This new rule could reveal the huge gap between CEO pay and worker pay

Have you noticed what happens to a company's stock price when its earnings miss analysts' estimates for the quarter?

 

Yes, I have. But do you honestly think a company could, say, lay off a couple hundred/couple thousand employees to "make its numbers" without that affecting the stock price?

 

Wall Street usually responds very favorably to workforce reductions.

 

Actually, it doesn't. Layoff announcements on average are associated with a decline in the value of the firm. I haven't delved into that literature in a while, but I took a quick look and didn't see anything new coming up.

 

I owned WWE stock last year. When it announced layoffs, the stock price went up, if I recall correctly.

 

How's your Blockbuster stock doing?

 

I wish I had stuck with WWE stock. It gained like 10% the other day. As usual, I sold too early.

 

Gresham's law of political information at work.

 

I didn't notice the discussion about layoffs, only your general disbelief about the importance of quarterly numbers. I don't know what layoff announcements do to stock prices, although I'm going to guess, based on my experience, "it depends." I do know there is significant pressure within publicly traded companies to make estimates every quarter because of the effects of an earnings miss on stock price. I've gone through a quarterly earnings miss. It wasn't fun.

 

So companies will use massive layoffs to make some quarterly estimate without much regard for the effect on future earnings to keep a stock price temporarily stable?

 

This is probably a campaign promise to lower-level CEO salaried people and a backhanded way of driving their wages up. With a few more dollars for campaign donations and thank-yous. The Kochs sure aren't one of those who will benefit from this, just as an example of the partisan side of it.

 

No. That would be silly.

They do it so the CEO looks like he/she is making bold moves to keep the stock price up and thus maybe get a nice, fat bonus again this year.