[code_sloth]

> Companies are giving their cash back to shareholders because each individual company thinks their shareholders can better allocate the cash, rather than the companies themselves.

_This_ doesn't make any sense. Companies don't think. They're legal entities that are controlled by a small group of people. This group of people can decide that they would prefer to do share buybacks to meet their own performance targets.

[derefr]

Five facts, and one generally-held assumption:

Fact 1. Companies’ brains (for this level of executive decision-making) are their boards of directors.

Fact 2. Boards of directors are made up of people elected by shareholders.

Fact 3. “Making the shareholders money” (either through dividends or equity) is the most obvious “platform” on which to get elected to this position; and “not making the shareholders money” is usually a quick way to get replaced.

Fact 4. Unlike government elections in America—but like elections in Commonwealth nations—corporate “snap elections” can be triggered at any time from a shareholder vote. This means that a board-member can be removed pretty much instantly if they start to look like they’re not serving the shareholders’ interests.

Fact 5. Members of the board usually want to stay on the board, because it confers advantages. Even if there are no explicit advantages to being on the board, they get the ability to vote in ways that work toward their own personal interests, perhaps even getting themselves sweetheart deals. Even if they don’t go for these, there might be “lobbyists” (internal to the company, from industry-organizational bodies, etc.) that are willing to bribe them to vote certain ways.

And now, the assumption, that tends to hold in cases of publicly-traded companies: shareholders in the company are, by majority, pure investors that want their share value to increase, with some making short-term plays and others going long, but neither all that interested in the company outside of its portfolio value.

Putting the facts and the assumption together, you can derive that the board is structured in such a way, and members of the board are incentivized in such a way, that their behaviour is extremely predictable, operating almost according to an algorithm, rather than acting like a “group of people” with human whims.

This emergent behavior of the group, and the clear algorithmic model that can be used to predict it, are what people mean when they talk about “what corporations want.”

It’s very similar to how a person can want things that are at odds with the “wants” of the cells that compose them (such as doing things like drinking that damage those cells, despite each cell embodying an algorithm that steers toward that cell’s own survival.)

[rlucas]

Fact 4 is largely incorrect. Boards with adversarial relationships with large blocs of shareholders generally adopt provisions like staggered board terms (like the US Senate).

Fact 3 is also a fairly fanciful interpretation. Large public corporate board membership can be lucrative, but is in practice not competed for by a talent pool the way that say, a CTO or VP of Sales or CFO role would be. New board members are almost always vetted and nominated by the existing board. Hence new board members are nearly always either 1. in-group members (a cynic would say "cronies") with satisficing business acumen from the same social/business milieu as the incumbents, or in the exceptional case, 2. high visibility outsiders (a cynic would say "window-dressing") from other endeavors, such as former politicians, admirals and generals, etc. A new movement adds a third possible vector in, namely being a highly qualified business person with a politically / optically desirable diversity characteristic. But once that candidate comes in, they quickly will learn that the means to stay in the Inner Ring and gain lucrative additional such opportunities is to toe the line...

I'm sympathetic to your idea of emergent behaviors of the group arising from knowable axioms about the individuals and their motivation but I think you've got some incorrect axioms about the selection and incentives of those individuals.

[mattmanser]

These are obviously not "facts" and companies obviously do not operate in that way.

Really obviously. Just observe any company.

I appreciate you might have a real hard-on for capitalism, but making up stuff like you just did doesn't help.

Companies are cess-pools of politics, incomplete information, petty rivalries, and disparate power. Most shareholders are clueless, poorly informed or spreadbetting.

Given this is all true, your "facts" are all objectively false.

[crazygringo]

Have you ever sat on a board?

Employees at a company might be engaging in petty rivalries in a "cesspool"... but the board of directors is composed of extremely professional, educated and informed investors.

Also, the board primarily represents not the small independent investor, but the majority of shares which are owned by professional institutional investors, which have quite the clue and are extremely well-informed -- they have entire teams of research analysts.

The comment you responded to does accurately represent how corporate boards work, if you actually bothered to "observe any company" in reality -- specifically publicly traded ones.

[airstrike]

> Just observe any company.

That's not a valid counter to the parent's well-formed post. Speaking for myself, I have observed countless companies and those facts continue to hold true.

I appreciate you might have a real hard-on for anti-capitalism, but making up stuff like you just did doesn't help.

[mcguire]

Pssst! Hey, Bud, there's a problem...

Fact 2 is true-ish, sort-of, but largely irrelevant. Except in extreme cases that tend to make headlines, shareholders vote for the people management selects.

And when was Fact 4 last seen in public?

[airstrike]

October 15, 2019

https://www.cnbc.com/2019/10/15/de-shaw-gives-searing-indict...

[mcguire]

"Emerson’s stock price, which has already responded to stories of D.E. Shaw’s potential activism, was up slightly Tuesday."

[airstrike]

One day stock price changes aren't meaningful.

I was only asked to provide a recent example, not an example of an effective campaign.

Look up the Elliott / Arconic saga to name an older example of a successful activism campaign.