How do businesses pay for the large bonuses to their executives and for the costly mistakes they make while us

Question

ing your hard earned money unwisely in their companies sometimes? What market action makes all of this possible?

Answer 1

By increasing the cash in the company's treasury by 1) taking on more debt than otherwise needed or 2) paying stockholders a lower dividend than would otherwise happen or 3) not using the money to expand/help the company (not making acquisitions, not buying newer more efficient equipment, etc) .

TO Box815: Who says they all are making costly mistakes? No one said all, but there are way too many. For 1 example, the shareholders and employees of former WorldCom/MCI who watched Bernie Ebbers give himself a $8000 shower curtain, a $5,000 elephant's foot umbrella stand, plus other things adding up to $180 billion loss for investors. And the SEC is still investigating plenty of companies (I just read about 400 for backdating options). Carl Icahn is also going after many of these executives. All his public investments (and fights with subpar managers) have, since Nov. 2004, increased total shareholder value by over 55 billion dollars.

Answer 2

Who says they're all making costly mistakes? The bonuses come out of revenue generated by the business, or by the value of options generated when the stock price rises because of the profits generated.

If they're generating all that revenue and profit they must not be the dopes you think they are. What else might you be wrong about?

Gosh, you're also wrong about Bernie Ebbers. The guy you're thinking of was Dennis Koslowski at a completely different company. Bernie Ebbers kept all his money in WorldCom stock and lost it all. Not saying it shouldn't have but you have your facts wrong. What else might be wrong in your thinking or facts.

Answer 3

It's not a market action, it's a law of the universe: There is plenty of everything that you could ever want.

It's easy to see how negatively you feel about the success of others. Just worry about getting your success. There's enough for you to be a billionaire AND enough for them to pay their execs and everything else that goes on in the world.

In 1920 there was X amount of money and X amount of people.
Today there is more money, more people, more resources, and more tools available - do you see how there is always more than enough?

Get a great idea and act on it - make millions and you won't care about the negative parts of a company like GM or United Airlines, you'll be too busy enjoying first class on a vacation or zipping down I-90 in your new Mustang.

Good Luck!

Answer 4

By screwing their employees and cutting corners on the product. I've even seen this in a small family-owned business.