#share options

Do you enjoy reading something so personal yet so universal? I had this type of couple in my mind for a long time who created the song of love, added verses of tragedy in it and ended it with the couplet of hope. It can be your personal story or the well known tale of eclipse, the tale of sun and moon.

You can say the fable woven by me is of a blind singer and a deaf dancer. The singer sings his own symphony and the dancer sway in his own rhythm. But they are trying.....

“Finding a way to measure the direct contribution of managers can be difficult. But Stephan Billinger and Stephen Rosenbaum, two academics from the University of Southern Denmark, have made a brave attempt. Their study used a variation of a common laboratory experiment, known as a public-goods game, to test the impact of managers on worker collaboration.”

[T]he paper describes a laboratory experiment in which the gains were trifling; participants received just over $15 on average. But it lends weight to the idea that managerial incentives can have distorting effects on business performance. That is certainly the view of Andrew Smithers, a British economist and author of a new book, “Productivity and the Bonus Culture”. He believes that the way that managers are incentivised has led to sluggish growth in business investment, which in turn explains the poor recent productivity record of America and Britain.”

“The problem, he argues, is that managers are incentivised with share options. That encourages them to pay spare cash to investors, often through buy-backs, which tend to boost the share price in the short term. In contrast, new investment tends to lower earnings per share immediately afterwards—and with it the share price. The proportion of cash paid out to shareholders by non-financial American companies was 40.7% from 2000 to 2017, when share options became popular. Between 1947 and 1999, when they were not, it was 19.6%. As a corollary, the proportion used for investment fell.”

“[A]s the Danish study and Mr Smithers’s work suggest, managers will game whatever incentive scheme they are offered. Managers are necessary. It is also necessary to watch them closely.”

The Economist, October 13, 2019: The usefulness of managers: A study finds that bosses can be useful but also sneaky