CEO pay and stock buybacks have soared at the largest low-wage corporations

https://ips-dc.org/report-executive-excess-2025/

by hhs • 11 months ago

223 224 11 months ago

ips-dc.org

happyopossum• 11 months ago

100 S&P 500 corporations with the lowest median worker pay

So not necessarily “low-wage” corporations, just the lowest quintile from a very small group.

hnlmorg• 11 months ago

There’s plenty of low wage corporations in the S&P 500 index.

It’s certainly not enough of a cherrypicked group to warrant dismissing their findings.

tyleo• 11 months ago

It’s interesting to me this doesn’t self correct. I’d love to know if someone can explain why.

E.g. presumably companies can pay people more if they capture less value themselves. Why can’t a company do that and just hire the best talent?

bluefirebrand• 11 months ago

Shareholders won't let them, basically

fakedang3• 11 months ago

Because the "talent" in this case is a commodity. Most of the low-wage corporation's employees tend to be front-of-house customer facing staff or brown-collar labor, which in most cases does not require any special skill set, nor rewards exceptional talent in most companies. Jobs that are easily replaceable and does not require a degree holder.

Ironically, one of the few places I've seen that actually rewards employees for going above and beyond regularly is Walmart. Entry-level staff who can rise through the ranks with exceptional work can turn from low-wage line workers to store managers who are often paid close to $250k.

01HNNWZ0MV43FF2• 11 months ago

Brown collar? All I found for that is military https://en.wikipedia.org/wiki/Designation_of_workers_by_coll...

Fade_Dance2• 11 months ago

In business sectors where talent matters, the reverse process absolutely does take place, and it is a positive flywheel. Ex: take US tech. Stock issuance (as opposed to buybacks) is used as incentive to attract talent, which then drives growth and valuation, which makes the company more attractive for talent, in a reflexive cycle.

But many businesses are just optimizing for lowest labor cost when it comes to their main workforce. That's where you see the arguably exploitive situation above.

qq66• 11 months ago

Talent quality doesn’t really matter outside of the bottom 20% and the top 5%

nitwit0052• 11 months ago

If you want a fun exercise, try to estimate how many more Chipotle stores they could open if they didn't have to pay their executive salaries.

WalterBright7• 11 months ago

Maybe this is the self correction. Consider the various CEOs of Apple. Some drove it to near bankruptcy, Jobs drove it to the richest company in the world.

Same company, same employees.

The only difference was leadership.

Consider also what happened to MSFT when Nadella took over. Same company, same employees, dramatically different results.

As a shareholder of Microsoft and Apple, I am happy with their CEO compensation. They earned it. And after all, CEO compensation comes out of the pockets of the shareholders, not the pockets of the employees.

biimugan2• 11 months ago

The only difference was leadership.

That's quite the leap though, and is just confusing correlation and causation. Maybe the previous leadership was simply getting in the way of the engineers and managers that had the good ideas. And the new leadership was more hands-off, or focused in other areas like marketing. Or those cases are just flukes. For every case like the ones you cite, I could find two where the exact opposite happened.

If you're downing a shot of vodka every morning, and suddenly stop, then yeah, your health is going to improve.

In my opinion, many (if not most) of these CEOs are business-focused people with no technical (or even non-technical) knowledge of anything they purport to manage. And on the whole, they really don't affect the value of the company one way or the other.

ryandrake2• 11 months ago

The only difference was leadership.

Not really. There are a lot of external factors that could explain the difference in the company's performance. Different time, different customers, different overall market strength, different availability in capital, different interest rates. You can't pin the company's success or failure entirely on the CEO, and there is not that much correlation between CEO compensation and company success.

I think a lot of people could do Nadella’s job and you’d see similar company performance. In fact I’d be so bold to say that the higher up on the totem pole you go, the more people could do an equal or better job. The world has few CEOs simply because the world has few companies, not because the job is particularly difficult or requires niche, rare skill.

We love to hero worship, though, and the fiction we consume loves to uplift That One Person who won the day, downplaying everyone else who contributed to that win, and the environment in which the win happened.

bruceb5• 11 months ago

This from an advocacy group with a clear agenda. But if they wanted to raise wages they could just advocate for less immigration and robust enforcement. Restrict supply, wages will rise. But they don't.

nielsbot4• 11 months ago

Key Points

- While some policymakers have blamed immigration for slowing U.S. wage growth since the 1970s, most academic research finds little long run effect on Americans’ wages.

- The available evidence suggests that immigration leads to more innovation, a better educated workforce, greater occupational specialization, better matching of skills with jobs, and higher overall economic productivity.

- Immigration also has a net positive effect on combined federal, state, and local budgets. But not all taxpayers benefit equally. In regions with large populations of less educated, low-income immigrants, native-bor

https://www.congress.gov/118/meeting/house/116727/documents/...

m00x3• 11 months ago

This account seems to be bot-posting.

VirusNewbie3• 11 months ago

what a weird way of rephrasing what the study actually says

"most academic research finds little long run effect on Americans’ wages."

Right, with this sentence being important right after:

"studies suggest that these gains come at the cost of short-term losses from lower wages and higher unemployment."

thrance• 11 months ago

Immigration is an economic net positive on the country, you're just pushing your agenda. Don't pretend otherwise.

bruceb5• 11 months ago

Pushing the agenda of supply and demand? Generally any gain in income is NOT going towards the lowest rung American worker who are specifically being talked about here. This is why you always told by open border advocates if you restrict/enforce immigration the price if produce will rise. Why would that be..

sharts• 11 months ago

Capital will just flow to where costs are less. We don’t see Nike opening factories in the US for this reason

m00x3• 11 months ago

Capital will flow to maximize total shareholder value, therefore projected revenue/profits.

