Posted by Rick Denney on May 06, 2003 at 11:40:36:
In Reply to: Re: Re: Re: Re: Re: Re: Our business posted by Volker on May 06, 2003 at 11:07:39:
It is all a result of the tax code. The tax code favors paying executives huge stock-option bonuses instead of large salaries. If you look at executive salaries, they aren't that high.
But the compensation is commensurate with supply and demand. Corporations these days have to a have a CEO who can impress the stock market, and those are few. I don't like this system either, and I think the pendulum will swing away from it eventually.
But it all goes back to the tax code's preference for stock appreciation--it's value growth over time. In the old days, investors were more interested in dividends, which kept a cap on corporate incomes because the measurement of success was more closely tied to the output of the corporation than to its perceived value in the stock market. If our president gets his way, we will see a sharp decline in taxes on dividends, which will nudge that pendulum back the other way. If that happens, then I predict that in a few years those bonuses will decline considerably because CEO's will not be able to keep their jobs just by inflating the stock value of the corporation.
Rick "who earns few dividends but who still sees the value in not taxing them" Denney