins with your tax dollars?
I think the role of government is limited to that of protecting constitutional rights of citizens. People in impoverished countries live with extended family and share income and get along just fine. We shouldn't violate rights of individuals to facilitate a welfare program. That should be handled by families, communities, religious institutions, etc.
That is your opinion. The role of government should be whatever the citizens decide through democratic processes. If they want the government to go around feeding people from milk bottles, that is what it will be. If they decide it is to run the fight club that decides who eats and who dies, that will be its role. Americans have decided that the role of government is going to be closer to the second than the first, as is their right. Other countries lie in a different points in the continuum, but they are not any more wrong.
Yeah it's the opinion of the western world. "We hold these truths to be self evident" is the preamble.
These truths are not self evident to other cultures. Like yours
These truths are not self evident to other cultures. Like yours
What Western world? European countries have decent social safety nets administered by the government.
They're just trolling. This is far too silly a line of argument to treat seriously.
Stock buybacks used to be illegal. It's a loophole way of paying employees at a lower tax rate than salary.
HBR discusses some downsides of buybacks: https://hbr.org/2020/01/why-stock-buybacks-are-dangerous-for...
HBR discusses some downsides of buybacks: https://hbr.org/2020/01/why-stock-buybacks-are-dangerous-for...
Buybacks are just a more tax-efficient way to issue dividends to shareholders (dividend issuance is a taxable event and at short-term rates, buybacks raise the stock price and those gains aren't taxable until you sell, at which point it may be long-term cap gains).
It's reasonable to be upset about the fact that this is arguably a tax dodge! But all of the other criticism of buybacks apply equally to dividends which no one seems to get upset about. Fundamentally this is the corporation saying it doesn't have a market-beating way to reinvest this capital, and it's giving the money back to its owners to more productively invest.
It's reasonable to be upset about the fact that this is arguably a tax dodge! But all of the other criticism of buybacks apply equally to dividends which no one seems to get upset about. Fundamentally this is the corporation saying it doesn't have a market-beating way to reinvest this capital, and it's giving the money back to its owners to more productively invest.
But the buyback involves buying from sellers. Why don't the sellers of the shares owe tax? Don't see how that's a tax-dodge.
The fundamental purpose of a buyback is not to raise the stock price. The purpose of a buyback is to reduce the amount of outstanding shares, which makes every existing owner own an increased percentage. If a company buys back 10% of its stock, each long term shareholder now owns 10% more of the company. Over the long term, steady buybacks increase shareholder value this way, but the purpose of it isn't to slam the order book and juice the price. That's counterproductive, because you'll buy fewer shares at higher prices, and within a trading day, the market will push the price back to normal anyway.
The fundamental purpose of a buyback is not to raise the stock price. The purpose of a buyback is to reduce the amount of outstanding shares, which makes every existing owner own an increased percentage. If a company buys back 10% of its stock, each long term shareholder now owns 10% more of the company. Over the long term, steady buybacks increase shareholder value this way, but the purpose of it isn't to slam the order book and juice the price. That's counterproductive, because you'll buy fewer shares at higher prices, and within a trading day, the market will push the price back to normal anyway.
> Why don't the sellers of the shares owe tax?
They do, but it is only paid by the people who took the money (instead of being forced to do so), and, more importantly, only on the difference from what they paid.
If you pay out $1mln of dividends, then everyone collectively owes (let's say at a qualified rate of 20%) a total of $200k. If you buy 20,000 shares from one guy at $50/share, you returned the same $1mln of cash to shareholders, but if he bought last year for $45, he only owes (let's say at a long-term capital gains rate of 20%) a total of $20k in taxes.
They do, but it is only paid by the people who took the money (instead of being forced to do so), and, more importantly, only on the difference from what they paid.
If you pay out $1mln of dividends, then everyone collectively owes (let's say at a qualified rate of 20%) a total of $200k. If you buy 20,000 shares from one guy at $50/share, you returned the same $1mln of cash to shareholders, but if he bought last year for $45, he only owes (let's say at a long-term capital gains rate of 20%) a total of $20k in taxes.
Slight correction.
If they buy back x, it strengthens shares by 1/(1-x)
So if they buy back 50%, remaining shareholders have 2x ownership.
If they buy back x, it strengthens shares by 1/(1-x)
So if they buy back 50%, remaining shareholders have 2x ownership.
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capital gains tax (selling for a higher price) is lower than income tax (getting dividends)
Unless you're day trading, dividends are generally taxed at capital gains rates for most publicly traded companies in America (REITs and K-1 partnerships get worse tax treatment at the point of distribution). You don't even need to hold it for a year. Could be different in other nations.
You're comparing apples to oranges. At least in the US, both capital gains an dividends have lower tax rate carve outs if you own the stock for > 1 year.
> The fundamental purpose of a buyback is not to raise the stock price.
Make up whatever nonsense you want about the “fundamental purpose” of something, it doesn’t matter. The purpose of a system is what it does:
https://en.m.wikipedia.org/wiki/The_purpose_of_a_system_is_w...
Stock buybacks increase share price. There’s no reason to look any farther than that. The purpose of stock buybacks is what stock buybacks do.
Make up whatever nonsense you want about the “fundamental purpose” of something, it doesn’t matter. The purpose of a system is what it does:
https://en.m.wikipedia.org/wiki/The_purpose_of_a_system_is_w...
Stock buybacks increase share price. There’s no reason to look any farther than that. The purpose of stock buybacks is what stock buybacks do.
They reduce sharecount. Not all buybacks increase share price. I can give you a thousand examples of massive buybacks that happened before the stock dropped considerably. But all reduce sharecount.
That's usually long term.
Searching on the subject of "buybacks where share price decresed", Google returns Merck as an example (reffing Harvard Business Review), which actually works quite well to illustrate. The HBR article even notes the main strategy "historically, companies that bought back their own shares have posted immediate returns between two and 12 percentage points above the market average"
"Merck's stock price dropped after a major buyback announcement when investors focused on expiring patents and a drying drug pipeline"
Except: Feb. 23, 2000, NYT, "Merck & Company, the No. 1 United States drugmaker, will buy back as much as $10 billion of its shares, which have fallen 18 percent this month." (Closest share price I can grab is 2/25/2000 at $57.39)
Share price then climbs steadily (tiny drop in July) up to a max at 12/29/2000 of $89.27 before finally crashing.
The first example Google returns is full of info on the stock behavior that makes it look like the stock buyback did not initially jack the price. Owners had 10 months to pull in a 55% share price increase before it crashed. And they floated through the 2000 March 10 bubble popping until the stock market really started deflating in 2001.
Searching on the subject of "buybacks where share price decresed", Google returns Merck as an example (reffing Harvard Business Review), which actually works quite well to illustrate. The HBR article even notes the main strategy "historically, companies that bought back their own shares have posted immediate returns between two and 12 percentage points above the market average"
"Merck's stock price dropped after a major buyback announcement when investors focused on expiring patents and a drying drug pipeline"
Except: Feb. 23, 2000, NYT, "Merck & Company, the No. 1 United States drugmaker, will buy back as much as $10 billion of its shares, which have fallen 18 percent this month." (Closest share price I can grab is 2/25/2000 at $57.39)
Share price then climbs steadily (tiny drop in July) up to a max at 12/29/2000 of $89.27 before finally crashing.
The first example Google returns is full of info on the stock behavior that makes it look like the stock buyback did not initially jack the price. Owners had 10 months to pull in a 55% share price increase before it crashed. And they floated through the 2000 March 10 bubble popping until the stock market really started deflating in 2001.
Until the mid-80s they were illegal except in a handful of unique cases. This is not just about div vs buyback taxes. Though there is no immediate mathematical economical benefit to the shareholders who remain, the markets have proven that the stock price will rise (and likely executive compensation) as a result of reduced sharecount vs the same demand (though possibly more demand as other companies engage in the same behavior).
Much of the gains in the stock market the past decade or so are simply the result of a greatly reduced number of shares available to purchase - as a result of buybacks, takeovers and going private (there are roughly 1/2 the number of listed companies today as in the 1990s).
Much of the gains in the stock market the past decade or so are simply the result of a greatly reduced number of shares available to purchase - as a result of buybacks, takeovers and going private (there are roughly 1/2 the number of listed companies today as in the 1990s).
Fundamentally this is the corporation saying it doesn't have a market-beating way to reinvest this capital
There aren't always infinity positive return ideas to invest in. Sometimes there really aren't any. Garrett Motion is a company that manufactures turbochargers and sells them to the big three automakers. It's a decently steady and profitable business but it's slowly on the way out. EVs don't need turbochargers. They have a small R&D division looking into EV inverters, and they'll continue to make turbochargers for non-auto applications, but for the most point, they are a melting ice cube and their CEO tells you this in plain terms on earnings calls.
But their stock is priced like it too, so they are plowing most of their free cash flow into buying back shares, and it more than offsets the melt. The result? Their shares are steady and up about 95% over the past 5 years despite overall revenue decline across this period.
Sure, you could have this sleepy turbocharger factory start investing in real estate, or get into uranium mining, or begin trying to write and sell cloud computing software. But their strategy is to keep making a good product and regularly eat up stock to overcome declining earnings per share, and it's working rather nicely.
But their stock is priced like it too, so they are plowing most of their free cash flow into buying back shares, and it more than offsets the melt. The result? Their shares are steady and up about 95% over the past 5 years despite overall revenue decline across this period.
Sure, you could have this sleepy turbocharger factory start investing in real estate, or get into uranium mining, or begin trying to write and sell cloud computing software. But their strategy is to keep making a good product and regularly eat up stock to overcome declining earnings per share, and it's working rather nicely.
That was considered a tax loophole by the last administration so the R&D exception was allowed to expire in 2022 and only recently restored by the new admin.
R&D tax credits did not “expire". Immediate expensing expired in 2022, requiring companies to split credits across multiple years. Multiple attempts since then have tried to restore expensing (often in bipartisan tax packages), but Congress hasn’t passed a permanent fix.
> but Congress hasn’t passed a permanent fix
The new admin just did that last month in the Big Beautiful Bill.
The new admin just did that last month in the Big Beautiful Bill.
> Fundamentally this is the corporation saying it doesn't have a market-beating way to reinvest this capital, and it's giving the money back to its owners to more productively invest.
Before tech companies demonstrated the principle of infinite growth, the purpose of a company was to generate revenue (paid as dividends) for its shareholders.
