Is it possible ????

[spunky]

I am wondering could the gov step in and make divended paying mandatory for all publicly traded stocks on major exchanges ??? Couldnt this help with not only only those outrageous CEO comps but would force more accurate reporting of company value, profits ?????



Excuse me if this is a totally moronic question ???

[Spartacus]

Re: Is it possible ????

I suppose it could be done.

As long as the board controls CEO compensation and the CEO can manipulate accounting and stack the board, and other CEOs sit on boards, CEO pay will stay out of touch.

AFAICT most of those CEO comps are paid out of stock options or stock grants. So your suggestion that loading one (dividends) would put a load on the other (excessive pay) probably won't work - the 2 things come out of different pools. Because of the power CEOs have, you probably need a very specific restriction loading down their pay - absent specificity, the CEO could just shift any non-specific load to somewhere else.

Dividends are paid (usually) out of cash flow. I don't know if it's actually illegal to pay dividends from debt (ie, bond issuance proceeds).

I am wondering could the gov step in and make divended paying mandatory for all publicly traded stocks on major exchanges ??? Couldnt this help with not only only those outrageous CEO comps but would force more accurate reporting of company value, profits ?????



Excuse me if this is a totally moronic question ???

[Finster]

Re: Is it possible ????

I am wondering could the gov step in and make divended paying mandatory for all publicly traded stocks on major exchanges ??? Couldnt this help with not only only those outrageous CEO comps but would force more accurate reporting of company value, profits ?????



Excuse me if this is a totally moronic question ???

I suppose it could, but it would be a horrible thing. Imagine the new Department of Dividends, run by bureaucrats and politicians, a few thousand more federal employees and contractors to administer the law and write the regulations ...

... practically makes my eyeballs bleed just thinking about it.

But there is something the government can and should do. It should give shareholders more power over corporate boards and require boards to be independent of managements. This, after all, is well within governmental prerogative, since the existence of corporations is a legal matter to begin with, and the government has to set out the basic conditions of their organization.

The problem you cite is due to a simple conflict of interest. Boards determine management compensation, yet managements have effective control over boards and their memebership. Most people's compensation would be out of control if it they exercised that much discretion over the people who set their pay.

The people doing the paying, on the other hand - the shareholders - have almost no effective control.

What would we expect when the payee has a lot of say and the payer has little to say?

[Finster]

Re: Is it possible ????

Another thing that would help would be to level the playing field between dividends and other forms of capital return. Allow corporations to deduct what they pay in dividends to shareholders just like they can coupons to bond holders. Rates investors pay on dividends, cap gains, and interest could all be set equal to those paid on ordinary income - and made indexable for inflation.

Ideally, all these income taxes would be eliminated in favor of a national consumption tax, but the above would nevertheless still be a huge step in the right direction.

[DemonD]

Re: Is it possible ????

I don't think it would be wise for the government to force companies to pay out money when a large percentage of companies listed on the major exchanges have negative earnings, or at least some time periods of negative earnings.

[spunky]

Re: Is it possible ????

Thanks folks. Seems like this subject will get some play on the hill soon