shaneknysh t1_j6kswtw wrote on January 31, 2023 at 12:56 AM

Reply to comment by bobjoylove in ELI5: What does it mean when a company buys back stocks and why is it frowned upon? by lilly_kilgore

>It means the company has so much cash that it doesn’t even know what to do with it. So they buy back stock.

Or the company has so much cash and no incentive to lower prices or improve employee compensation. There only incentive is to improve profit.

In the before time the highest tax brackets meant that at some point a company made enough then the company could pay 10000 in taxes or raise compensation by 8000. The company could then choose to pay their employees or pay the government.

The companies still made huge profits but there was incentive beyond just rewarding shareholders.

bobjoylove t1_j6ktn4g wrote on January 31, 2023 at 1:01 AM

This is true but many companies include stock as compensation, releasing it over the years to retain staff using ‘golden handcuffs’. So it does have a way to may it back to the staff

Rishfee t1_j6kuwrd wrote on January 31, 2023 at 1:11 AM

It may be common in certain fields, but on the whole, stock options are not what I would consider a common component of employee compensation, at least here in the US.

shaneknysh t1_j6kw73p wrote on January 31, 2023 at 1:20 AM

As a recipient of stock rewards as an employee they are not a great reward. Like company scrip the stock rewards to staff are a cheap way to reward staff costing the company pennies on the dollar. And every single one I've received the stock was non voting and diluted.

bobjoylove t1_j6kwcoo wrote on January 31, 2023 at 1:21 AM

In tech companies stock awards can more that double the amount you get paid every year. Often triple you base salary.

shaneknysh t1_j6l6334 wrote on January 31, 2023 at 2:34 AM

What tech companies did you work for? My stock options never came close to 25% of my base salary.

bobjoylove t1_j6n3wup wrote on January 31, 2023 at 2:43 PM

Not revealing any personal data, but both Fintech and Silicon Valley is paying staff this way. The annual stock award is performance based, and except for the last 2 years there has been a bull market that also swells the award granted 4 years ago.