Nike opens factories in low-cost areas because they're allowed to. Before Clinton, most things were built in the country. Profits were lower, but the wage gap was also much lower.

simianwords15• 11 months ago

This is not true. Restrict supply too much and you can't build anything. Could you have built Nvidia by restricting supply? Probably not - so there seems to be a middle ground.

bruceb5• 11 months ago

This is specifically addressing the type workers mentioned in the article. Restricting immigration of those who would compete with them. Which ain't going to be your Nvida type engineers.

GuinansEyebrows• 11 months ago

This from an advocacy group with a clear agenda

does this not describe literally every successful coordinated collective effort? can you be more specific about what you mean by this?

fakedang3• 11 months ago

Doesn't matter here. The examples cited here are Starbucks and Ulta Beauty, neither of which are big on hiring illegal or foreign workers.

m00x3• 11 months ago

What? Almost every Starbucks I visit hires foreign workers.

bruceb5• 11 months ago

Hundreds of thousand of foreigners were given work permits by the previous administration. You can see all the companies they highlight in the report here. Many do hire foreign workers: https://ips-dc.org/wp-content/uploads/2025/08/executive_exce...

Clearly there foreign workers at Starbucks or there would not be protests: According to the popular videos circulating over the Internet, Starbucks halted a few minutes of their services across the nation as a form of protest against the recent “illegal deportation of immigrants.” "We are stopping work for a few minutes to read a statement in protest of actions against our fellow workers," Starbucks Workers United members at the Ellicott City location in Maryland said in a statement during their strike on April 1.

https://economictimes.indiatimes.com/news/international/glob...?

kacesensitive2• 11 months ago

Yeah no.

Immigration’s impact on wages, especially in the long term, is not as straightforward as “less supply → higher pay.” Multiple studies from the U.S. National Academies of Sciences and leading labor economists find that immigration has only small effects on native-born workers’ wages, and in most cases boost overall wage growth by fueling demand, entrepreneurship, and innovation. Restricting immigration might reduce competition in some low-skill job markets, but it can also harm industries that rely on labor shortages being filled, push up costs for consumers, and slow economic growth, which in the longer run counteracts any wage gains.

bruceb5• 11 months ago

"Immigration’s impact on wages, especially in the long term, is not as straightforward as “less supply → higher pay.”

"Restricting immigration might reduce competition in some low-skill job markets, but it can also harm industries that rely on labor shortages being filled"

So restricting immigration of low wage workers, would push up wages in low wage industries. Seems pretty clear.

curiousgeorgio• 11 months ago

What's funny is that the people who hate on America the most tend to also have a strong belief in American exceptionalism without realizing it. "America is the worst!" in one breath, while in the next breath saying "Everyone deserves to live in America".

What I see missing most in discussions around immigration is what it does to the home countries of the people trying to move to the United States. I know a lot of families who have come into the country from Mexico, and I don't blame them - I'd probably do the same. But if you look at the towns they're leaving (which I've done many times), it's creating a vacuum of good, hard-working people. As a result, crime and drug lords fill the vacuum, making it even more unsafe.

If you ask a lot of those people (which I've done), they'd really like to stay in their home countries - provided that there weren't growing concerns over crime. As Americans, why do we have to act like this is the only place in the world where people can be successful, and the only safe haven? What if we instead supported those countries and encouraged their brightest and best citizens to stay so that their communities can thrive?

I love immigrants, and I also love a lot of the countries they're coming from. I just wish we could stop pretending that everyone needs to move to the United States to be happy, productive, or successful.

And yes, markets tend to be affected by supply and demand, the labor market included. If you have an almost unlimited supply of people looking for work and willing to work at very low wages, of course we're going to see wages stagnate.

nostrademons2• 11 months ago

It’s entirely possible that this is causal ABs deliberate, ie the reason why boards of these companies have approved large CEO pay packages is so that the CEO will align themselves with the shareholders paying them rather than the workers working for them and cut wages so the money can be returned to shareholders as buybacks.

flockonus• 11 months ago

Google up "CEO fiduciary duty" - that's very much within the definition of a CEO role.

simianwords15• 11 months ago

Yeah pretty much.. but this is a good thing. Companies should focus on improving profits and not wages.

TylerE2• 11 months ago

Yes, crush the bottom 99.9% under the jackboots of the 0.1% even harder! That's what we need!

whatisthiseven• 11 months ago

Are there studies that show a causal relationship between higher CEO pay and profits?

Do buybacks cause profits to increase? Maybe from what I can see? But long-term? If all we care about is short-term then that will lead to the continued financial cannibalization of the US economy. Where private equity firms buy companies and destroy them for short-term profit while loading them with the debt used to buy them.

I think the obvious answer to both these questions is: no. CEO pay and buybacks don't focus on profits. At best short-term. Which isn't good.

