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John Fugelsang: (Original Post) applegrove Dec 9 OP
It isn't just the executives. It is also the shareholders. Bluetus Dec 9 #1
Then they spend billions on stock "buy Backs" multigraincracker Dec 9 #4
Yep, and the buybacks are for one and only one purpose, Bluetus Dec 9 #5
Truth. Delphinus Dec 9 #2
Recommended bagimin Dec 9 #3

Bluetus

(294 posts)
1. It isn't just the executives. It is also the shareholders.
Mon Dec 9, 2024, 07:40 PM
Dec 9

As Thom has pointed out regularly, it was only a couple of decades ago that neatly all hospitals and most of the big health insurance providers (think Blue Cross, Blue Shield) were non-profits. That means, among other things, no shareholders expecting big dividends.

UHC is paying about $7 billion per year in dividends. If they were a non-profit, they would be paying $0 in dividends.

Bluetus

(294 posts)
5. Yep, and the buybacks are for one and only one purpose,
Mon Dec 9, 2024, 10:34 PM
Dec 9

which is to immediately make the share price pop, inflating the value of the stock options they have dealt themselves in lieu of salary (usually in addition to salary). And of course, the options are taxed at the low cap gains rate, about half the rate many of their employees are taxed.

For those who don't understand how the buybacks work, executives like to deal themselves stock options or compensation deals that are based on how much they can pump up the share price. If a company has excess cash (and with all the price gouging going on since COVID, many of these biggest corporations have huge piles of cash way beyond their business needs), then they simply use that cash to buy a bunch of their own shares from the open market. Simple supply/demand drives up the share price -- works every time. And when that share price goes up, they can exercise their options for a huge payday.

The whole argument for executive stock options is to "align the executive interest with the interests of the company". That sounds great, right? Well, it would be great if superior executive strategies or exceptional execution led to higher profits, and therefore a higher stock price. But that's too hard. Instead of actually developing great products and managing the business diligently, it is far easier just to buy back shares, and then go celebrate with martinis.

Delphinus

(12,159 posts)
2. Truth.
Mon Dec 9, 2024, 07:47 PM
Dec 9

The statistics about bankruptcies here in America due to health care costs are eye-opening.

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