Profit is a terrible metric. Because profit = revenue - expenses, and the easy way to increase profit is to cut expenses like R&D. Good companies pour nearly all their free revenue back into expansion and R&D, which is why Amazon has small profits but a constantly growing lineup of popular products and services.
In that case, why not go the extra mile and register as a nonprofit? After all, if you are not generating profit, why go to all the trouble of having shareholders and the like?
Reinvesting profit doesn't make you not profitable, it just means you've decided to grow with your profit rather than extract it. Amazon doesn't have small profits, they've just plowed their money into growth.
No, I'm not confusing anything. What they're putting into growth are undeclared profits, that's a simple fact. When a business subtracts the cost of doing business from revenue, the remainder is profit, regardless of whether that profit is declared as such or whether it's put back into the business to grow it and thus avoid taxation. They could not "grow" if there weren't any profit left over after costs, just because you don't declare taxable profit doesn't mean you didn't have profits.
Business is almost always all about share price for the shareholders, who are the ones who set a CEO's salary (via the board). A drop is share price can diminish or even wipe out any dividends a company might pay out of profits. Many companies don't pay dividends at all (reinvesting profit for growth), so the only possible gain a shareholder has in those cases is through capital gains from selling stock.
> Business is almost always all about share price for the shareholders
And there's what wrong with the world in one short sentence. The market was supposed to be about raising capital so companies could go out and earn profits, the company shouldn't worry or care about its share price in the secondary market, it should be taking the capital and making good business decisions that lead to making profits. Letting the share price be the metric that decisions are made on is letting the tail wag the dog and leads to short term quarterly thinking and bad decisions all around; it's not how a good company is run. Profits lead to good companies which lead to good share prices, you aim for profits and good share prices are the result, not the other way around.
well, I was trying to be specific :) - 'the shareholders'. It's not (usually) that way for 'regular' employees and customers, who typically care more about the mission of the venture (if they care at all :) ). But in the context of CEO/executive pay, the shareholders have an enormous influence - they're the ones providing the incentive and direction, in their own self-interest. That's the way the system is designed from bottom to top.
Some companies controlled by a small number of investors (typically founders) may have other more socially constructive priorities, but I think in even many of those cases, it's lip service, and the real reason those things are priorities at all are because it's 'good business' (it will be better off for the shareholders financially).
> the company shouldn't worry or care about its share price in the secondary market
But "the company" is literally owned by people who buy & sell portions of it in the second market. There are only two reasons to buy shares of a company: dividends and price gains. Owners of company first and foremost want their investment to appreciate not depreciate, ergo company cares about share price first and foremost.
And that's the problem of managing a public company, share holders care about the wrong thing; they've confused the tail with the dog which is what leads public companies to do stupid shit that hurts the business long term to pump up the share price short term. Look, I don't need you to explain how companies work, I'm fully aware, you don't seem to realize I'm critiquing how they work, I'm not lacking in understanding, I'm simply pointing out how the incentives are perverse and lead to companies doing the wrong thing.
Wow... um, how about profit, it is a business after all. Business isn't about the share price.