I think companies should focus on making good products that positively serve the countries they sell in, while secondly still aiming for a profit.

pj_mukh• 11 months ago

Now the question is how the efficient market hypothesis plays out here in the long term. Counterexamples like Costco exist and are doing extremely well, when and how do their asset prices reflect this?

mnky9800n• 11 months ago

Do you have an iPhone? Mine is constantly turning “and” into “ABs” when I type with swipe.

packetlost• 11 months ago

I've noticed too. Idk what it is about iOS's autocorrect that has made it go to absolute shit over the last few years.

alfalfasprout• 11 months ago

weird, I'm running into this with IOS 26 beta as well

nostrademons2• 11 months ago

Yes, posted that from an iPhone. Didn't even notice the typo at the time.

The iPhone swipe keyboard is crap. I have much better luck with GBoard, but then I have to install GBoard, and have all sorts of issues with app unresponsiveness or crashes whenever either GBoard or iPhone updates.

bofadeez3• 11 months ago

Wages are not set by a company, they're set by the supply and demand of the market. Adding a minimum wage just criminalizes hiring anyone who is not productive enough to economically justify the minimum. It hurts unskilled poor people the most.

abdullahkhalids• 11 months ago

Minimum wage is supposed to represent the minimum wage necessary for a worker to meet their basic human needs.

If you don't have a minimum wage, some people get paid below this level, and they somehow struggle along in poverty. But there is no real incentive for the state to help them.

Establish a minimum wage. Now these people are unemployed. Which contributes to the unemployment percentage. Causes the government to lose votes. The state has to pay out unemployment benefits to these people. The govt+state now have real incentives to change the structure of economy to ensure jobs are created for these people that are productive enough to justify the minimum wage.

claudiulodro• 11 months ago

If people are working full time yet still in poverty, they will need government services like food stamps. In this scenario your tax dollars subsidize businesses that pay poverty wages. Wal Mart is the top employer of SNAP and Medicaid recipients. You would rather subsidize Wal Mart’s margins with your tax dollars?

nitwit0052• 11 months ago

There's no plan. CEO salaries have just crept up steadily.

If anything, they're paying CEOs so much in some cases that the rational thing for the CEO to do is as little work as possible. Why work hard if you'll get enough to retire comfortably on regardless of your performance?

shortrounddev25• 11 months ago

Why work hard if you'll get enough to retire comfortably on regardless of your performance?

... Sundar Pichai, is that you?

missedthecue15• 11 months ago

Measuring median wage of Starbucks employees against the one time multi-year strictly performance based stock-option plan given to the new CEO is so blatantly dishonest I can barely read the rest of the article.

Especially when Starbucks awards stock and healthcare plans to even part time baristas. Probably one of the better major employers of low skill labor in the world.

Hikikomori• 11 months ago

Is part of the performance keeping worker wages as low as possible?

missedthecue15• 11 months ago

No. If keeping worker wages as low as possible was the goal, they wouldn't award stock or healthcare benefits to part time workers in their kitchens.

The point is that poaching a new CEO from another company (in this case, Chipotle), and awarding him a pile of stock options if he hits certain metrics is not pay, is not comparable to W2 income, does not hit his bank account, and does not make anyone else poorer, except theoretically the shareholders, who were so excited to hire this new guy that the stock literally popped 20% when the news broke.

FredPret3• 11 months ago

You're not asking this in good faith, but I'll give my answer anyway: companies have an interest in paying workers market wages, not more, and not much less.

Too much over the market rate, and you're not maximally efficient at converting economic inputs into larger economic outputs.

Too much under the market rate, and you'll see increased employee churn, leading to all sorts of other problems.

If you want workers to be paid more, as we all do, even us greedy capitalists, their economic productivity has to go up (not the same as working harder).

The best way to do that - as far as I know - is improving technology and education.

nielsbot4• 11 months ago

Stock buybacks used to be illegal. It's a loophole way of paying employees at a lower tax rate than salary.

HBR discusses some downsides of buybacks: https://hbr.org/2020/01/why-stock-buybacks-are-dangerous-for...

missedthecue15• 11 months ago

Stock buybacks were never illegal. Stock buybacks were how Buffett took control of a small textile mill called Berkshire Hathaway in the 1960s. What was not allowed was at-the-market buybacks in the open market. Corporations had to do tender offers at a fixed price, usually well above market price, in order to attract sellers to mail in their certificates. I'm not sure why that is necessarily better or helps anyone, so I think allowing ATM buybacks is a net good.

arthurcolle• 11 months ago

I think they are actually bad because it enables messing with stock price in a way that is "explainable" when really it is just a bookkeeping exercise

nielsbot4• 11 months ago

According to Forbes they were

For most of the 20th century, stock buybacks were deemed illegal because they were thought to be a form of stock market manipulation.

https://www.forbes.com/sites/aalsin/2017/02/28/shareholders-...

yieldcrv2• 11 months ago

They had a presumption of guilt until a safe harbor rule was adopted by the SEC in 1982

which just formalized ways that the SEC was finding corporations not guilty and transparent enough, this blueprint paved the way for corporations to all copy it as well as reducing the administrative overheard of caring at all

the exceptions make the rule

beezle2• 11 months ago

If one does not think that buy backs are good to begin with, making them as difficult as possible (as was the case before the mid 80s) is preferable to the situation today.

Fade_Dance2• 11 months ago

That's specifically focusing on debt-driven buybacks and leverage, which is come down significantly since the dates in the article: https://www.federalreserve.gov/publications/April-2025-finan...

Metrics like debt service costs to cashflow are also relatively healthy.

necubi• 11 months ago

Buybacks are just a more tax-efficient way to issue dividends to shareholders (dividend issuance is a taxable event and at short-term rates, buybacks raise the stock price and those gains aren't taxable until you sell, at which point it may be long-term cap gains).

