When Will Corporations Finally Admit That Their CEO’s Are Ripping Them Off?

  • While many people seem to recognize that CEOs rip off their companies, they fail to see the obvious implication, that shareholders have a direct interest in lowering CEO pay. For example, a common complaint about share buybacks is that they allow top management to manipulate stock prices to increase the value of their options. (Editor’s note: Before 1982, buybacks were illegal, deemed a form of manipulation.)
  • If CEOs really don’t earn their pay, the obvious question is how do they get away with it? The answer is easy to see, they largely control the boards of directors that determine their pay. Top management typically plays a large role in getting people appointed to the board, and once there, the best way to remain on the board is to avoid pissing off your colleagues. More than 99% of the directors nominated for re-election by the board win their elections.
  • As a practical matter, it is easy to show that the last two decades have not been a period of especially high returns for shareholders. This is in spite of the large cut in corporate taxes under the Trump administration.

See full story here.



Categories: Business

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