So much growth hasn't really been possible before.
If a company can keep growing and investing infinitely, one might argue that it's time for the DOJ / FTC to step in and stop them from eating the entire business sector. That's the sign of a monopoly pushing into every market like an invasive species and making the existing businesses in those markets go extinct. Kind of like how tech companies are now movie companies, music companies, game companies, pharmaceuticals, grocery stores...
Before tech companies demonstrated the principle of infinite growth, the purpose of a company was to generate revenue (paid as dividends) for its shareholders.
So much growth hasn't really been possible before.
If a company can keep growing and investing infinitely, one might argue that it's time for the DOJ / FTC to step in and stop them from eating the entire business sector. That's the sign of a monopoly pushing into every market like an invasive species and making the existing businesses in those markets go extinct. Kind of like how tech companies are now movie companies, music companies, game companies, pharmaceuticals, grocery stores...
> Before tech companies demonstrated the principle of infinite growth
Perhaps we have different definitions of “infinite,” but either way I’m pretty sure nobody’s demonstrated that yet.
Perhaps we have different definitions of “infinite,” but either way I’m pretty sure nobody’s demonstrated that yet.
> buybacks raise the stock price and those gains aren't taxable until you sell
They temporarily raise the stock price for the people who are the counterparties to the stock purchase, but isn't that also creating a taxable event for them?
Once the buyback is done, what's keeping that share price from sliding right back down to earth? The shareholders who support the company and hold watch a group who bet against the company by selling shares reap a profit, in a tax advantaged way, while their own dividends are effectively stolen. The buybacks are actually a crap deal for anyone who is a responsible buy and hold investor.
They temporarily raise the stock price for the people who are the counterparties to the stock purchase, but isn't that also creating a taxable event for them?
Once the buyback is done, what's keeping that share price from sliding right back down to earth? The shareholders who support the company and hold watch a group who bet against the company by selling shares reap a profit, in a tax advantaged way, while their own dividends are effectively stolen. The buybacks are actually a crap deal for anyone who is a responsible buy and hold investor.
The dividends aren't stolen. A company with 1m shares outstanding buys back 100k of them. Now there are 900k shares outstanding. All long term shareholders who support the company own an extra 10% of the firm with nothing out of pocket. Imagine steady buybacks at reasonable prices over a long period of time... this has an incredible effect.
Warren Buffett bought a couple percent of American Express, and now owns 22% of the company despite not buying a share in decades. It really becomes apparent over time. American Express just carefully repurchased shares over the years and Buffett's stake became greater and greater.
Warren Buffett bought a couple percent of American Express, and now owns 22% of the company despite not buying a share in decades. It really becomes apparent over time. American Express just carefully repurchased shares over the years and Buffett's stake became greater and greater.
> All long term shareholders who support the company own an extra 10% of the firm with nothing out of pocket.
They own an extra 11%. Not 10%.
1/100 versus 1/90
They own an extra 11%. Not 10%.
1/100 versus 1/90
I hate how fractions work this way. We need to call up the math people and ask them to change it.
Can you tell them to get rid of compounding interest while they are at it?
Sure. I’ll add it to the list.
I’m not sure if this is basically the same or just related to the first item, but I’m also going to make them also fix the bug where taking away 1/4 then adding 1/3 returns you to the same amount.
I’m not sure if this is basically the same or just related to the first item, but I’m also going to make them also fix the bug where taking away 1/4 then adding 1/3 returns you to the same amount.
Dividends create a taxable event for everyone that owns the stock.
Buybacks only create a taxable event for the shareholders that wish to sell.
And the share price doesn't slide down because there are now less shares on the open market. Theoretically the market capitalization decreases by the amount of money spent on the buyback.
Also, if you issue a dividend the market expects that dividend to be ongoing, hell or high water. Share buybacks do not have that social expectation, so the "temporary" nature of them is an asset for companies that don't want to go from a growth stock to an income stock.
Buybacks only create a taxable event for the shareholders that wish to sell.
And the share price doesn't slide down because there are now less shares on the open market. Theoretically the market capitalization decreases by the amount of money spent on the buyback.
Also, if you issue a dividend the market expects that dividend to be ongoing, hell or high water. Share buybacks do not have that social expectation, so the "temporary" nature of them is an asset for companies that don't want to go from a growth stock to an income stock.
> Once the buyback is done, what's keeping that share price from sliding right back down to earth?
The plan really seems for the buyback never to be done. Or only in case of economy-wide disruption when there is something to blame— a kind of reverse-Buffet.
In fact , adding more punch to the bowl is a key advantage over the legacy tender offer process— tenders directly compete for shares for just a little while. Buybacks, while they have limits, are much more persistent and flexible.
Perhaps it was some historical accident that when the SEC made reacquiring shares easier, everyone started doing more of it … but at some point the explanations of efficient capital allocation just become too much.
The plan really seems for the buyback never to be done. Or only in case of economy-wide disruption when there is something to blame— a kind of reverse-Buffet.
In fact , adding more punch to the bowl is a key advantage over the legacy tender offer process— tenders directly compete for shares for just a little while. Buybacks, while they have limits, are much more persistent and flexible.
Perhaps it was some historical accident that when the SEC made reacquiring shares easier, everyone started doing more of it … but at some point the explanations of efficient capital allocation just become too much.
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What if the stock buyback is done to trigger stock options with artificial stock price inflation?
And maybe I don't understand the stock option game and stock BuyBacks don't count towards the strike price for options. But I doubt it
And maybe I don't understand the stock option game and stock BuyBacks don't count towards the strike price for options. But I doubt it
> But all of the other criticism of buybacks apply equally to dividends which no one seems to get upset about.
I don't know what planet you're living on, where nobody's ever been upset about dividends.
I don't know what planet you're living on, where nobody's ever been upset about dividends.
Does "tax-efficient" mean "tax-dodging" here
Stock buybacks were never illegal. Stock buybacks were how Buffett took control of a small textile mill called Berkshire Hathaway in the 1960s. What was not allowed was at-the-market buybacks in the open market. Corporations had to do tender offers at a fixed price, usually well above market price, in order to attract sellers to mail in their certificates. I'm not sure why that is necessarily better or helps anyone, so I think allowing ATM buybacks is a net good.
According to Forbes they were
> For most of the 20th century, stock buybacks were deemed illegal because they were thought to be a form of stock market manipulation.
https://www.forbes.com/sites/aalsin/2017/02/28/shareholders-...
> For most of the 20th century, stock buybacks were deemed illegal because they were thought to be a form of stock market manipulation.
https://www.forbes.com/sites/aalsin/2017/02/28/shareholders-...
Forbes is simply wrong.
Henry Singleton who founded Teledyne is known as the buyback king because he used his high-flying stock in the 1960s to snap up tons of smaller electronics companies, and when his stock crashed to $8 during the years of stagflation, snapped up millions with buybacks. In the end, he had used his stock as a currency to acquire dozens of companies at what essentially became 80% discounts.
http://csinvesting.org/wp-content/uploads/2015/05/Dr.-Single...
A very good very in-depth PDF read about him if you're interested in this type of thing.
Henry Singleton who founded Teledyne is known as the buyback king because he used his high-flying stock in the 1960s to snap up tons of smaller electronics companies, and when his stock crashed to $8 during the years of stagflation, snapped up millions with buybacks. In the end, he had used his stock as a currency to acquire dozens of companies at what essentially became 80% discounts.
http://csinvesting.org/wp-content/uploads/2015/05/Dr.-Single...
A very good very in-depth PDF read about him if you're interested in this type of thing.
forbes is not a source of information. it used to be a real source of journalism but now is worthless
I think they are actually bad because it enables messing with stock price in a way that is "explainable" when really it is just a bookkeeping exercise
Messing in what way? They are buying from willing sellers at the market price, using funds that are announced well before hand in public government filings (Form 10-Q and 8K) are to be used to buyback shares
Sure, bids hitting the orderbook theoretically keeps a stock price higher than the counterfactual where the bids did not exist, but it's simply urban myth that failing companies can keep their stock price high over the long term with buybacks. The math doesn't pencil out.
Sure, bids hitting the orderbook theoretically keeps a stock price higher than the counterfactual where the bids did not exist, but it's simply urban myth that failing companies can keep their stock price high over the long term with buybacks. The math doesn't pencil out.
> Sure, bids hitting the orderbook theoretically keeps a stock price higher
QED: manipulation
> failing companies can keep their stock price high over the long term with buybacks
This assumes they care about the long term.
QED: manipulation
> failing companies can keep their stock price high over the long term with buybacks
This assumes they care about the long term.
Am I manipulating a stock when I place a limit buy order? I don't even publicly announce it months beforehand like corporations do.
Are you an executive who will gain millions by doing it, and you are doing it with company money that your have corporate control over? Then yep.
Maybe executives shouldn't have stock. Then it wouldn't be manipulation.
But they do. That is their main compensation people like to point (the CEO isn't really getting paid those millions, it's stocks). So the CEO is paid in a way that encourage the CEO to commit DIRECT stock manipulation.
Maybe executives shouldn't have stock. Then it wouldn't be manipulation.
But they do. That is their main compensation people like to point (the CEO isn't really getting paid those millions, it's stocks). So the CEO is paid in a way that encourage the CEO to commit DIRECT stock manipulation.
> when really it is just a bookkeeping exercise
…that’s what a share of stock is.
…that’s what a share of stock is.
They had a presumption of guilt until a safe harbor rule was adopted by the SEC in 1982
which just formalized ways that the SEC was finding corporations not guilty and transparent enough, this blueprint paved the way for corporations to all copy it as well as reducing the administrative overheard of caring at all
the exceptions make the rule
which just formalized ways that the SEC was finding corporations not guilty and transparent enough, this blueprint paved the way for corporations to all copy it as well as reducing the administrative overheard of caring at all
the exceptions make the rule
If one does not think that buy backs are good to begin with, making them as difficult as possible (as was the case before the mid 80s) is preferable to the situation today.
As has been pointed out elsewhere, buybacks are morally equivalent to shareholder dividends; the only effective difference is the tax treatment.
If you think returning money to investors is bad, I have to ask: Why would anyone invest in the first place?
If you think returning money to investors is bad, I have to ask: Why would anyone invest in the first place?
Forced liquidity and the tax implications can absolutely be bad for investors.
