Ignorant is still ignorant, isn’t it?

Boeing shares hit another record high after the company boosted its quarterly dividend by a fifth and announced a $18bn share buyback programme.

A business fuelled by the world’s wealthiest people (you have to be to travel, and I am personally aware of this) and the defence sector is returning vast sums of cash to shareholders rather than invest it in new products, services and training with the aim of lifting the share price in the short term to, no doubt, trigger executive share price related incentive scheme payouts that will massively and wholly disproportionately increase the reward of a few in the company at cost to all the rest and society at large.

If you want to know why modern capitalism does not work, that’s why. It’s called rentierism by management. It’s rampant. It’s corrupting. And it’s undermining the way our economy and society works.

So, what happens to the money once it is outside Boeing? Those shareholders can either invest it or spend it, there’s nothing else they can do with it, is there?

What, we should demand that money stay inside extant companies so that only things done by extant companies gain investment?

It’s simply a putridly stupid complaint by the Senior Lecturer here.

23 comments on “Ignorant is still ignorant, isn’t it?

  1. Why would you write a contract for executive compensation that doesn’t take in to consideration the effect of share buybacks or dividend policy. You are just loading the dice if you don’t.

  2. Shareholders which probably include institutional fund managers managing millions of peoples pensions, and which are no doubt looking for better returns on their money than Murphy’s proposed local authority issued instruments which promise returns of less than zero, at least in financial terms…..

  3. “What, we should demand that money stay inside extant companies so that only things done by extant companies gain investment? ”

    If it stays inside the company, as cash, then it’s in a bank. Being lent to other people/companies. Who will be doing stuff with it.

    But yes, Boeing’s profits / cash, hence whatever maximises the return to their shareholders.

  4. You have to be one of the world’s wealthiest people to travel? Well, ok, I suppose so, on six grand a year in the UK I am in the top 1% globally, but it doesn’t feel like it. And 40 quid to Dublin and 400 quid to Hong Kong isn’t really in the realm of “wealthy-only” affordability.

  5. “A business fuelled by the world’s wealthiest people (you have to be to travel, and I am personally aware of this) ”

    Presumably written by someone whose only travel is business class, New York/LA. And isn’t aware of the millions of poor S.Americans scrimp, save & borrow to get to Spain, alone. To work, save & scrimp to afford a flight back to see their families, once in a while. And the amount of people around the world doing the same from relatively poor countries to relatively rich countries. Half the seats on any plane climbing out of Rio de Janeiro will be occupied by folk a damn sight poorer than the writer.

  6. “Why would you write a contract for executive compensation that doesn’t take in to consideration the effect of share buybacks or dividend policy.”

    Because that is more complicated to draft, and remuneration committees don’t want the hassle.

  7. A business fuelled by the world’s wealthiest people (you have to be to travel, and I am personally aware of this)

    For fuck’s sake, the airline industry is awash with budget airlines and cut-price air travel. Just because Dick Tater hasn’t the gumption to use a comparison website all air travel is extortion exercised by nasty capitalist airplane manufacturers on unwary travelers. Twat.

  8. Wonder when the last time Dick travelled by air anywhere without passing the cost on to someone else?

    I suspect that his trip to Dachau last summer was undertaken in a Horch 108.

  9. Oh I do apologise. I missed the clue, the quote was from the globetrotter from Ely with the Irish passport. Probably hard to find someone more mentally provincial. If they were still making nylon shirts, I’ve no doubt he’s be wearing one. Possibly with a sting vest under it.

  10. ‘If you want to know why modern capitalism does not work, that’s why.’

    Modern?

    Doesn’t work? WTF?

    ‘trigger executive share price related incentive scheme payouts that will massively and wholly disproportionately increase the reward of a few in the company at cost to all the rest and society at large.’

    At cost? What cost? WTF is he talking about?

    Outlandish assertions pulled from his arse.

    And congratulations to Boeing!

  11. “A business fuelled by the world’s wealthiest people (you have to be to travel, and I am personally aware of this)”

    OK.

    “Ryanair only use Boeing 737-800 aircraft. … Currently we have 183 Boeing 737 -800 on order and we have an option for another 100 Boeing 737 MAX 200. This expansion means that by 2024 we’ll have over 520 planes in operation and we’ll be able to carry 160 million passengers a year.”

    Oh.

    Maybe that’s 10 very rich people making 16 million journeys a year?

    “the defence sector is returning vast sums of cash to shareholders rather than invest it in new products, services and training”

    Boeing makes the Chinook, AH-64 Apache, V-22 Osprey, F-15, F/A-18, AGM-86, and Harpoon. So should that read;

    “the defence sector is returning vast sums of cash to shareholders rather than invest it in new products, services and training that are designed and intended to kill people.”

    Confused. Sad.

  12. the senior lecturer thinks he should be able to dictate to Boeing how it spends its money. Who knows what the shareholders might do with it once received? Surely, there are wise senior lecturers who could direct its spending more wisely.

  13. Alex, that makes about as much sense for a business to do as basing a sales team’s performance payments upon turnover without considering whether they can give customers discounts that result in a loss on the actual sale.

    Any non-execs should be hauled over the coals if they let this happen, that is what remuneration committees are for. Sadly I’m sure this does go on.

  14. @bis: “Presumably written by someone whose only travel is business class, New York/LA.”

    Nah. Murphy strikes me as the sort of nebbish who counts his change out of a shovel purse. He’s a Pooterish character whose Dunning-Kruger gives him pretensions of grandeur. His blog really should be retitled The Diary of a Nobody.

  15. Making military airplanes is not the way to make money. One dud jet fighter and governments who decide to cut back on spending can more or less bankrupt a company. Boeing has been on the edge of folding several times.

    Whereas non-military sees the likes of Bombardier and Embraer entering.

  16. Share buybacks (that is, gradual liquidation) is not always popular. A company has to believe its stock is undervalued. (In the US, this is in the process of correcting itself.) Given a vibrant economy, a company will see more future value in deploying its capital in new areas than in extinguishing it. There was a time under President Jimmy Carter when companies were splitting up and liquidating, realizing they had more value as pencils and desks than they had as an enterprise doing the work they were doing. (This is still true of Sears Roebuck for reasons not involving macroeconomics.)

    Granted, Boeing itself does not live in a free market but through favor-trading, both in military sales to the US and in sales abroad where credit is subsidized by the Ex-Im Bank.

  17. I remember reviewing a bad debt of long standing and we looked at the contract and realised that the salesman had signed for the customer, received his commission and then resigned… It sure happens

  18. @Tim W

    What, we should demand that money stay inside extant companies so that only things done by extant companies gain investment?

    iirc their was a legacy trust fund for heirs of a (1920/30s) USA Tram Company owner where T&Cs stated investments could only be made in Tram Companies.

    Heirs & trustees had to watch assets dwindle to near zero.

    Ritchie would have approved.

  19. Heirs & trustees had to watch assets dwindle to near zero.

    Surely they could have created a Tram Company startup, funded it, and have it then pivot to something with more chance of being profitable?

  20. Spike,

    “Share buybacks (that is, gradual liquidation) is not always popular. A company has to believe its stock is undervalued. (In the US, this is in the process of correcting itself.)”

    That doesn’t make sense (to me anyway). The share price is the value of the company / shares issued. The other fundamentals the drive the value of a company, such as revenue, costs, assets etc don’t change because the number of shares in circulation change.

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