Comment by constantcrying

Comment by constantcrying 8 hours ago

It is a totally delusional argument. Companies always could reward their shareholders, stock buybacks aren't fundamentally different from paying dividends to shareholders. The idea that stock buybacks are what caused a decrease in company funded basic science is ridiculous.

Only in very rare cases is doing basic science anything but a total waste of money, viewed from a commercial perspective. Companies should seek to be commercial entities, which operate for profit. Anything else is just self destruction.

Look at Bell Labs, it could only exist because some company decided it could use a money shredder. Bell Labs could not survive the dismantling of the Bell telephone monopoly, because ending that monopoly ended the prerequisite that was needed to allow it to exist.

_DeadFred_ 6 hours ago

Yes yes, companies used to compensate management with 'dividend options' so switching to stock options totally didn't pervert management's incentives.

And management doesn't manipulate the stock using stock buybacks. Why would they? Their performance and compensation are only completely tied to stock price. But no, stock buybacks don't allow perverse incentives that lead to short term thinking different than dividends. Totally the same.

Reply View 1 reply

constantcrying 5 hours ago

If you write something which is more than pure sarcasm it might become readable and form into a coherent argument.
Do you genuinely believe that the breakup of the Bell monopoly had a smaller effect on Bell Labs than stock buybacks?
Stock buybacks also are not stock manipulation and managers aren't rewarded because they buy back stocks. The board understand what a stock buyback is, they reward managers for being able to buy back stocks, in other words, they reward them for profits, which are then paid in buybacks or dividends. Stock buy backs are a tool corporations use to reward shareholders, they have no fundamental difference to dividends.
Dividends have the exact same short term incentives. Do you think that a manager can not be rewarded for his paying out dividends, which leads him to cut R&D spending to increase short term profits? It is just delusional to think that there is a difference and certainly in the scientific literature about corporate finance it would be a fringe belief to separate those two as you do.
To be honest it is a bit upsetting to read a comment with so little understanding of the subject and so little imagination. Do you truly believe that managers can not have short term dividend goals? How uninformed are you.

Reply View | 0 replies