If my option is a 5% dividend or a 5% share buy-back, the net-of-taxes benefit of the 5% dividend is 15%-20% less due to capital gains taxes than the share buy-back. The effect with annual compounding over many years is quite material...
If my option is a 5% dividend or a 5% share buy-back, the net-of-taxes benefit of the 5% dividend is 15%-20% less due to capital gains taxes than the share buy-back. The effect with annual compounding over many years is quite material...
If the only difference is how much of the profit is socialized vs privatized, then they are not morally equivalent
> how much of the profit is socialized vs privatized
What does that phrase even mean? It's nonsensical. Whether via buybacks or dividends, money goes from the corporation to its investors. That's why investors invest.
What does that phrase even mean? It's nonsensical. Whether via buybacks or dividends, money goes from the corporation to its investors. That's why investors invest.
That's specifically focusing on debt-driven buybacks and leverage, which is come down significantly since the dates in the article: https://www.federalreserve.gov/publications/April-2025-finan...
Metrics like debt service costs to cashflow are also relatively healthy.
Metrics like debt service costs to cashflow are also relatively healthy.
Inequity is a real thing, but I am confused about why the CEO of a company that consists primarily of low wage earners deserves a lower compensation for that reason alone. If you follow this logic to extremes, the compensation of a CEO of a company of a dozen people earning 100,000 should be higher than one with with tens of thousands of employees earning 30,000.
Not all businesses are the same.
Not all businesses are the same.
What’s the motivation of the CEO to increase employee wages if his compensation isn’t tied to theirs?
There’s this perverse belief that companies should exist to enrich the wealthy shareholders at the expense of the workers and it’s put us dangerously close to a complete collapse of the social contract.
There’s this perverse belief that companies should exist to enrich the wealthy shareholders at the expense of the workers and it’s put us dangerously close to a complete collapse of the social contract.
The motivation? A healthy and productive workforce. The greater good.
Not sure why you would tie pure compensation (a greedy concept) with goals that align exactly to the opposite.
Not sure why you would tie pure compensation (a greedy concept) with goals that align exactly to the opposite.
People who become CEOs tend not to care about other people. Sort of a prerequisite to the job in a lot of cases. See that UHC guy as a prime example.
>The motivation? A healthy and productive workforce. The greater good.
This is so outrageously naive
This is so outrageously naive
> What’s the motivation of the CEO to increase employee wages if his compensation isn’t tied to theirs?
To pay the asking price for the needed labor?
To pay the asking price for the needed labor?
> What’s the motivation of the CEO to increase employee wages if his compensation isn’t tied to theirs?
Wages are a cost. Profits are revenue minus costs. Share price is driven by profits. The job of a CEO is to maximize share price.
The only reason to raise wages is if you think it will lead to a net gain of profit during your tenure. Say do to efficiency or simply retaining better talent. There’s no gain for simply raising employee wages. Quite the opposite.
Wages are a cost. Profits are revenue minus costs. Share price is driven by profits. The job of a CEO is to maximize share price.
The only reason to raise wages is if you think it will lead to a net gain of profit during your tenure. Say do to efficiency or simply retaining better talent. There’s no gain for simply raising employee wages. Quite the opposite.
>The job of a CEO is to maximize share price.
It absolultely is not. That was an idea floated by Milton Friedman, and he was wrong with his ridicluous assertion. His justification wasn't even legally sound...
https://www.forbes.com/sites/stevedenning/2013/06/26/the-ori...
A CEOs job is to grow market share, increase the value of the company, and tend to its long-term health. All of which directly conflicts with "maximizing the share price" as we've seen time and time again with the corporate raider class.
It absolultely is not. That was an idea floated by Milton Friedman, and he was wrong with his ridicluous assertion. His justification wasn't even legally sound...
https://www.forbes.com/sites/stevedenning/2013/06/26/the-ori...
A CEOs job is to grow market share, increase the value of the company, and tend to its long-term health. All of which directly conflicts with "maximizing the share price" as we've seen time and time again with the corporate raider class.
What is the difference in your mind between maximizing share price and "increase the value of the company"?
> I am confused about why the CEO of a company that consists primarily of low wage earners deserves a lower compensation for that reason alone
If you're looking for an economic reason, there isn't any. Politics in the US has always been moralistic since the days of the Puritans, so people prefer moralistic "solutions".
If you're looking for an economic reason, there isn't any. Politics in the US has always been moralistic since the days of the Puritans, so people prefer moralistic "solutions".
Even $30,000 is below minimum wage full time on the west coast. You’re not gonna be doing well at all making that.
which neither bolsters or negates the point.
> 100 S&P 500 corporations with the lowest median worker pay
So not necessarily “low-wage” corporations, just the lowest quintile from a very small group.
So not necessarily “low-wage” corporations, just the lowest quintile from a very small group.
There’s plenty of low wage corporations in the S&P 500 index.
It’s certainly not enough of a cherrypicked group to warrant dismissing their findings.
It’s certainly not enough of a cherrypicked group to warrant dismissing their findings.
This is exactly why I believe in building companies that actually create value, not just extract it. We could easily charge enterprise prices and hire armies of consultants to inflate our costs. Instead, we focus on making compliance genuinely affordable for the companies that need it most.
The best businesses solve real problems efficiently. When you're spending millions on CEO compensation while your workers can't afford basic necessities, you're not solving problems - you're creating them.
I suspect the low tax rate of long term capital gains combined with companies being allowed to do buy-backs drives all of this.
Seems like today they are paid mostly in stock. Their vision becomes very short term. If they can’t organically grow the company, stock buybacks will prop up their shares. Otherwise a CEO paid mainly from salary might be more motivated to stay a tiny bit longer.
Seems like today they are paid mostly in stock. Their vision becomes very short term. If they can’t organically grow the company, stock buybacks will prop up their shares. Otherwise a CEO paid mainly from salary might be more motivated to stay a tiny bit longer.
Brought to you by trickle down economics!!
I kind of wish stock buybacks had to include an equivalent portion of executive and board shares (bought back) and options (reduced). It may raise the value of remaining shares, but at least it would reduce the use of the decision to drain value from the public and the company itself.
It’s interesting to me this doesn’t self correct. I’d love to know if someone can explain why.
E.g. presumably companies can pay people more if they capture less value themselves. Why can’t a company do that and just hire the best talent?
E.g. presumably companies can pay people more if they capture less value themselves. Why can’t a company do that and just hire the best talent?
Because the "talent" in this case is a commodity. Most of the low-wage corporation's employees tend to be front-of-house customer facing staff or brown-collar labor, which in most cases does not require any special skill set, nor rewards exceptional talent in most companies. Jobs that are easily replaceable and does not require a degree holder.
Ironically, one of the few places I've seen that actually rewards employees for going above and beyond regularly is Walmart. Entry-level staff who can rise through the ranks with exceptional work can turn from low-wage line workers to store managers who are often paid close to $250k.
Ironically, one of the few places I've seen that actually rewards employees for going above and beyond regularly is Walmart. Entry-level staff who can rise through the ranks with exceptional work can turn from low-wage line workers to store managers who are often paid close to $250k.
Brown collar? All I found for that is military https://en.wikipedia.org/wiki/Designation_of_workers_by_coll...
Ahh, perhaps I was taught wrong. We used to be taught where I'm from that brown-collar meant dirty industries (including black-collar jobs in the above list such as oil-drilling, etc) and agriculture, while blue collar meant a step more technical but still did not require a college education (home technicians, factory jobs, delivery personnel, etc.).
In business sectors where talent matters, the reverse process absolutely does take place, and it is a positive flywheel. Ex: take US tech. Stock issuance (as opposed to buybacks) is used as incentive to attract talent, which then drives growth and valuation, which makes the company more attractive for talent, in a reflexive cycle.
But many businesses are just optimizing for lowest labor cost when it comes to their main workforce. That's where you see the arguably exploitive situation above.
But many businesses are just optimizing for lowest labor cost when it comes to their main workforce. That's where you see the arguably exploitive situation above.
If you want a fun exercise, try to estimate how many more Chipotle stores they could open if they didn't have to pay their executive salaries.
Maybe this is the self correction. Consider the various CEOs of Apple. Some drove it to near bankruptcy, Jobs drove it to the richest company in the world.
Same company, same employees.
The only difference was leadership.
Consider also what happened to MSFT when Nadella took over. Same company, same employees, dramatically different results.
As a shareholder of Microsoft and Apple, I am happy with their CEO compensation. They earned it. And after all, CEO compensation comes out of the pockets of the shareholders, not the pockets of the employees.
Same company, same employees.
The only difference was leadership.
Consider also what happened to MSFT when Nadella took over. Same company, same employees, dramatically different results.
As a shareholder of Microsoft and Apple, I am happy with their CEO compensation. They earned it. And after all, CEO compensation comes out of the pockets of the shareholders, not the pockets of the employees.
> The only difference was leadership.
Not really. There are a lot of external factors that could explain the difference in the company's performance. Different time, different customers, different overall market strength, different availability in capital, different interest rates. You can't pin the company's success or failure entirely on the CEO, and there is not that much correlation between CEO compensation and company success.
I think a lot of people could do Nadella’s job and you’d see similar company performance. In fact I’d be so bold to say that the higher up on the totem pole you go, the more people could do an equal or better job. The world has few CEOs simply because the world has few companies, not because the job is particularly difficult or requires niche, rare skill.
We love to hero worship, though, and the fiction we consume loves to uplift That One Person who won the day, downplaying everyone else who contributed to that win, and the environment in which the win happened.
Not really. There are a lot of external factors that could explain the difference in the company's performance. Different time, different customers, different overall market strength, different availability in capital, different interest rates. You can't pin the company's success or failure entirely on the CEO, and there is not that much correlation between CEO compensation and company success.
I think a lot of people could do Nadella’s job and you’d see similar company performance. In fact I’d be so bold to say that the higher up on the totem pole you go, the more people could do an equal or better job. The world has few CEOs simply because the world has few companies, not because the job is particularly difficult or requires niche, rare skill.
We love to hero worship, though, and the fiction we consume loves to uplift That One Person who won the day, downplaying everyone else who contributed to that win, and the environment in which the win happened.
Nadella changed the focus and direction of Microsoft. The company increased in value 10x. Maybe "anyone could have done that", in hindsight. Heck, if I went back in time with a detailed copy of Apple's history, I could have done what Jobs did.
But without that guide, I would have destroyed Apple. I'm just not that good.