It's reasonable to be upset about the fact that this is arguably a tax dodge! But all of the other criticism of buybacks apply equally to dividends which no one seems to get upset about. Fundamentally this is the corporation saying it doesn't have a market-beating way to reinvest this capital, and it's giving the money back to its owners to more productively invest.

missedthecue15• 11 months ago

But the buyback involves buying from sellers. Why don't the sellers of the shares owe tax? Don't see how that's a tax-dodge.

The fundamental purpose of a buyback is not to raise the stock price. The purpose of a buyback is to reduce the amount of outstanding shares, which makes every existing owner own an increased percentage. If a company buys back 10% of its stock, each long term shareholder now owns 10% more of the company. Over the long term, steady buybacks increase shareholder value this way, but the purpose of it isn't to slam the order book and juice the price. That's counterproductive, because you'll buy fewer shares at higher prices, and within a trading day, the market will push the price back to normal anyway.

beezle2• 11 months ago

Until the mid-80s they were illegal except in a handful of unique cases. This is not just about div vs buyback taxes. Though there is no immediate mathematical economical benefit to the shareholders who remain, the markets have proven that the stock price will rise (and likely executive compensation) as a result of reduced sharecount vs the same demand (though possibly more demand as other companies engage in the same behavior).

Much of the gains in the stock market the past decade or so are simply the result of a greatly reduced number of shares available to purchase - as a result of buybacks, takeovers and going private (there are roughly 1/2 the number of listed companies today as in the 1990s).

echelon• 11 months ago

Fundamentally this is the corporation saying it doesn't have a market-beating way to reinvest this capital, and it's giving the money back to its owners to more productively invest.

Before tech companies demonstrated the principle of infinite growth, the purpose of a company was to generate revenue (paid as dividends) for its shareholders.

So much growth hasn't really been possible before.

If a company can keep growing and investing infinitely, one might argue that it's time for the DOJ / FTC to step in and stop them from eating the entire business sector. That's the sign of a monopoly pushing into every market like an invasive species and making the existing businesses in those markets go extinct. Kind of like how tech companies are now movie companies, music companies, game companies, pharmaceuticals, grocery stores...

mullingitover• 11 months ago

buybacks raise the stock price and those gains aren't taxable until you sell

They temporarily raise the stock price for the people who are the counterparties to the stock purchase, but isn't that also creating a taxable event for them?

Once the buyback is done, what's keeping that share price from sliding right back down to earth? The shareholders who support the company and hold watch a group who bet against the company by selling shares reap a profit, in a tax advantaged way, while their own dividends are effectively stolen. The buybacks are actually a crap deal for anyone who is a responsible buy and hold investor.

shortrounddev25• 11 months ago

Does "tax-efficient" mean "tax-dodging" here

conradev2• 11 months ago

  Fundamentally this is the corporation saying it doesn't have a market-beating way to reinvest this capital

Isn’t that the crux of it, though? Running a company into the ground by not investing in growth or R&D? We give tax credits to corporations to incentivize R&D spending

justin66• 11 months ago

But all of the other criticism of buybacks apply equally to dividends which no one seems to get upset about.

I don't know what planet you're living on, where nobody's ever been upset about dividends.

AtlasBarfed4• 11 months ago

What if the stock buyback is done to trigger stock options with artificial stock price inflation?

And maybe I don't understand the stock option game and stock BuyBacks don't count towards the strike price for options. But I doubt it

VirusNewbie3• 11 months ago

This in particular seems silly to post to the hackernews crowd, as this seems to imply the majority of stock goes to senior execs, when large tech companies are literally paying out tens of billions of dollars to the average tech worker.

missedthecue15• 11 months ago

This is a great point. Companies like Microsoft have spent billions on buybacks over the last couple years, yet their sharecount has not decreased. It's literally just to eat up the dilution from paying out RSUs to rank and file.

johnecheck3• 11 months ago

No, large tech companies are not paying out tens of billions of dollars to the average worker.

Did you mean that tens of billions of dollars are going to ALL the tech workers combined? True, but a single absolute number means little when the conversation is about relative distribution of resources and how those numbers change over time.

VirusNewbie3• 11 months ago

what is the claim here? That the majority of the tens of billions are given to what, L7 and above? L10?

csours2• 11 months ago

I'm not sure how to phrase this, so please be patient and try to understand what I intend to say.

CEO pay relative to median employee pay has soared since the 1970s. That is, a CEO may be paid $10,000,000 vs the median employee at $70,000 (arbitrary numbers), where before 1970 the numbers may have been $150,000 and $20,000

Using only one set of numbers can be deceiving though. For instance, through mergers and acquisitions, there may be One CEO where there were previously 10. So you might be able to see this by comparing Total Executive Pay - ie the whole C-suite to Total Non-Executive Pay.

Also, many companies have become more efficient as measured in revenue per employee over time, so another good set of numbers might be Total Executive Pay vs Gross Revenue.

How does Executive Pay look in these contexts?

I'm sure someone has done the work, but I have not had luck googling it, and I definitely don't trust a LLM to get this one right.

