Comment by Uehreka

Comment by Uehreka 6 hours ago

Unfortunately CEOs have to do buybacks at every opportunity, because otherwise shareholders will sue them for failing to maximize shareholder value.

> Jobs was always thinking Apple could do better with the money in R&D than paying off shareholders. Wall Street did not approve of this position, but Jobs wasn’t one to listen to anybody, so it did not matter.

(Head spins) wait what?! No! You’re not supposed to do that! If you fail to always maximize short term profits, people might start thinking CEOs actually have agency, and they won’t be able to hide behind the “maximizing shareholder value” excuse!

hyperpape 6 hours ago

> shareholders will sue them for failing to maximize shareholder value

That's quite a bold claim. Do you have an example in which a company/CEO/board was sued specifically for not doing enough buybacks?

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skeeter2020 5 hours ago

I don't think it's typically this explicit or direct, but it can definitely flow more like 1. company is not doing buybacks, 2. performance is judged against comparables in the short (quarterly) term using metrics that prioritize the affects of buybacks, 3. major stakeholders (big stock holders, institutions, funds, etc) put pressure on the board, 4. CEO pushes back and is dismissed for performance or "not hitting targets". Functionally a lot of players in power positions prefer buy backs, optics are better for a surging stock vs. modest increase in dividends, and it favours short-term metrics.

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bena 5 hours ago

A lot of this comes back to Dodge v Ford. The Dodge brothers sued the Ford Motor Company because Ford wanted to cut prices and invest in the company while removing dividends to shareholders. The Dodges disagreed with this and sued. The courts found in favor of them.
https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.

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- mike_hearn 5 hours ago
  
  Ford was an egregious case though. The court's judgement was surely correct but it also hardly matters for the real world. CEOs usually don't publicly announce they plan to literally and deliberately burn all their profits, even if it in reality they absolutely plan to spend it on vanity projects or whatever.
  
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  bena 4 hours ago
  
  Regardless of what the intention was, shareholder primacy has roots in that judgment.
  
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