But without that guide, I would have destroyed Apple. I'm just not that good.
All I am saying is we don't know that it was his decisions that caused the value increase and not something else, and we can't know because we can't do a controlled experiment in another otherwise identical universe to rule out other factors.
In order to increase the market cap of the company by 10x over 10 years, he would have had to have consistently made the best decision.
Being dumb luck seems highly unlikely.
If you can show me an incompetent CEO who presided over such success, I'd enjoy hearing about it.
Being dumb luck seems highly unlikely.
If you can show me an incompetent CEO who presided over such success, I'd enjoy hearing about it.
> The only difference was leadership.
That's quite the leap though, and is just confusing correlation and causation. Maybe the previous leadership was simply getting in the way of the engineers and managers that had the good ideas. And the new leadership was more hands-off, or focused in other areas like marketing. Or those cases are just flukes. For every case like the ones you cite, I could find two where the exact opposite happened.
If you're downing a shot of vodka every morning, and suddenly stop, then yeah, your health is going to improve.
In my opinion, many (if not most) of these CEOs are business-focused people with no technical (or even non-technical) knowledge of anything they purport to manage. And on the whole, they really don't affect the value of the company one way or the other.
That's quite the leap though, and is just confusing correlation and causation. Maybe the previous leadership was simply getting in the way of the engineers and managers that had the good ideas. And the new leadership was more hands-off, or focused in other areas like marketing. Or those cases are just flukes. For every case like the ones you cite, I could find two where the exact opposite happened.
If you're downing a shot of vodka every morning, and suddenly stop, then yeah, your health is going to improve.
In my opinion, many (if not most) of these CEOs are business-focused people with no technical (or even non-technical) knowledge of anything they purport to manage. And on the whole, they really don't affect the value of the company one way or the other.
Jobs created 3 fortunes. One you could attribute to luck. Two is getting hard to say any schmuck could have done that. 3 means Jobs was a unicorn.
I'm not saying any schmuck could have done that. I'm saying that the engineers and managers at Apple (to use your example) are just as (if not more) responsible for the success than Jobs. Those lower-level engineers and managers also explain the repeated successes. And that, I would say, is the case in most market successes. The CEO is not remotely deserving of all the credit, or even most of the credit, in most situations. They don't really deserve to be paid what they're paid.
There's this certain anti-historical proclivity to create heroes for worship. Because it's a simple story to tell and it gives you the opportunity to put yourself in the hero's shoes. But the simple story is almost always wrong.
There's this certain anti-historical proclivity to create heroes for worship. Because it's a simple story to tell and it gives you the opportunity to put yourself in the hero's shoes. But the simple story is almost always wrong.
Talent quality doesn’t really matter outside of the bottom 20% and the top 5%
thrance(1)
Shareholders won't let them, basically
So perhaps someone can explain something to me.
One of the main problems I see with modern Corporatism is that "shareholders" have too much influence over companies, driving them to make choices that erode long-term customer trust and brand value in return for short-term gains. (This is rational from the investor POV, because they can sell their stake at any point and still have made a profit on the dead husk of a company they left behind). Put more briefly, being beholden to shareholders drives enshittification.
Stock buybacks should, in principal, allow a company to dilute shareholder power and re-control its own destiny. It should allow a company that is successful enough to not need external investment anymore to re-prioritize what's good for the company, rather than the shareholders, especially once they've reached the point of having enough free cash to not need investors. Why, then, is it so universally reviled?
One of the main problems I see with modern Corporatism is that "shareholders" have too much influence over companies, driving them to make choices that erode long-term customer trust and brand value in return for short-term gains. (This is rational from the investor POV, because they can sell their stake at any point and still have made a profit on the dead husk of a company they left behind). Put more briefly, being beholden to shareholders drives enshittification.
Stock buybacks should, in principal, allow a company to dilute shareholder power and re-control its own destiny. It should allow a company that is successful enough to not need external investment anymore to re-prioritize what's good for the company, rather than the shareholders, especially once they've reached the point of having enough free cash to not need investors. Why, then, is it so universally reviled?
I think what I've heard is: The buyback is part of a larger scheme where execs / board members can pump the price of the stock, and then make themselves money either through bonuses tied to rising stock prices, or through dumping their own shares once the market price goes up.
https://en.wikipedia.org/wiki/Share_repurchase#Criticism
The vibe is that there's a vicious cycle of "Customers are not brand-loyal, let's make our products shitty, hollow out the brand, and then liquidate everything to enrich ourselves" and "Why should I be loyal to any brand when brands that were institutions in my parents' time, like Sears and Craftsman, are hollowing out their brands and making everything shitty for a quick buck?"
Feels like everything has become a market for lemons, and the hand of Moloch has realized that if something isn't a market for lemons, it would be more profitable if it was.
In my head there's a piece of red string connecting this to the Internet Whalefall phenomenon - The Internet used to feel like (again, vibes are all I have for this) a place where the savvy early-adopter techie could be rewarded for their skill at installing any web browser but IE, with secret information shared by other elite techies, about which brands were good and how to get things done cheaper.
But now that Eternal September post-2007 has Pokemon-mega-evolved into Eternal 2007, everyone just buys reviews and nothing online is trustworthy. All the whale meat is eaten and those picking at the bones are left starving.
This led to my personal heuristic of just taking recommendations from people or orgs I meet in person. "Do you like that brand of clothing? How is that USB hub treating you? Where did you buy this?" It's a natural hedge against "I could have _told_ you not to buy that piece of crap" and it's also mathematically similar to best-of-two-random-choices load balancing. Just pick any service or product that one real human halfway-likes.
https://en.wikipedia.org/wiki/Share_repurchase#Criticism
The vibe is that there's a vicious cycle of "Customers are not brand-loyal, let's make our products shitty, hollow out the brand, and then liquidate everything to enrich ourselves" and "Why should I be loyal to any brand when brands that were institutions in my parents' time, like Sears and Craftsman, are hollowing out their brands and making everything shitty for a quick buck?"
Feels like everything has become a market for lemons, and the hand of Moloch has realized that if something isn't a market for lemons, it would be more profitable if it was.
In my head there's a piece of red string connecting this to the Internet Whalefall phenomenon - The Internet used to feel like (again, vibes are all I have for this) a place where the savvy early-adopter techie could be rewarded for their skill at installing any web browser but IE, with secret information shared by other elite techies, about which brands were good and how to get things done cheaper.
But now that Eternal September post-2007 has Pokemon-mega-evolved into Eternal 2007, everyone just buys reviews and nothing online is trustworthy. All the whale meat is eaten and those picking at the bones are left starving.
This led to my personal heuristic of just taking recommendations from people or orgs I meet in person. "Do you like that brand of clothing? How is that USB hub treating you? Where did you buy this?" It's a natural hedge against "I could have _told_ you not to buy that piece of crap" and it's also mathematically similar to best-of-two-random-choices load balancing. Just pick any service or product that one real human halfway-likes.
I think this "lemonade stand" effect is where a lot of companies are staying privately funded as opposed to ever going IPO... it's such a slippery slope to the bottom in that you lose control over doing what you feel is best for the company (or society) in favor of maximizing shareholder value.
Even personal recommendations have the problem of requiring significant use time (c. a year?) to estimate value. A company can (it seems) degrade quality for a model faster than quality can be evaluated by normal use.
Shareholders own the company. They are literally the owners of the company. Like anything you own.
In the same way you own your house and pay a painter to paint it, the shareholders own the company and pay Nick to stamp boxes.
I don't know of anyone who has had work done on their home, and then upon selling the home, went back to the painter and said "Here is your cut of the profit we made selling our house, thanks for the great work!"
But I know and endless number of people who think that because they painted a house at an agreed price to make it look nice, they need to be cut in on the profit from selling the house.
In the same way you own your house and pay a painter to paint it, the shareholders own the company and pay Nick to stamp boxes.
I don't know of anyone who has had work done on their home, and then upon selling the home, went back to the painter and said "Here is your cut of the profit we made selling our house, thanks for the great work!"
But I know and endless number of people who think that because they painted a house at an agreed price to make it look nice, they need to be cut in on the profit from selling the house.
Now, this painter works for your house exclusively every day 40 to 60 hours each week total, 2-5 years, and because of their work you sell house for 1,000x of the original price. You now go to live luxury life without need to ever work again, while painter continue their meager life painting another house 8 hours every day.
I would say that is a pretty dumb painter. Definitely wildly talented at painting, but incredibly unintelligent. Just paint the house like you were paid to.
You might think I was making an analogy, and hence tried to break it, but it wasn't an analogy. Its the same thing. You own something, you pay people to work on it, it's still all yours afterwards.
You might think I was making an analogy, and hence tried to break it, but it wasn't an analogy. Its the same thing. You own something, you pay people to work on it, it's still all yours afterwards.
Telling the majority of our population they are dumb for engaging in our current social contract isn't going to work out well for society long term.
Those with a 1000x return almost universally recognize that they have the talent to not work for someone else. Or they do work for someone else, but make far, far, more than a house painter to do it.
Those are probably less than 1% of the population. The majority don't even approach 2x, much less 1000x.
Those are probably less than 1% of the population. The majority don't even approach 2x, much less 1000x.
Then the 1000x return people should be smart enough to realize they are a small minority and not choose to alienate the much larger majority.
The stock does not carry voting rights and for good reason management could effectively vote itself more power and entrench control. There are many laws in place to prevent this.
Reagan economic policy of legalizing stock manipulation via "stock buybucks" has been one of the worst mistakes for American class and sustainable living.
[deleted]
k_roy(3)
Measuring median wage of Starbucks employees against the one time multi-year strictly performance based stock-option plan given to the new CEO is so blatantly dishonest I can barely read the rest of the article.
Especially when Starbucks awards stock and healthcare plans to even part time baristas. Probably one of the better major employers of low skill labor in the world.
Especially when Starbucks awards stock and healthcare plans to even part time baristas. Probably one of the better major employers of low skill labor in the world.
Is part of the performance keeping worker wages as low as possible?
No. If keeping worker wages as low as possible was the goal, they wouldn't award stock or healthcare benefits to part time workers in their kitchens.
The point is that poaching a new CEO from another company (in this case, Chipotle), and awarding him a pile of stock options if he hits certain metrics is not pay, is not comparable to W2 income, does not hit his bank account, and does not make anyone else poorer, except theoretically the shareholders, who were so excited to hire this new guy that the stock literally popped 20% when the news broke.