CGMthrowaway• 11 months ago

As a thought experiment, consider what it would take to make CEO pay gap even BIGGER, in addition to stock-based comp* and buybacks, which are mentioned in headline. Here's what one might do:

- Reduce unions

- Outsource and automate labor

- Slow minimum wage increases

- Consolidate power via M&A (you mentioned this)

- Cut back on benefits like healthcare, pensions and paid leave

- Promote "guru culture": indispensable, iconic leaders like Jack Welch, Steve Jobs etc

- Shift economy towards high-margin industries (tech, finance, pharma) and away from lower-margin ones (retail, manufacturing)

Turns out all of these have been happening since the 70s. So this result should not be surprising.

*Important note that the 1993 Clinton tax bill made it so corporations could no longer deduct the full amount of top executive salaries as a business expense. Only up to $1 million. UNLESS the amount beyond $1 million was performance-based (leading to stock option comp boom).

NoahZuniga2• 11 months ago

None of these issues are specific to CEO wages. This is essentially just a list of reasons why you don't like capitalism. ie if a CEO doesn't do these on their own accord, the shareholders might contact the CEO and tell them to take some of these measures. This mechanism isn't dependent on CEO pay, because the CEO is always beholden to the shareholders, and shareholders always want more money.

The solution to this isn't to get mad (or even do something about) CEO wages, but to make sure there are other good reasons why companies might not use these approaches to maximize shareholder returns (ie stronger government regulation, making these approaches illegal).

WalterBright7• 11 months ago

Sounds like you should start a company, name yourself CEO, and execute this strategy!

WalterBright7• 11 months ago

Keep in mind that executive compensation is at the expense of the shareholders, not the workers.

ethbr12• 11 months ago

Yes and no. Executive compensation, from one perspective, is the mechanism via which shareholders align executive behavior in their favor, to the detriment of workers.

_DeadFred_7• 11 months ago

It's no longer a company it's an empire. Got it. But the executive layer didn’t shrink. You don’t just have one CEO now you have the CEO, presidents of divisions, business-unit heads, all pulling down compensation packages that in the 1970s would’ve looked like outliers even for the very top.

Is revenue per employee the best metric? Productivity gains don’t automatically justify higher executive pay. Most of those gains come from technology the CEO didn't invent or personally implement, supply-chain leverage, and cost-cutting at the bottom, not from some surge of genius at the top. Yet the financial rewards are heavily skewed upward, while median wages flatlined. Plus you know the rule about what you measure being what you get more of. All that would happens under your metric is CEOs push to move to 'contractors' to reduce the measured headcount to justify an even higher salary.

Changing the metric just masks things. Society is broken for those at the bottom, and if their numbers grow too large, it will become broken for everyone.

csours2• 11 months ago

Changing the metric just masks things.

Using only one metric is THE classic way to misunderstand a system.

Society is broken for those at the bottom, and if their numbers grow too large, it will become broken for everyone.

It's difficult to capture my intention and perspective in a short comment. In my personal belief, if the future is going to be better than the present, we need to share resources more fairly.

However, money is an imperfect representation of resources. For instance, the extremely wealthy may eat more food or more quality food, but not anywhere near a proportionate excess. They may have a bit more housing, but generally not proportionate to their excess income. Etc etc etc for most things.

This is not excuse, or justification.

What I am saying is that focusing on the excess wealth can become a distraction.

I believe that the majority of harm relating to income inequality does not come from the inequality itself, or even excess resource (food, housing, etc) consumption.

I believe that the majority of harm comes from actions taken while attaining and defending wealth.

It's regulations bent and broken while growing a business.

It's not the housing per se, but the housing must retain value.

It's not the stock portfolio per se, it's the tax loopholes exploited.

----

Excess wealth is a correlation to harm. Beyond that, I feel that care must be taken.

Beware of easy narratives and blame.

LordDragonfang• 11 months ago

So perhaps someone can explain something to me.

One of the main problems I see with modern Corporatism is that "shareholders" have too much influence over companies, driving them to make choices that erode long-term customer trust and brand value in return for short-term gains. (This is rational from the investor POV, because they can sell their stake at any point and still have made a profit on the dead husk of a company they left behind). Put more briefly, being beholden to shareholders drives enshittification.

Stock buybacks should, in principal, allow a company to dilute shareholder power and re-control its own destiny. It should allow a company that is successful enough to not need external investment anymore to re-prioritize what's good for the company, rather than the shareholders, especially once they've reached the point of having enough free cash to not need investors. Why, then, is it so universally reviled?

01HNNWZ0MV43FF2• 11 months ago

I think what I've heard is: The buyback is part of a larger scheme where execs / board members can pump the price of the stock, and then make themselves money either through bonuses tied to rising stock prices, or through dumping their own shares once the market price goes up.

https://en.wikipedia.org/wiki/Share_repurchase#Criticism

The vibe is that there's a vicious cycle of "Customers are not brand-loyal, let's make our products shitty, hollow out the brand, and then liquidate everything to enrich ourselves" and "Why should I be loyal to any brand when brands that were institutions in my parents' time, like Sears and Craftsman, are hollowing out their brands and making everything shitty for a quick buck?"

Feels like everything has become a market for lemons, and the hand of Moloch has realized that if something isn't a market for lemons, it would be more profitable if it was.

In my head there's a piece of red string connecting this to the Internet Whalefall phenomenon - The Internet used to feel like (again, vibes are all I have for this) a place where the savvy early-adopter techie could be rewarded for their skill at installing any web browser but IE, with secret information shared by other elite techies, about which brands were good and how to get things done cheaper.

But now that Eternal September post-2007 has Pokemon-mega-evolved into Eternal 2007, everyone just buys reviews and nothing online is trustworthy. All the whale meat is eaten and those picking at the bones are left starving.

