While they are officially succeeding, the stock markets are really failing us all in other respects
At SeaPigs we think the way that the stock market has interfered with businesses has become fundamentally unfair. It can’t be denied that the stock market is not without its benefits - it, for the most part, succeeds in driving companies to make better decisions as a necessity to further their own success. However, one of the biggest mistakes in the running of the stock market is the tethering of CEO’s wages to the share prices. 80% of what a CEO of a publicly-traded company earns is decided by share prices. This has seen CEO’s pay packets skyrocket as it has now become in their own personal interest for their company to do well so they obviously line their own pockets. It does not take a genius to figure out that this has created a giant rift in what the CEO is getting paid compared to everybody else, when dealing with these mega-companies turning billions in profit.
In 1973, before the onset of this unfair rule, the average CEO made 22 times more money than their average worker. In 2016, the average CEO made 271 times more money than their average worker. This more than ten-times larger increase is the perfect example of why how as stock prices have went up, so has inequality. When the gap between rich and poor is this wide, it is no shock to hear that the average family’s worth has not recovered from the Great Recession (as much as politicians like to tell us that Everything Is Back to Normal).
Wages have barely increased since the 1960s because these massive companies don’t have room to increase them - they’re spending all of their money on stock buybacks and dividends as a way to put money back into the CEO’s pockets. From 2007-2016, companies on the S&P 500 spent 55% of their profits on buybacks, and distributed a further 39% back to investors, leaving only 6% left for raises or developing new products, which is essential to the long term growth of the economy. This is why the price of things is increasing with inflation, but people are unable to afford things as their wages aren’t increasing alongside everything else. It’s no wonder poverty is on the rise - money really does not go as far as it used to.
The stock market is far too focused on success in the short term - who’s got the most money today, and who’s going to have enough money tomorrow? But what about ten years down the line? What then? In its current form, the stock market is unable to take this into account feasibly. In the 1990s, during the emergence of the internet, the stock market predicted a boom for years upon years to come, which ultimately did not happen, only proving somewhat true in the cases of tech giants like Amazon and Google.
We’re not saying we should head back to how things used to be pre-20th Century with titans like John D. Rockefeller and Cornelius Vanderbilt ruling the roost and personally having a percentage of an entire country’s GDP. But neither can we continue as we are. It makes a mockery out of the bottom line and embodies corporate greed, as the desire for self-preservation supersedes taking a risk and pushing the envelope which may affect stock prices. Therefore this is not sustainable for the economy or the future of society. We hope you agree.
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