The point is that poaching a new CEO from another company (in this case, Chipotle), and awarding him a pile of stock options if he hits certain metrics is not pay, is not comparable to W2 income, does not hit his bank account, and does not make anyone else poorer, except theoretically the shareholders, who were so excited to hire this new guy that the stock literally popped 20% when the news broke.
> ...awarding him a pile of stock options if he hits certain metrics is not pay, is not comparable to W2 income, does not hit his bank account...
Are you certain that they are options, and not RSUs? The bonus plan described in the SEC filing [0] seems to indicate that the stock offered is not options.
My RSUs absolutely counted as wages once they vested, and I was absolutely able to turn them into cash in my bank account (as would have been the case with stock options that were worth something).
[0] <https://www.sec.gov/Archives/edgar/data/829224/0001193125242...>
Are you certain that they are options, and not RSUs? The bonus plan described in the SEC filing [0] seems to indicate that the stock offered is not options.
My RSUs absolutely counted as wages once they vested, and I was absolutely able to turn them into cash in my bank account (as would have been the case with stock options that were worth something).
[0] <https://www.sec.gov/Archives/edgar/data/829224/0001193125242...>
Good question. Options was casual nomenclature. He received PSRUs, which are Performance-based Restricted Stock Units. For him they vest through 2027 depending on if his hits the metrics or not. Failure to hit means no vesting at all.
Some of his metrics are about store renovations, revamping the rewards program, and hitting some internal financial operating ratios, and a couple other things.
Some of his metrics are about store renovations, revamping the rewards program, and hitting some internal financial operating ratios, and a couple other things.
So, I'm not sure what your claim is. Is it something like "bonus pay is totally incomparable to regular wage pay and does not enter your bank account"? That's the most charitable interpretation I can make out of
> ...awarding him a pile of [RSUs] if he hits certain metrics is not pay, is not comparable to W2 income, does not hit his bank account...
> ...awarding him a pile of [RSUs] if he hits certain metrics is not pay, is not comparable to W2 income, does not hit his bank account...
Performance pay that requires you to hit multiple metrics over a number of years, metrics you may or may not hit, due to unpredictable factors within and outside of your control, is not comparable to guaranteed wage income in a single year.
That's my point. Their CEO has a W-2 salary and cash bonus. It is about $5m a year. They should use that. We all know the reason they pull forward the next 3 years of maybe money and compare it against a part-time barista's single year pay. Because it juices the ratio and makes for a more outrageous headline. But it's dishonest. Starbucks CEO is not paid $98m per annum.
That's my point. Their CEO has a W-2 salary and cash bonus. It is about $5m a year. They should use that. We all know the reason they pull forward the next 3 years of maybe money and compare it against a part-time barista's single year pay. Because it juices the ratio and makes for a more outrageous headline. But it's dishonest. Starbucks CEO is not paid $98m per annum.
> is not comparable to guaranteed wage income...
Funnily enough, wage income for nearly all USians is not guaranteed. For most of us, you have to keep hitting performance targets to earn subsequent paychecks. Sometimes (as many of us in the tech sector, and so, so many in the movie and video games sector know) you get that income taken away from you for no real reason at all.
> ...in a single year.
(To keep things simple in the following, I'm going to assume that Starbucks' fiscal years line up with calendar years, even though I'm certain that they do not.)
Sure, that objection of yours I sort of agree with. He gets a ten million signing bonus [0] and ~30 million in stock just for signing up, with ~45 million in additional stock gated behind continued job performance. The guy only starts getting 10.8 million per year (through the LTIP) in FY2025, with an equity bonus of 13.8 million and a cash bonus with target value of 3.6 million and maximum-planned value of 7.2 million.
Having said that, it does look like the annual cash bonus starts immediately:
> Your annual cash bonus for FY2024 will be pro-rated based on your Start Date and, notwithstanding anything to the contrary in the foregoing, will be calculated by multiplying (i) the annual cash bonus due based on actual performance for FY2024 by (ii) a fraction, (A) the numerator of which is the number of calendar days from the Start Date through September 30, 2024, and (B) the denominator of which is 366.
Another thing that's very important to look into: How often do these CEOs fail to meet their cash bonus targets? Their stock bonus targets? When I was working a bonus-eligible job, the only people who didn't meet their cash bonus target were folks who were going to be fired soon. (Noone I knew was eligible for bonuses delivered via RSUs.)
If we assume that he's not eligible for stock bonus in 2024, and we assume that his late start only divides his 2024 earnings by four, then (if I haven't fucked up my math) it looks like his Q4 2024 earnings were 41.3 million dollars. That's a little less than half what that article reported, but
a) That's still a lot of money... much, much, much more than most USians will ever make in their life, for four months work.
b) Because of my fiscal year manipulation, It's entirely possible that I'm not counting some money that was actually paid out in calendar year 2024, that would bring the actual payout much closer to the value stated in the article.
[0] I'm counting 100% of that signing bonus as paid up front because the only way he loses any of it is if he gets fired With Cause before he hits the six-month mark. If he got disabled on day #2 of his job and had to quit, he'd get 100% of the signing bonus.
Funnily enough, wage income for nearly all USians is not guaranteed. For most of us, you have to keep hitting performance targets to earn subsequent paychecks. Sometimes (as many of us in the tech sector, and so, so many in the movie and video games sector know) you get that income taken away from you for no real reason at all.
> ...in a single year.
(To keep things simple in the following, I'm going to assume that Starbucks' fiscal years line up with calendar years, even though I'm certain that they do not.)
Sure, that objection of yours I sort of agree with. He gets a ten million signing bonus [0] and ~30 million in stock just for signing up, with ~45 million in additional stock gated behind continued job performance. The guy only starts getting 10.8 million per year (through the LTIP) in FY2025, with an equity bonus of 13.8 million and a cash bonus with target value of 3.6 million and maximum-planned value of 7.2 million.
Having said that, it does look like the annual cash bonus starts immediately:
> Your annual cash bonus for FY2024 will be pro-rated based on your Start Date and, notwithstanding anything to the contrary in the foregoing, will be calculated by multiplying (i) the annual cash bonus due based on actual performance for FY2024 by (ii) a fraction, (A) the numerator of which is the number of calendar days from the Start Date through September 30, 2024, and (B) the denominator of which is 366.
Another thing that's very important to look into: How often do these CEOs fail to meet their cash bonus targets? Their stock bonus targets? When I was working a bonus-eligible job, the only people who didn't meet their cash bonus target were folks who were going to be fired soon. (Noone I knew was eligible for bonuses delivered via RSUs.)
If we assume that he's not eligible for stock bonus in 2024, and we assume that his late start only divides his 2024 earnings by four, then (if I haven't fucked up my math) it looks like his Q4 2024 earnings were 41.3 million dollars. That's a little less than half what that article reported, but
a) That's still a lot of money... much, much, much more than most USians will ever make in their life, for four months work.
b) Because of my fiscal year manipulation, It's entirely possible that I'm not counting some money that was actually paid out in calendar year 2024, that would bring the actual payout much closer to the value stated in the article.
[0] I'm counting 100% of that signing bonus as paid up front because the only way he loses any of it is if he gets fired With Cause before he hits the six-month mark. If he got disabled on day #2 of his job and had to quit, he'd get 100% of the signing bonus.
This is a point always missed in debates about CEO pay. The money doesn't rain from the sky onto his yacht. Shareholders have to shell it out, and they'd prefer the CEO works for free. That CEO has to add billions to their bottom line in order to get paid millions.
Nice if CEO was something like an election — with competing CEO's listing their qualifications, how much they expect in compensation. Shareholders could vote for the CEO + pay package they prefer.
You realize minimum wage workers have to meet metrics, right? So he should be paid more for... doing the job like minimum wage workers do?
yes I realize that, I worked a minimum wage job for a long time. The CEO has daily job requirements to meet too, and for that the Starbucks CEO receives a cash salary of about $5m a year. This publication should use that for the ratio, rather than pulling forward the next three years of RSUs that only vest if he hits extremely broad strategy dependent goals that can easily be sunk because of a pandemic or general economic recession.
The CEO has NOTHING like the metrics held to the feet of a minimum wage worker who doesn't have the cushion to handle missing one paycheck.
You're not asking this in good faith, but I'll give my answer anyway: companies have an interest in paying workers market wages, not more, and not much less.
Too much over the market rate, and you're not maximally efficient at converting economic inputs into larger economic outputs.
Too much under the market rate, and you'll see increased employee churn, leading to all sorts of other problems.
If you want workers to be paid more, as we all do, even us greedy capitalists, their economic productivity has to go up (not the same as working harder).
The best way to do that - as far as I know - is improving technology and education.
Too much over the market rate, and you're not maximally efficient at converting economic inputs into larger economic outputs.
Too much under the market rate, and you'll see increased employee churn, leading to all sorts of other problems.
If you want workers to be paid more, as we all do, even us greedy capitalists, their economic productivity has to go up (not the same as working harder).
The best way to do that - as far as I know - is improving technology and education.
Could you explain then why CEO's are not paid at "market rate"? Or is market rate for CEO's basically hundreds of millions or billions of dollars?
If you had a $100B asset, like Starbucks Inc, how much would you pay to search for and keep the right guy to run it?
The Venn diagram of people who have the diversity and depth of skills to pull off a major CEO role has a very small overlapped area.
If you choose your CEO well, you turn Apple in 1997 into Apple in 2010. If you choose poorly, your investment stagnates or evaporates.
So a couple of tens of millions in stock options are a bargain for investors. The value-add of any particular minimum wage employee, despite their equal human dignity and worth, is never going to even be in the same league.
The Venn diagram of people who have the diversity and depth of skills to pull off a major CEO role has a very small overlapped area.
If you choose your CEO well, you turn Apple in 1997 into Apple in 2010. If you choose poorly, your investment stagnates or evaporates.
So a couple of tens of millions in stock options are a bargain for investors. The value-add of any particular minimum wage employee, despite their equal human dignity and worth, is never going to even be in the same league.
I'd likely be progressive if American progressivism wasn't so economically illiterate (as opposed to say Piketty). The vindictive themes make me think that it's motivated more by envy than a genuine desire to improve society.
The CEO to worker compensation ratio is a useless metric. There is absolutely no reason why Starbucks should be punished for hiring more workers over a company like Nvidia that hires relatively few very well paid workers. If you want raise taxes, just increase taxes across the board.