This led to my personal heuristic of just taking recommendations from people or orgs I meet in person. "Do you like that brand of clothing? How is that USB hub treating you? Where did you buy this?" It's a natural hedge against "I could have _told_ you not to buy that piece of crap" and it's also mathematically similar to best-of-two-random-choices load balancing. Just pick any service or product that one real human halfway-likes.

tracker12• 11 months ago

I think this "lemonade stand" effect is where a lot of companies are staying privately funded as opposed to ever going IPO... it's such a slippery slope to the bottom in that you lose control over doing what you feel is best for the company (or society) in favor of maximizing shareholder value.

Paul_Clayton• 11 months ago

Even personal recommendations have the problem of requiring significant use time (c. a year?) to estimate value. A company can (it seems) degrade quality for a model faster than quality can be evaluated by normal use.

qaq• 11 months ago

The stock does not carry voting rights and for good reason management could effectively vote itself more power and entrench control. There are many laws in place to prevent this.

Workaccount24• 11 months ago

Shareholders own the company. They are literally the owners of the company. Like anything you own.

In the same way you own your house and pay a painter to paint it, the shareholders own the company and pay Nick to stamp boxes.

I don't know of anyone who has had work done on their home, and then upon selling the home, went back to the painter and said "Here is your cut of the profit we made selling our house, thanks for the great work!"

But I know and endless number of people who think that because they painted a house at an agreed price to make it look nice, they need to be cut in on the profit from selling the house.

timeattack• 11 months ago

Now, this painter works for your house exclusively every day 40 to 60 hours each week total, 2-5 years, and because of their work you sell house for 1,000x of the original price. You now go to live luxury life without need to ever work again, while painter continue their meager life painting another house 8 hours every day.

therobots927• 11 months ago

Brought to you by trickle down economics!!

xyst• 11 months ago

Reagan economic policy of legalizing stock manipulation via "stock buybucks" has been one of the worst mistakes for American class and sustainable living.

tracker12• 11 months ago

I kind of wish stock buybacks had to include an equivalent portion of executive and board shares (bought back) and options (reduced). It may raise the value of remaining shares, but at least it would reduce the use of the decision to drain value from the public and the company itself.

slashdave3• 11 months ago

Inequity is a real thing, but I am confused about why the CEO of a company that consists primarily of low wage earners deserves a lower compensation for that reason alone. If you follow this logic to extremes, the compensation of a CEO of a company of a dozen people earning 100,000 should be higher than one with with tens of thousands of employees earning 30,000.

Not all businesses are the same.

cammikebrown• 11 months ago

Even $30,000 is below minimum wage full time on the west coast. You’re not gonna be doing well at all making that.

yieldcrv2• 11 months ago

which neither bolsters or negates the point.

tw042• 11 months ago

What’s the motivation of the CEO to increase employee wages if his compensation isn’t tied to theirs?

There’s this perverse belief that companies should exist to enrich the wealthy shareholders at the expense of the workers and it’s put us dangerously close to a complete collapse of the social contract.

slashdave3• 11 months ago

The motivation? A healthy and productive workforce. The greater good.

Not sure why you would tie pure compensation (a greedy concept) with goals that align exactly to the opposite.

whimsicalism• 11 months ago

What’s the motivation of the CEO to increase employee wages if his compensation isn’t tied to theirs?

To pay the asking price for the needed labor?

koolba• 11 months ago

What’s the motivation of the CEO to increase employee wages if his compensation isn’t tied to theirs?

Wages are a cost. Profits are revenue minus costs. Share price is driven by profits. The job of a CEO is to maximize share price.

The only reason to raise wages is if you think it will lead to a net gain of profit during your tenure. Say do to efficiency or simply retaining better talent. There’s no gain for simply raising employee wages. Quite the opposite.

Aunche7• 11 months ago

I am confused about why the CEO of a company that consists primarily of low wage earners deserves a lower compensation for that reason alone

If you're looking for an economic reason, there isn't any. Politics in the US has always been moralistic since the days of the Puritans, so people prefer moralistic "solutions".

Aunche7• 11 months ago

I'd likely be progressive if American progressivism wasn't so economically illiterate (as opposed to say Piketty). The vindictive themes make me think that it's motivated more by envy than a genuine desire to improve society.

The CEO to worker compensation ratio is a useless metric. There is absolutely no reason why Starbucks should be punished for hiring more workers over a company like Nvidia that hires relatively few very well paid workers. If you want raise taxes, just increase taxes across the board.

If you really think that stock buybacks are meant to "pump up short term share prices", you should test your theory in the market and you'll be a billionaire in no time.

danny_codes2• 11 months ago

It’s a metric capturing income inequality. Very relevant to those of us who care about income inequality. There are plenty of reasons to want to limit income inequality.

Aunche7• 11 months ago

My point is that it is a useless metric about income inequality. Starbucks can restructure to a franchise model and immediately reduce worker-CEO pay. Like I said, any other form of taxation would be a less economically distortionary way to reduce income inequality.

rchaud• 11 months ago

You're conflating managerial economics with macroeconomics. CEOs at publicly traded companies aren't hired to enhance the long-term productive capacity of the firm ("growing the economy"); they're there to calm investor nerves and make the stock sexy. Those only have a very slight correlation to the overall health of the economy. Microsoft grew revenue and profits under Steve Ballmer, but the stock stayed flat, so he had to go.

