Do investors sell if they company income falls for a quarter? I'm guessing yes, and that answers the question of whether the company looks to the short term when seeking only to satisfy investors.

The whole system is wrong.

Why would the company care if the investors sell? They’ll happily buy again when things are looking up.

Only when things are going so terrible that the board is trying to get you replaced is when it becomes important.

If the board aims to replace you because of a bad quarter in a bad economy… find a different company to be CEO of I guess.

Because a huge part of their compensation both to themselves and their employees is floated stock.

That doesn't explain it. It might be a factor, but it's not a big factor. FAANG jobs pay extremely well and then there's the stock on top.

Is the vast majority working at these companies (with years of vesting, no?) so shortsighted? Especially the higher ups?

Is it a requirement at these companies that you have to be 10000% in debt and living paycheck-to-paycheck to be a SVP/VP/director/whatever so you have to be hyper-focused on that stock comp?

It's just ridiculous. (And note, I'm not saying it's not a factor, it might be, but it's just not the full picture.)

It's taken on a life of its own at this point. The idea that the quarterly stock price is The One And Only Metric That Matters arose for various reasons related to what was mentioned, but over the years it's become so ingrained in the minds of executives and other wealthy people that even when those conditions don't specifically apply, they still act as though they do.

Amazon cash comp was capped in the low 100s IIRC.

> FAANG jobs pay extremely well and then there's the stock on top.

When excluding RSUs, FAANG jobs are not extreme in any way. RSUs are not a cherry on top but an important component of remuneration. Often for mid-level and above (roughly TL/staff engineer and Manager-II), the value of RSUs is more than 50% of total compensation.

tech/IT salaries are very high compared the median income of the country/region. and FAANG base salaries are top of that, so ... I would say they are infact extreme.

and then there's stock on top. oth

The stock is not just on top. The stock is a large portion of the pay if you aren't just a nameless minion.

Who is "the company"? From your comment it seems that you consider that the board is not part of it.

Always forgotten: for every seller there must be a buyer.

Generally speaking, unless there is a fundamental change in outlook, selling based upon the latest earnings report is the hot money which attempts to chase the latest greatest and is moving on (and rarely tells you about their misses).

investors care about long term profits. If they magically knew that income would fall this quarter and 2X next quarter, the price would go up.

The challenge is that they dont have magic powers to see into the future. If a company income is falls this quarter without a compelling reason such as investment, this data indicates that the company will not do good next quarter.

The are tons of examples of company stock prices increasing due to a acquisition, despite a lower quarterly profit.

Public companies have an incentive to focus on the short term (quarterly reports). This really makes a difference in management behavior. Bill Clinton and Warren Buffett have both talked about this, and presented regulatory approaches to fixing it, but here we are.

Clinton’s attempt was so watered down it accelerated executive pay increases: https://ips-dc.org/wp-content/uploads/2016/08/IPS-report-on-...

> Public companies have an incentive to focus on the short term (quarterly reports).

Why?

Incentivized by whom? This is choice they make. See the OP.

Incentivized by the stock market.

If you go on an investor call as the CEO and said, "hey we didn't make any profits this quarter because we invested it all into projects that will grow our revenue X% in the next quarter or half" you'll get fired by the board very quickly, or an activist fund will buy up shares and vote you out as quickly as they can.