If you really think that stock buybacks are meant to "pump up short term share prices", you should test your theory in the market and you'll be a billionaire in no time.
The CEO to worker compensation ratio is a useless metric. There is absolutely no reason why Starbucks should be punished for hiring more workers over a company like Nvidia that hires relatively few very well paid workers. If you want raise taxes, just increase taxes across the board.
If you really think that stock buybacks are meant to "pump up short term share prices", you should test your theory in the market and you'll be a billionaire in no time.
>if American progressivism wasn't so economically illiterate
Economists by and large tend to be academically and principally in support of many progressive positions so I'm not sure your statement can be read any other way than "I don't like perspectives that disagree with my primed and preconceived beliefs"
Which is an exceedingly common phenomena in a post-truth world. But it's quite obvious; just want to point that out to you.
For decades, professional American economists vote for the democratic party at a rate greatly exceeding the general population and profess support for ideological progressive positions that is also at a notable rate higher than the general population.
You know, there's also something to say about how people invoke the term "economics" in their own personal posts as some sort of grandstanding dog-whistle but we'd be here for hours.
Economists by and large tend to be academically and principally in support of many progressive positions so I'm not sure your statement can be read any other way than "I don't like perspectives that disagree with my primed and preconceived beliefs"
Which is an exceedingly common phenomena in a post-truth world. But it's quite obvious; just want to point that out to you.
For decades, professional American economists vote for the democratic party at a rate greatly exceeding the general population and profess support for ideological progressive positions that is also at a notable rate higher than the general population.
You know, there's also something to say about how people invoke the term "economics" in their own personal posts as some sort of grandstanding dog-whistle but we'd be here for hours.
You assume that I'm conservative, but I'm not. I'm a Democrat who is growing increasingly concerned about their voting base demanding populism. AOC, Sanders, Warren are progressives. I don't consider establishment Democrats progressive.
I didn't say that. I responded directly to your own statement about not being a progressive and the fact that progressives are generally, implied by your words, economic illiterate.
Those were your words, not mine.
Whether you are a Democrat or any other party member is kind of irrelevant; although it certainly is amusing.
Those were your words, not mine.
Whether you are a Democrat or any other party member is kind of irrelevant; although it certainly is amusing.
You made a lot of loaded assumptions, the most objectively wrong one being that I was conservative. "I'd likely be progressive if American progressivism wasn't so economically illiterate (as opposed to say Piketty)" means that I share similar values as progressives, but think that all of them in my home country are a joke.
> the most objectively wrong one being that I was conservative.
Where? No one has stated anything. Everything has been a _direct_ response to your own words.
Where? No one has stated anything. Everything has been a _direct_ response to your own words.
> Where?
> I'm not sure your statement can be read any other way than "I don't like perspectives that disagree with my primed and preconceived beliefs"
You could have read the second half of the comment which explains why I think progressives are economically illiterate and an example of a non economically illiterate policy.
> For decades, professional American economists vote for the democratic party at a rate greatly exceeding the general population
This assumes that I'm not Democrat. Maybe it's partially at fault for not being clear about what progressive means, but again the rest of the comment would not sense with this assumption.
> there's also something to say about how people invoke the term "economics" in their own personal posts as some sort of grandstanding dog-whistle
A dog whistle for what?
> I'm not sure your statement can be read any other way than "I don't like perspectives that disagree with my primed and preconceived beliefs"
You could have read the second half of the comment which explains why I think progressives are economically illiterate and an example of a non economically illiterate policy.
> For decades, professional American economists vote for the democratic party at a rate greatly exceeding the general population
This assumes that I'm not Democrat. Maybe it's partially at fault for not being clear about what progressive means, but again the rest of the comment would not sense with this assumption.
> there's also something to say about how people invoke the term "economics" in their own personal posts as some sort of grandstanding dog-whistle
A dog whistle for what?
You are still not answering the question lol.
>This assumes that I'm not Democrat.
No it doesn't. It's not even about you? English seems like your first language so I can't help but feel there's something else going on here.
You're just being a troll at this point. Goodbye.
>This assumes that I'm not Democrat.
No it doesn't. It's not even about you? English seems like your first language so I can't help but feel there's something else going on here.
You're just being a troll at this point. Goodbye.
[deleted]
It’s a metric capturing income inequality. Very relevant to those of us who care about income inequality. There are plenty of reasons to want to limit income inequality.
My point is that it is a useless metric about income inequality. Starbucks can restructure to a franchise model and immediately reduce worker-CEO pay. Like I said, any other form of taxation would be a less economically distortionary way to reduce income inequality.
You're conflating managerial economics with macroeconomics. CEOs at publicly traded companies aren't hired to enhance the long-term productive capacity of the firm ("growing the economy"); they're there to calm investor nerves and make the stock sexy. Those only have a very slight correlation to the overall health of the economy. Microsoft grew revenue and profits under Steve Ballmer, but the stock stayed flat, so he had to go.
It'd be great if public companies could grow market share by beating competitors by with better prices or service, but that takes long-term strategic planning and no surprises from government, activist investors, suppliers and employees. CEOs don't have that kind of time, so they reach for familiar tools: restructuring (mass firings), selling off parts, and yes, share buybacks, because these tools move the needle that matters. During their quarterly earnings calls, they answer to Wall Street analysts, who represent the interests of shareholders, not employees or economic policymakers.
As for "economic illiteracy", the very concept is nonsensical. Every economy is structured differently and what's "sensible" changes over time. If you asked a US economist whether they thought zero interest rate policy (2008-2022) was a good idea, they'd think you were talking about a communist society with a desperate government trying to manufacture growth. But this is how every western economy largely operated after the Great Recession. They'd probably take a dim view of venture capital as well, considering its portfolio strategy ignores operational profit targets in favor of IPO windfalls. That's how you end up with abominations like SPACs, where companies can go public with a fraction of the financial transparency that would otherwise be required.
It'd be great if public companies could grow market share by beating competitors by with better prices or service, but that takes long-term strategic planning and no surprises from government, activist investors, suppliers and employees. CEOs don't have that kind of time, so they reach for familiar tools: restructuring (mass firings), selling off parts, and yes, share buybacks, because these tools move the needle that matters. During their quarterly earnings calls, they answer to Wall Street analysts, who represent the interests of shareholders, not employees or economic policymakers.
As for "economic illiteracy", the very concept is nonsensical. Every economy is structured differently and what's "sensible" changes over time. If you asked a US economist whether they thought zero interest rate policy (2008-2022) was a good idea, they'd think you were talking about a communist society with a desperate government trying to manufacture growth. But this is how every western economy largely operated after the Great Recession. They'd probably take a dim view of venture capital as well, considering its portfolio strategy ignores operational profit targets in favor of IPO windfalls. That's how you end up with abominations like SPACs, where companies can go public with a fraction of the financial transparency that would otherwise be required.
> If you asked a US economist whether they thought zero interest rate policy (2008-2022) was a good idea, they'd think you were talking about a communist society with a desperate government trying to manufacture growth.
I think you missed some words. Did you mean economists from the Cold War? By economic illiteracy, I don't mean economic opinions I think are stupid, but refusal to acknowledge economics altogether. If Milton Friedman rises from the dead, he could read the Fed's rationale for keeping interest rates low. He may vehemently disagree, but he would at least acknowledge there is an argument to be made.
On the other hand, there has been no thought whatsoever put into the implications of a tax that specifically targets companies with a exec to worker pay gap. There is no economic argument for why stock buybacks are bad for workers. There are arguments for why they're bad for investors, but somehow I doubt that the authors of the article are worried about those people.
I think you missed some words. Did you mean economists from the Cold War? By economic illiteracy, I don't mean economic opinions I think are stupid, but refusal to acknowledge economics altogether. If Milton Friedman rises from the dead, he could read the Fed's rationale for keeping interest rates low. He may vehemently disagree, but he would at least acknowledge there is an argument to be made.
On the other hand, there has been no thought whatsoever put into the implications of a tax that specifically targets companies with a exec to worker pay gap. There is no economic argument for why stock buybacks are bad for workers. There are arguments for why they're bad for investors, but somehow I doubt that the authors of the article are worried about those people.
This in particular seems silly to post to the hackernews crowd, as this seems to imply the majority of stock goes to senior execs, when large tech companies are literally paying out tens of billions of dollars to the average tech worker.
This is a great point. Companies like Microsoft have spent billions on buybacks over the last couple years, yet their sharecount has not decreased. It's literally just to eat up the dilution from paying out RSUs to rank and file.
No, large tech companies are not paying out tens of billions of dollars to the average worker.
Did you mean that tens of billions of dollars are going to ALL the tech workers combined? True, but a single absolute number means little when the conversation is about relative distribution of resources and how those numbers change over time.
Did you mean that tens of billions of dollars are going to ALL the tech workers combined? True, but a single absolute number means little when the conversation is about relative distribution of resources and how those numbers change over time.
what is the claim here? That the majority of the tens of billions are given to what, L7 and above? L10?
I don't know, you didn't provide any stats. Without that context, the total compensation of all employees isn't a terribly meaningful number when discussing disparity.
My claim was that your argument isn't well supported, not that you're wrong.
My claim was that your argument isn't well supported, not that you're wrong.
[deleted]
This from an advocacy group with a clear agenda. But if they wanted to raise wages they could just advocate for less immigration and robust enforcement. Restrict supply, wages will rise.
But they don't.
Capital will just flow to where costs are less. We don’t see Nike opening factories in the US for this reason
Capital will flow to maximize total shareholder value, therefore projected revenue/profits.
Nike opens factories in low-cost areas because they're allowed to. Before Clinton, most things were built in the country. Profits were lower, but the wage gap was also much lower.
Nike opens factories in low-cost areas because they're allowed to. Before Clinton, most things were built in the country. Profits were lower, but the wage gap was also much lower.
What's funny is that the people who hate on America the most tend to also have a strong belief in American exceptionalism without realizing it. "America is the worst!" in one breath, while in the next breath saying "Everyone deserves to live in America".
What I see missing most in discussions around immigration is what it does to the home countries of the people trying to move to the United States. I know a lot of families who have come into the country from Mexico, and I don't blame them - I'd probably do the same. But if you look at the towns they're leaving (which I've done many times), it's creating a vacuum of good, hard-working people. As a result, crime and drug lords fill the vacuum, making it even more unsafe.
