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by tim333 2552 days ago
Though of course in traditional theory the company should be run for the shareholders rather than the executives. It's a bit of a flaw in the system if they can extract large bonuses while tanking the stock. Maybe the government could write some laws that bonuses have to be held in escrow for a while to check the company survives.

(And in more modern views maybe you should worry about the other stakeholders too.)
3 comments
nradov 2552 days ago
Shareholders are free to impose deferred compensation schemes on executives. In fact many companies have done so. No new laws are needed.
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mcguire 2552 days ago
Which companies?

Most shares in most companies I've seen have been owned or controlled by executives or by institutional investors (mutual funds, insurance cos., pensions) that tend to vote with executives' recommendations. Without high-level executive support, shareholders are free to do whatever they want, but the important ones typically don't want.

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rectang 2552 days ago
I disagree that it's a "flaw". It is the natural consequence of an ideology, where we ascribe proportionate value to the contributions of executives and marginal value to the contributions of everyone else.

Since we believe that executives are the ones creating the wealth, it is just that the wealth flows out of the company and towards them. Executives giveth and executives taketh away.

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tim333 2552 days ago
>Since we believe that executives are the ones creating the wealth

I wonder how many people actually believe that.

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marcosdumay 2552 days ago
Active shareholders are happy to see their stock value rise to unsustainable levels and then selling them to the next suckers.

Passive shareholders, well, don't participate on decision making.

Expect this feature to get worse with increased share of index funds. But not by much, because most people never were active anyway.

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icebraining 2552 days ago
> Passive shareholders, well, don't participate on decision making.

That's not true, fund managers vote on behalf of those shareholders, and not always go along with the board's position. See for example Vanguard's voting record: https://about.vanguard.com/investment-stewardship/how-our-fu...

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mcguire 2552 days ago
"Expect this feature to get worse with increased share of index funds."

How so? Index funds buy when the shares are high and sell when they're low.

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