It'd be great if public companies could grow market share by beating competitors by with better prices or service, but that takes long-term strategic planning and no surprises from government, activist investors, suppliers and employees. CEOs don't have that kind of time, so they reach for familiar tools: restructuring (mass firings), selling off parts, and yes, share buybacks, because these tools move the needle that matters. During their quarterly earnings calls, they answer to Wall Street analysts, who represent the interests of shareholders, not employees or economic policymakers.

As for "economic illiteracy", the very concept is nonsensical. Every economy is structured differently and what's "sensible" changes over time. If you asked a US economist whether they thought zero interest rate policy (2008-2022) was a good idea, they'd think you were talking about a communist society with a desperate government trying to manufacture growth. But this is how every western economy largely operated after the Great Recession. They'd probably take a dim view of venture capital as well, considering its portfolio strategy ignores operational profit targets in favor of IPO windfalls. That's how you end up with abominations like SPACs, where companies can go public with a fraction of the financial transparency that would otherwise be required.

Aunche7• 11 months ago

If you asked a US economist whether they thought zero interest rate policy (2008-2022) was a good idea, they'd think you were talking about a communist society with a desperate government trying to manufacture growth.

I think you missed some words. Did you mean economists from the Cold War? By economic illiteracy, I don't mean economic opinions I think are stupid, but refusal to acknowledge economics altogether. If Milton Friedman rises from the dead, he could read the Fed's rationale for keeping interest rates low. He may vehemently disagree, but he would at least acknowledge there is an argument to be made.

On the other hand, there has been no thought whatsoever put into the implications of a tax that specifically targets companies with a exec to worker pay gap. There is no economic argument for why stock buybacks are bad for workers. There are arguments for why they're bad for investors, but somehow I doubt that the authors of the article are worried about those people.

whoknowsidont4• 11 months ago

if American progressivism wasn't so economically illiterate

Economists by and large tend to be academically and principally in support of many progressive positions so I'm not sure your statement can be read any other way than "I don't like perspectives that disagree with my primed and preconceived beliefs"

Which is an exceedingly common phenomena in a post-truth world. But it's quite obvious; just want to point that out to you.

For decades, professional American economists vote for the democratic party at a rate greatly exceeding the general population and profess support for ideological progressive positions that is also at a notable rate higher than the general population.

You know, there's also something to say about how people invoke the term "economics" in their own personal posts as some sort of grandstanding dog-whistle but we'd be here for hours.

Aunche7• 11 months ago

You assume that I'm conservative, but I'm not. I'm a Democrat who is growing increasingly concerned about their voting base demanding populism. AOC, Sanders, Warren are progressives. I don't consider establishment Democrats progressive.

simianwords15• 11 months ago

I did an exercise here: the average CEO salary of S&P 500 is around $20M. That's around $10B totally. Assume there are three executives - so thats around $30B annually.

Lets go much further, lets multiply this by 10 to account for top 5000 companies (in practice it would be more like top 20,000 because the lower companies have much lower CEO salaries).

There are around 300 million people in USA. By redistributing the 100% CEO salary you can give around $900 per year to every single person. All this for $900? Which does not even account for income tax paid by CEO's. Edit: after accounting for income tax it is more like $600

So all you have achieved by completely eradicating C suite salary for top 20,000 companies in the USA is around ~$900~ $600 for each individual per year.

I'm increasingly convinced that CEO pay is the wrong place to look at for any impact at all.

Edit: there's more to this if you account for spending patterns.

Even if you give $500 to every citizen, that does not mean affordability will increase because inflation can increase proportionally. This is because even with increased money, each citizen is buying goods amongst the same quantity of goods as before.

For example we can take potatoes: do you think citizens can afford potatoes even more now? No, because the number of potatoes have remained the same. Taking away CEO salary does not mean potato stock would increase because CEO's are not hoarding up potatoes.

drunner2• 11 months ago

As shown by the covid payments. $900 a year is a lot of money to a lot of folks.

Heck annual social security average is 24k a year, so you are talking about nearly 4% more money for just those people alone.

simianwords15• 11 months ago

Fair, lets then count income tax which makes it more like $500 assuming net taxes around 40%. I'm ignoring salary increase due to stock valuation going up because it complicates things and there is equal force from both sides of the argument.

So you decide: 20,000 companies running with a CEO being paid like an average person. And every citizen gets $500 in their account per year.

Edit: its not just a CEO but the C suite. 20,000 running without a C suite.

Forlien• 11 months ago

You might be interested in https://www.theargumentmag.com/p/giving-people-money-helped-... which talks about the studies showing low effects for just giving money to Americans. It seems like just giving people money is still unproven to have impacts to make people healthier, happier (beyond the year they start giving money), get them better jobs, or improve their children’s intellectual development. There's still hope for targeted programs, but it changed my view on blanket payments.

woooooo2• 11 months ago

Thats 3600 for a family of four. 5% of median household income in a country where most have zero savings.

simianwords15• 11 months ago

The impact of the whole C suite of top 20,000 companies in USA would be much reduced incentives. These are the same companies that are making products that workers purchase from. Sure 5% extra money per family.

Do you really think 5% increase in income would change the savings scenario? The median real disposable income increased by more than 20% over the years. I don't think savings have changed.

ravivooda• 11 months ago

Beginning of game:

CEO = 0$ value Employee = 0$ value

---

Round 1 Year

CEO = $20M Employee = $0.5M (generous)

Round 5 Years

CEO = $100M (if pay remained the same, and they did not create new companies, which I'm sure they will).

