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Predatory Value ExtractionHow the Looting of the Business Corporation Became the US Norm and How Sustainable Prosperity Can Be Restored$
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William Lazonick and Jang-Sup Shin

Print publication date: 2019

Print ISBN-13: 9780198846772

Published to Oxford Scholarship Online: January 2020

DOI: 10.1093/oso/9780198846772.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2020. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 14 August 2020

The Value-Extracting Insiders

The Value-Extracting Insiders

Chapter:
(p.69) 4 The Value-Extracting Insiders
Source:
Predatory Value Extraction
Author(s):

William Lazonick

Jang-Sup Shin

Publisher:
Oxford University Press
DOI:10.1093/oso/9780198846772.003.0004

This chapter focuses on the general transformation of senior corporate executives in the United States from industrialist leaders dedicated to value creation into financial engineers intent on value extraction. It argues that, being incentivized by stock-based pay and legitimized by MSV ideology, senior executives of major American corporations began in the 1980s to turn their backs on long-standard practices of resource allocation: Ceasing to retain profits and reinvest them for the future, many executives placed the emphasis on cost-cutting and distributing profits to shareholders in the form of not only dividends but also stock buybacks Some companies’ distributions to shareholders have exceeded 100 percent of net income for years, even decades. This chapter emphasizes the dire consequence of executives turning from value creation to value extraction.

Keywords:   Executive pay, stock-based pay, stock buybacks, dividends, retain-and-invest, downsize-and-distribute, financial engineering, value creation, value extraction

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