Bird on a Fire wrote: ↑Tue Aug 16, 2022 3:17 pm
The huge shareholder payouts and director compensation etc. simply show what's being done with the available money.
This article from 2 years ago gives figures of £123bn capital expenditure vs. £57bn shareholder payouts - and note that all the capital expenditure was paid by customers' bills, with the £48bn of accumulated debt all being funneled straight down the piggies' gullets.
That article is typical sensationalist nonsense. The amount of dividends is of no concern to anyone except the shareholders. Here is an example to illustrate how dividends work. Alice, Bob, Carol, and Dave form a company, ABCD, each contributing £25,000, so the ABCD starts with £100,000. It then trades for a year, buying and selling stuff and at the end of the year it has spent £400,000 and taken in £410,000. The company therefore ends the year with £110,000. It then declares a dividend, and distributes £5,000 to shareholders, so Alice, Bob, Carol, and Dave each get £1,250 and the ABCD starts the next year with £105,000. Note that the dividend distributed is money which already belongs to the four shareholders. If they do not distribute a dividend, they each own a quarter of ABCD worth £27,500 while if they do distribute a dividend, they each own a quarter of the company worth £26,250 and £1,250 in cash which adds up to £27,500. Dividend distribution is merely the shareholders moving their own money about.
Now to tackle the issue of borrowing to fund dividends. Suppose, instead of trading ABCD borrows £20,000 from Zoe, giving it £120,000 and a debt of £20,000 and then distributes this £20,000 as dividends. That means each shareholder is left with a quarter of ABCD, worth £20,000 and cash of £5,000 which adds up to £25,000 so they have exactly what they started with. Dividends are almost exclusively a concern of shareholders - not outsiders. The only outsider who might have a legitimate concern is Zoe, who might be worried that a company doing such strange things might go bust before repaying the loan, but if that was arranged specifically for the purpose of avoiding repayment, Zoe could "pierce the corporate veil" and pursue the shareholders who were effectively trying to perpetrate a fraud.
Another problem with the article is the sensationalist way it presents the data to exploit people's inability to grasp large numbers instinctively. The figures are totals over a period from 1991 to 2019 (presumably 28 years, but that's not completely clear). This makes them look really big. A more honest presentation would be to use average annual figures, while a form intended to give readers a true feeling of how it relates to them would be to say that the dividends paid were about £81 per household per year, which is then easily relatable to the water bills that readers will have personal experience of. Similarly, instead of describing the capital expenditure as £123bn, saying £175 per household per year would give a genuine feel of how much that is.
Bird on a Fire wrote: ↑Tue Aug 16, 2022 3:22 pm
... shareholders, who are just paid for having money. Sure they're "accepting risk" or whatever, but at least from my outsider perspective having money looks a lot less risky than
not having it. Where are my dividends?
Shareholders are not paid for having money. They are paid for letting a company use their money. This is similar to a loan except that a lender is entitled to their money back with interest, whereas a shareholder is only entitled to their share of what happens to be left - which may be a lot more than they would have got by lending the money, or it may be a lot less, sometimes nothing. Dividends are a bit like interest - you can only get them if you have contributed money (well, it can get very complex, but that's the basics).