Employee = $3M (let's give them promo) etc. Cost of living is increasing with employee's wage, nothing for a CEO.

----

Tell me who is more secure, who has the flexibility to take risks, and create new value.

It's not about the 900$ every human being gets. It's how much differentiation 5 years makes, which is 1/4 of value generation timespan of adults.

Workaccount24• 11 months ago

Do it again but factor in the 90% start-up failure rate.

shortrounddev25• 11 months ago

You're only looking at salary, and not equity based compensation?

simianwords15• 11 months ago

It accounts for equity based compensation.

DeRock• 11 months ago

Another way to look at it is every single person, including children, are paying $75 a month for executives of 5000 public companies. Or $190 per month per household. That is significantly more than the average electricity bill ($130/month). Downplaying that shows you are out of touch with the average American.

Aurornis2• 11 months ago

Another way to look at it is every single person, including children, are paying $75 a month for executives of 5000 public companies.

No they are not. The economy isn’t a zero-sum game where the only way an executive can get paid is by taking money from a household.

Executive compensation is largely equity based. The mostly equity is new value created in the economy.

Using zero-sum thinking for economic topics like this is very misleading.

justinrubek• 11 months ago

I'm not convinced that diluting it this far is a fully effective thought experiment. If you took half of that $900 and distributed it amongst 500,000 instead of 300 million, then it'd be a more formidable amount. I'm not sure why it needs to be equally distributed. Just putting it back into the economy otherwise is good enough.

simianwords15• 11 months ago

I agree with you. I prefer it more centrally allocated - with the CEO's as the market intended.

Herring• 11 months ago

Is distributing it to individuals the best option? My suggestion would be to first identify the best option, eg improving education usually has a fairly high ROI. That's how taxes are supposed to work.

“Every dollar we put into high-quality early childhood education we get $7 back in reduced teen pregnancy, improved graduation rates, improved performance in school, reduced incarceration rates. The society as a whole does better.”

https://www.washingtonpost.com/news/fact-checker/wp/2015/04/...

ASalazarMX2• 11 months ago

Now do this exercise only for the workwers of each of those companies. If they're generating billions value, they should get a fairer share of the profits.

simianwords15• 11 months ago

Around $2000 per year.

ianhawes• 11 months ago

Similarly if you seized 100% of the wealth of the top 400 Americans[0] and liquidated all of their assets to cash, then you'd have ~$5.4T (assuming you didn't completely destroy the economy in the process, which you would but for the sake of the argument assume you wouldn't), which is around 15% of the US Public Debt OR about 3 years worth of the U.S. Budget Deficit.

fragmede• 11 months ago

$900 doesn't go a long way if you're buying cocaine or yacht time, but it goes pretty far at the grocery store. How about not eradicating it entirely, but taking enough to give $500 to everyone?

FridayoLeary• 11 months ago

It's the unfairness which bothers people.

Even if you give $500 to every citizen, that does not mean affordability will increase because inflation can increase proportionally. This is because even with increased money, each citizen is buying goods amongst the same quantity of goods as before.

I know. I thought those covid payments proved it. Everyone got a temporary financial boost, which was great, but they ended up paying for it threefold with rising inflation. As far as i can tell the only people that did really well from it were the banks. The whole policy was well intentioned and completely misguided.

_DeadFred_7• 11 months ago

Here's the problem. Companies need workers. And society needs it's people to be bought into society. So you can't really say to the majority of your people 'you are sucker loser idiots for working these jobs, you should really do something else'. Long term, that isn't going to work for society.

Look at China. The people were fine with whatever, as long as incomes were going up. America was the same. Give people the American dream, and you can do what you want at the top. Take it away and at the same time say 'yeah, of course your life is going to suck, you are a dumb worker who deserves nothing, have you tried not being that?' isn't a winning tagline for a company/a society.

BobbyTables2• 11 months ago

I suspect the low tax rate of long term capital gains combined with companies being allowed to do buy-backs drives all of this.

Seems like today they are paid mostly in stock. Their vision becomes very short term. If they can’t organically grow the company, stock buybacks will prop up their shares. Otherwise a CEO paid mainly from salary might be more motivated to stay a tiny bit longer.

jimmytucson• 11 months ago

The company with the lowest median pay, Aptiv, I had to look up, and what a darling of a company this is:

    - guilty of systemic accounting fraud from 1999-2004
    - manufactured a (allegedly known-to-be) faulty ignition switch that led to the deaths of 124 people and injured 275 others
    - currently forcing 20,000 former employees to fight a decades-long legal battle for their earned pension benefits
    - gleefully dumps massive quantities of carcinogens and poisons into the environment, including: lead compounds, chromium compounds, sulfuric and hydrochloride acid (lol), and glycol ethers

Simply a masterclass in corporate irresponsibility, exactly why their CEO is so well comped.

Citations here: https://en.m.wikipedia.org/wiki/Aptiv

selinkocalar• 11 months ago

This is exactly why I believe in building companies that actually create value, not just extract it. We could easily charge enterprise prices and hire armies of consultants to inflate our costs. Instead, we focus on making compliance genuinely affordable for the companies that need it most. The best businesses solve real problems efficiently. When you're spending millions on CEO compensation while your workers can't afford basic necessities, you're not solving problems - you're creating them.

CEO pay and stock buybacks have soared at the largest low-wage corporations

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