If you ask a lot of those people (which I've done), they'd really like to stay in their home countries - provided that there weren't growing concerns over crime. As Americans, why do we have to act like this is the only place in the world where people can be successful, and the only safe haven? What if we instead supported those countries and encouraged their brightest and best citizens to stay so that their communities can thrive?
I love immigrants, and I also love a lot of the countries they're coming from. I just wish we could stop pretending that everyone needs to move to the United States to be happy, productive, or successful.
And yes, markets tend to be affected by supply and demand, the labor market included. If you have an almost unlimited supply of people looking for work and willing to work at very low wages, of course we're going to see wages stagnate.
What I see missing most in discussions around immigration is what it does to the home countries of the people trying to move to the United States. I know a lot of families who have come into the country from Mexico, and I don't blame them - I'd probably do the same. But if you look at the towns they're leaving (which I've done many times), it's creating a vacuum of good, hard-working people. As a result, crime and drug lords fill the vacuum, making it even more unsafe.
If you ask a lot of those people (which I've done), they'd really like to stay in their home countries - provided that there weren't growing concerns over crime. As Americans, why do we have to act like this is the only place in the world where people can be successful, and the only safe haven? What if we instead supported those countries and encouraged their brightest and best citizens to stay so that their communities can thrive?
I love immigrants, and I also love a lot of the countries they're coming from. I just wish we could stop pretending that everyone needs to move to the United States to be happy, productive, or successful.
And yes, markets tend to be affected by supply and demand, the labor market included. If you have an almost unlimited supply of people looking for work and willing to work at very low wages, of course we're going to see wages stagnate.
> This from an advocacy group with a clear agenda
does this not describe literally every successful coordinated collective effort? can you be more specific about what you mean by this?
does this not describe literally every successful coordinated collective effort? can you be more specific about what you mean by this?
Immigration is an economic net positive on the country, you're just pushing your agenda. Don't pretend otherwise.
Pushing the agenda of supply and demand?
Generally any gain in income is NOT going towards the lowest rung American worker who are specifically being talked about here.
This is why you always told by open border advocates if you restrict/enforce immigration the price if produce will rise. Why would that be..
This is not true. Restrict supply too much and you can't build anything. Could you have built Nvidia by restricting supply? Probably not - so there seems to be a middle ground.
This is specifically addressing the type workers mentioned in the article. Restricting immigration of those who would compete with them. Which ain't going to be your Nvida type engineers.
After thinking about what you said I think I agree but only a bit.
Key Points
- While some policymakers have blamed immigration for slowing U.S. wage growth since the 1970s, most academic research finds little long run effect on Americans’ wages.
- The available evidence suggests that immigration leads to more innovation, a better educated workforce, greater occupational specialization, better matching of skills with jobs, and higher overall economic productivity.
- Immigration also has a net positive effect on combined federal, state, and local budgets. But not all taxpayers benefit equally. In regions with large populations of less educated, low-income immigrants, native-bor
https://www.congress.gov/118/meeting/house/116727/documents/...
- While some policymakers have blamed immigration for slowing U.S. wage growth since the 1970s, most academic research finds little long run effect on Americans’ wages.
- The available evidence suggests that immigration leads to more innovation, a better educated workforce, greater occupational specialization, better matching of skills with jobs, and higher overall economic productivity.
- Immigration also has a net positive effect on combined federal, state, and local budgets. But not all taxpayers benefit equally. In regions with large populations of less educated, low-income immigrants, native-bor
https://www.congress.gov/118/meeting/house/116727/documents/...
what a weird way of rephrasing what the study actually says
"most academic research finds little long run effect on Americans’ wages."
Right, with this sentence being important right after:
"studies suggest that these gains come at the cost of short-term losses from lower wages and higher unemployment."
"most academic research finds little long run effect on Americans’ wages."
Right, with this sentence being important right after:
"studies suggest that these gains come at the cost of short-term losses from lower wages and higher unemployment."
This account seems to be bot-posting.
Doesn't matter here. The examples cited here are Starbucks and Ulta Beauty, neither of which are big on hiring illegal or foreign workers.
What? Almost every Starbucks I visit hires foreign workers.
Hundreds of thousand of foreigners were given work permits by the previous administration.
You can see all the companies they highlight in the report here. Many do hire foreign workers:
https://ips-dc.org/wp-content/uploads/2025/08/executive_exce...
Clearly there foreign workers at Starbucks or there would not be protests: According to the popular videos circulating over the Internet, Starbucks halted a few minutes of their services across the nation as a form of protest against the recent “illegal deportation of immigrants.” "We are stopping work for a few minutes to read a statement in protest of actions against our fellow workers," Starbucks Workers United members at the Ellicott City location in Maryland said in a statement during their strike on April 1.
https://economictimes.indiatimes.com/news/international/glob...?
Clearly there foreign workers at Starbucks or there would not be protests: According to the popular videos circulating over the Internet, Starbucks halted a few minutes of their services across the nation as a form of protest against the recent “illegal deportation of immigrants.” "We are stopping work for a few minutes to read a statement in protest of actions against our fellow workers," Starbucks Workers United members at the Ellicott City location in Maryland said in a statement during their strike on April 1.
https://economictimes.indiatimes.com/news/international/glob...?
Yeah no.
Immigration’s impact on wages, especially in the long term, is not as straightforward as “less supply → higher pay.” Multiple studies from the U.S. National Academies of Sciences and leading labor economists find that immigration has only small effects on native-born workers’ wages, and in most cases boost overall wage growth by fueling demand, entrepreneurship, and innovation. Restricting immigration might reduce competition in some low-skill job markets, but it can also harm industries that rely on labor shortages being filled, push up costs for consumers, and slow economic growth, which in the longer run counteracts any wage gains.
Immigration’s impact on wages, especially in the long term, is not as straightforward as “less supply → higher pay.” Multiple studies from the U.S. National Academies of Sciences and leading labor economists find that immigration has only small effects on native-born workers’ wages, and in most cases boost overall wage growth by fueling demand, entrepreneurship, and innovation. Restricting immigration might reduce competition in some low-skill job markets, but it can also harm industries that rely on labor shortages being filled, push up costs for consumers, and slow economic growth, which in the longer run counteracts any wage gains.
"Immigration’s impact on wages, especially in the long term, is not as straightforward as “less supply → higher pay.”
"Restricting immigration might reduce competition in some low-skill job markets, but it can also harm industries that rely on labor shortages being filled"
So restricting immigration of low wage workers, would push up wages in low wage industries. Seems pretty clear.
"Restricting immigration might reduce competition in some low-skill job markets, but it can also harm industries that rely on labor shortages being filled"
So restricting immigration of low wage workers, would push up wages in low wage industries. Seems pretty clear.
You’re describing a narrow, short-run, partial-equilibrium effect. In the real world, general-equilibrium effects swamp it:
Cut low-wage immigration and you don’t just raise some hourly rates. You also shrink output, kill complementary jobs, and push prices up for everyone, which erodes those wage gains. The National Academies’ comprehensive review finds immigration’s impact on native wages is small overall and often positive for some groups, with clear long-run growth benefits. https://nap.nationalacademies.org/catalog/23550/the-economic...
Classic natural-experiment evidence like the Mariel Boatlift shows big low-skill inflows had essentially no hit to local low-skill wages. Labor markets adjust. https://davidcard.berkeley.edu/papers/mariel-impact.pdf
Meta-work by Peri and coauthors show across many settings, native wage effects are near zero, while immigration raises productivity and lets natives move up the job ladder. https://giovanniperi.ucdavis.edu/uploads/5/6/8/2/56826033/pe...
Recent CBO work attributes stronger labor-force growth and higher GDP to immigration. Reverse that and you get slower growth and upward price pressure that cancels your “clear” wage story. https://www.cbo.gov/publication/60569
So yes, if you freeze the rest of the economy in place, fewer workers can bid up some wages. Once you allow demand, complementarities, and prices to move, the simple “less supply → higher pay” slogan stops matching the data.
Cut low-wage immigration and you don’t just raise some hourly rates. You also shrink output, kill complementary jobs, and push prices up for everyone, which erodes those wage gains. The National Academies’ comprehensive review finds immigration’s impact on native wages is small overall and often positive for some groups, with clear long-run growth benefits. https://nap.nationalacademies.org/catalog/23550/the-economic...
Classic natural-experiment evidence like the Mariel Boatlift shows big low-skill inflows had essentially no hit to local low-skill wages. Labor markets adjust. https://davidcard.berkeley.edu/papers/mariel-impact.pdf
Meta-work by Peri and coauthors show across many settings, native wage effects are near zero, while immigration raises productivity and lets natives move up the job ladder. https://giovanniperi.ucdavis.edu/uploads/5/6/8/2/56826033/pe...
Recent CBO work attributes stronger labor-force growth and higher GDP to immigration. Reverse that and you get slower growth and upward price pressure that cancels your “clear” wage story. https://www.cbo.gov/publication/60569
So yes, if you freeze the rest of the economy in place, fewer workers can bid up some wages. Once you allow demand, complementarities, and prices to move, the simple “less supply → higher pay” slogan stops matching the data.
I did an exercise here: the average CEO salary of S&P 500 is around $20M. That's around $10B totally. Assume there are three executives - so thats around $30B annually.
Lets go much further, lets multiply this by 10 to account for top 5000 companies (in practice it would be more like top 20,000 because the lower companies have much lower CEO salaries).
There are around 300 million people in USA. By redistributing the 100% CEO salary you can give around $900 per year to every single person. All this for $900? Which does not even account for income tax paid by CEO's. Edit: after accounting for income tax it is more like $600
So all you have achieved by completely eradicating C suite salary for top 20,000 companies in the USA is around ~$900~ $600 for each individual per year.
I'm increasingly convinced that CEO pay is the wrong place to look at for any impact at all.
Edit: there's more to this if you account for spending patterns.
Even if you give $500 to every citizen, that does not mean affordability will increase because inflation can increase proportionally. This is because even with increased money, each citizen is buying goods amongst the same quantity of goods as before.
For example we can take potatoes: do you think citizens can afford potatoes even more now? No, because the number of potatoes have remained the same. Taking away CEO salary does not mean potato stock would increase because CEO's are not hoarding up potatoes.
Lets go much further, lets multiply this by 10 to account for top 5000 companies (in practice it would be more like top 20,000 because the lower companies have much lower CEO salaries).
