The Fed Just Unleashed The Next Stock Market Boom

USMChawk said:

My daughter and I were discussing CEO compensation and wondered why they don’t/can’t tie it to the dividend. Make it some multiplier, say a million, and if you pay $4.00/share in dividends per year, then you get $4M as your salary. Of course there would have to be oversight to ensure the dividend wasn’t artificially high, but it adds insensitive to pay the shareholders more.

@USMChawk , good point. Makes sense for dividend payers, but as you know many companies don't trade on yield. And those that do, I would argue that CEO comp., and in fact their good standing with shareholders, is tied to sustainable and growing dividends. For many incentive plans, which form a part of most executive comp. packages, the dividend is indirectly reflected in TSR as part of the calculation of shareholder return (stock price appreciation plus cash returns = TSR by most calculations).

@HoustonHusky , arguably those rules have been in place since time immemorial. We're talking about Regulation S-K Item 402 and Schedule 14A (proxy rules). In the old days, yes, the lawyers were paid to obfuscate as much as possible, but there was only so much you could do. In 2006 there was an aircraft carrier amendment to 402 that required, among other things, two key changes: (1) stock-based compensation had to be fair valued in accordance with GAAP accounting standards and disclosed on that basis in the comp. tables and (2) the creation of the requirement to include a Compensation Discussion and Analysis (CD&A). The CD&A requires pretty clear disclosure of how the comp. programs work, and a clear explanation for why the comp. committee made the salary and other compensation decisions it made for the prior year. So for this proxy season's SOP vote, the voters will be voting on whether to approve the 2020 comp. decisions "as set forth in the compensation tables and discussed in the CD&A" in the proxy statement.

I would say it's about as clear as it's going to get. Sure, for the average retail investor, some of the disclosure isn't obvious because most people don't spend their time thinking about how to compensate and incentivize senior executives.

I'll say this: absent a situation where they're gaming the system, which is harder to do than many think, I like the free market approach here as I usually do: let the market decide what these guys are worth. Plus, you have the ability to vote out the board if they continue to employ a dead beat who's being paid a ton of money to do a bad job. Running a company is a big deal and most people aren't equipped to do it, nor are most ready to make the personal sacrifices it takes to do it. To be a good CEO, you almost need to be obsessive about the company.

I was more referring to the early 1990s reform that I think made companies spell out their compensation clearly (along with other things). I may be wrong though...not my area of expertise. I’d have to go look it up.

FireCohen said:

PurpleThrobber said:

HoustonHusky said:

Short on time, but if I remember correctly wasn’t part of the reform making companies have to detail their CEO pay when historical it had been pretty hidden? The idea was it would shame them into getting paid less...reality is they used it to argue their salaries up and up. It’s something like 75% of the population think they are above average...I’d love to see that study on CEOs ranking themselves against their “peers”.

Imagine...govt completely misreading economics and incentives...

CEO's generally have ginormous egos that lead them to believe they are grossly underpaid for the 'value' they bring to a company.

Having an ego is a fucking requirement to be a CEO, dude has to make some tuff decisions

Unfortunately, the ginormous ego sometimes confuses a TUFF decision with a CORRECT decision.

godawgst said:

Before the mid 90's internet/technology boom buy-backs were very accreditive to the share price, but was ruined when companies like Intel, Cisco, others would announce how many shares they would buy back in the quarter, but buried on page 25 of the quarterlies was they issued just as many to purchase another company and/or stock options for upper management.

Not a metric I use when deciding to buy a stock.

When you really start in earnest to try and intellectually capture all the things that go into a stock's price, it's a miracle that buy-backs accomplish anything at all. What, the company announces they bought back X% in QX, now "my" selling prices has increased by some measure? Even if I could do the math, the market will tell me to fuck off if "my" price doesn't match current market price.

It's just too far removed. I mean, MAYBE if in a concentrated period of time a huge amount of the float were repurchased so people could get their heads around it ("hey, they bought back 40% of the company last quarter; our shares are worth so much more now!") ... but that's never how it goes.

Again, I say, if you have that much cash burning a hole in your pocket, declare a huge ass dividend and send me the $$. If I want to use that to buy stock, then I will.

Not a fan.