There are around 300 million people in USA. By redistributing the 100% CEO salary you can give around $900 per year to every single person. All this for $900? Which does not even account for income tax paid by CEO's. Edit: after accounting for income tax it is more like $600
So all you have achieved by completely eradicating C suite salary for top 20,000 companies in the USA is around ~$900~ $600 for each individual per year.
I'm increasingly convinced that CEO pay is the wrong place to look at for any impact at all.
Edit: there's more to this if you account for spending patterns.
Even if you give $500 to every citizen, that does not mean affordability will increase because inflation can increase proportionally. This is because even with increased money, each citizen is buying goods amongst the same quantity of goods as before.
For example we can take potatoes: do you think citizens can afford potatoes even more now? No, because the number of potatoes have remained the same. Taking away CEO salary does not mean potato stock would increase because CEO's are not hoarding up potatoes.
As shown by the covid payments. $900 a year is a lot of money to a lot of folks.
Heck annual social security average is 24k a year, so you are talking about nearly 4% more money for just those people alone.
Heck annual social security average is 24k a year, so you are talking about nearly 4% more money for just those people alone.
Fair, lets then count income tax which makes it more like $500 assuming net taxes around 40%. I'm ignoring salary increase due to stock valuation going up because it complicates things and there is equal force from both sides of the argument.
So you decide: 20,000 companies running with a CEO being paid like an average person. And every citizen gets $500 in their account per year.
Edit: its not just a CEO but the C suite. 20,000 running without a C suite.
So you decide: 20,000 companies running with a CEO being paid like an average person. And every citizen gets $500 in their account per year.
Edit: its not just a CEO but the C suite. 20,000 running without a C suite.
I don't think tax is that high for that income bracket but your point still stands for the rules of the current system. I agree with your sentiment there are way better ways to redistribute wealth.
Just dont discount what several hundred bucks means to way too many people in such a prosperous country.
Just dont discount what several hundred bucks means to way too many people in such a prosperous country.
This is the tax bracket for CEO's.
>Just dont discount what several hundred bucks means to way too many people in such a prosperous country.
Sure.. but the real disposable income has increased by a decent amount over the years. Just in the last 10 years (including covid) the real disposable income has increased by over 20%.
>Just dont discount what several hundred bucks means to way too many people in such a prosperous country.
Sure.. but the real disposable income has increased by a decent amount over the years. Just in the last 10 years (including covid) the real disposable income has increased by over 20%.
Shouldn't it be distributed to just the employees of those companies? Why are we including every citizen. That seems to dilute that overall picture.
> So you decide: 20,000 companies running with a CEO being paid like an average person. And every citizen gets $500 in their account per year
In these contrived scenarios people will always choose the anti-CEO scenario.
You could restructure your hypothetical scenario such that the money was lit on fire instead of being paid to executives and you’d still find support from people who are just angry at executives getting paid a lot.
In these contrived scenarios people will always choose the anti-CEO scenario.
You could restructure your hypothetical scenario such that the money was lit on fire instead of being paid to executives and you’d still find support from people who are just angry at executives getting paid a lot.
I agree but funnily enough - lighting it on fire will have the same consequence as every citizen being paid $500 (assuming similar spending patterns of CEO's and workers which is an exaggeration).
You might be interested in https://www.theargumentmag.com/p/giving-people-money-helped-... which talks about the studies showing low effects for just giving money to Americans. It seems like just giving people money is still unproven to have impacts to make people healthier, happier (beyond the year they start giving money), get them better jobs, or improve their children’s intellectual development. There's still hope for targeted programs, but it changed my view on blanket payments.
Thats 3600 for a family of four. 5% of median household income in a country where most have zero savings.
The impact of the whole C suite of top 20,000 companies in USA would be much reduced incentives. These are the same companies that are making products that workers purchase from. Sure 5% extra money per family.
Do you really think 5% increase in income would change the savings scenario? The median real disposable income increased by more than 20% over the years. I don't think savings have changed.
Do you really think 5% increase in income would change the savings scenario? The median real disposable income increased by more than 20% over the years. I don't think savings have changed.
I think we could do with some different incentives.
A lot of the readers here have worked at mega corps and seen what the incentives are in the real world, its not Ayn Rand superman doing the best thing for the company because their interests are aligned.
A lot of the readers here have worked at mega corps and seen what the incentives are in the real world, its not Ayn Rand superman doing the best thing for the company because their interests are aligned.
Beginning of game:
CEO = 0$ value Employee = 0$ value
---
Round 1 Year
CEO = $20M Employee = $0.5M (generous)
--
Round 5 Years
CEO = $100M (if pay remained the same, and they did not create new companies, which I'm sure they will).
Employee = $3M (let's give them promo) etc. Cost of living is increasing with employee's wage, nothing for a CEO.
----
Tell me who is more secure, who has the flexibility to take risks, and create new value.
It's not about the 900$ every human being gets. It's how much differentiation 5 years makes, which is 1/4 of value generation timespan of adults.
CEO = 0$ value Employee = 0$ value
---
Round 1 Year
CEO = $20M Employee = $0.5M (generous)
--
Round 5 Years
CEO = $100M (if pay remained the same, and they did not create new companies, which I'm sure they will).
Employee = $3M (let's give them promo) etc. Cost of living is increasing with employee's wage, nothing for a CEO.
----
Tell me who is more secure, who has the flexibility to take risks, and create new value.
It's not about the 900$ every human being gets. It's how much differentiation 5 years makes, which is 1/4 of value generation timespan of adults.
Do it again but factor in the 90% start-up failure rate.
Another way to look at it is every single person, including children, are paying $75 a month for executives of 5000 public companies. Or $190 per month per household. That is significantly more than the average electricity bill ($130/month). Downplaying that shows you are out of touch with the average American.
> Another way to look at it is every single person, including children, are paying $75 a month for executives of 5000 public companies.
No they are not. The economy isn’t a zero-sum game where the only way an executive can get paid is by taking money from a household.
Executive compensation is largely equity based. The mostly equity is new value created in the economy.
Using zero-sum thinking for economic topics like this is very misleading.
No they are not. The economy isn’t a zero-sum game where the only way an executive can get paid is by taking money from a household.
Executive compensation is largely equity based. The mostly equity is new value created in the economy.
Using zero-sum thinking for economic topics like this is very misleading.
Here's the problem. Companies need workers. And society needs it's people to be bought into society. So you can't really say to the majority of your people 'you are sucker loser idiots for working these jobs, you should really do something else'. Long term, that isn't going to work for society.
Look at China. The people were fine with whatever, as long as incomes were going up. America was the same. Give people the American dream, and you can do what you want at the top. Take it away and at the same time say 'yeah, of course your life is going to suck, you are a dumb worker who deserves nothing, have you tried not being that?' isn't a winning tagline for a company/a society.
Look at China. The people were fine with whatever, as long as incomes were going up. America was the same. Give people the American dream, and you can do what you want at the top. Take it away and at the same time say 'yeah, of course your life is going to suck, you are a dumb worker who deserves nothing, have you tried not being that?' isn't a winning tagline for a company/a society.
Is distributing it to individuals the best option? My suggestion would be to first identify the best option, eg improving education usually has a fairly high ROI. That's how taxes are supposed to work.
> “Every dollar we put into high-quality early childhood education we get $7 back in reduced teen pregnancy, improved graduation rates, improved performance in school, reduced incarceration rates. The society as a whole does better.”
https://www.washingtonpost.com/news/fact-checker/wp/2015/04/...
> “Every dollar we put into high-quality early childhood education we get $7 back in reduced teen pregnancy, improved graduation rates, improved performance in school, reduced incarceration rates. The society as a whole does better.”
https://www.washingtonpost.com/news/fact-checker/wp/2015/04/...
It's the unfairness which bothers people.
>Even if you give $500 to every citizen, that does not mean affordability will increase because inflation can increase proportionally. This is because even with increased money, each citizen is buying goods amongst the same quantity of goods as before.
I know. I thought those covid payments proved it. Everyone got a temporary financial boost, which was great, but they ended up paying for it threefold with rising inflation. As far as i can tell the only people that did really well from it were the banks. The whole policy was well intentioned and completely misguided.
>Even if you give $500 to every citizen, that does not mean affordability will increase because inflation can increase proportionally. This is because even with increased money, each citizen is buying goods amongst the same quantity of goods as before.
I know. I thought those covid payments proved it. Everyone got a temporary financial boost, which was great, but they ended up paying for it threefold with rising inflation. As far as i can tell the only people that did really well from it were the banks. The whole policy was well intentioned and completely misguided.
$900 doesn't go a long way if you're buying cocaine or yacht time, but it goes pretty far at the grocery store. How about not eradicating it entirely, but taking enough to give $500 to everyone?
I'm not convinced that diluting it this far is a fully effective thought experiment. If you took half of that $900 and distributed it amongst 500,000 instead of 300 million, then it'd be a more formidable amount. I'm not sure why it needs to be equally distributed. Just putting it back into the economy otherwise is good enough.
I agree with you. I prefer it more centrally allocated - with the CEO's as the market intended.
Now do this exercise only for the workwers of each of those companies. If they're generating billions value, they should get a fairer share of the profits.
Around $2000 per year.
That means those companies employ almost half the US population. Amazing.
Similarly if you seized 100% of the wealth of the top 400 Americans[0] and liquidated all of their assets to cash, then you'd have ~$5.4T (assuming you didn't completely destroy the economy in the process, which you would but for the sake of the argument assume you wouldn't), which is around 15% of the US Public Debt OR about 3 years worth of the U.S. Budget Deficit.
You're only looking at salary, and not equity based compensation?
It accounts for equity based compensation.
CEO pay relative to median employee pay has soared since the 1970s. That is, a CEO may be paid $10,000,000 vs the median employee at $70,000 (arbitrary numbers), where before 1970 the numbers may have been $150,000 and $20,000
Using only one set of numbers can be deceiving though. For instance, through mergers and acquisitions, there may be One CEO where there were previously 10. So you might be able to see this by comparing Total Executive Pay - ie the whole C-suite to Total Non-Executive Pay.
Also, many companies have become more efficient as measured in revenue per employee over time, so another good set of numbers might be Total Executive Pay vs Gross Revenue.
How does Executive Pay look in these contexts?
I'm sure someone has done the work, but I have not had luck googling it, and I definitely don't trust a LLM to get this one right.