Stock-Based Compensation

Stock-based compensation has attracted scrutiny among rapidly growing technology companies. However, looking back over the past decade, stock-based compensation has primarily destroyed value for a different kind of company. Companies with tepid growth that are unable to capture value slowly give their company away to employees through stock-based compensation programs. Fast growing companies at least have the potential to create a lot of market cap in order to justify the stock-based compensation.

The chart below illustrates that over the past 10 years, it is stagnant technology and consumer companies that cumulatively gave away the largest percentage of their company to employees.

Taxes

The biggest corporate tax payers over the past 10 years are what you would expect: the most profitable corporations. A large company that is missing from the list is Amazon.

Utilities are the most prominent tax dodgers. These companies are capital intensive and always have large capital investments to depreciate against current income.

Employee Growth

While Amazon doesn’t pay significant taxes, Jeff Bezos would argue that he contributes to society in more meaningful ways - including directly lowering consumer prices and hiring employees at a faster clip than any other company in the US. Excluding companies that do outsourced work or have franchisees, Amazon grew employees at 7x the pace of the next largest hiring company over the past 10 years.

The companies that shed the most employees were stagnant businesses that were unable to compete effectively.

Cash Flow Still Matters

Despite a decade that celebrated money-losing companies, the most market cap was created by the companies that generated the most cumulative cash flow (excluding stock-based compensation).

Cash Flow & Stock Market Performance

The stocks of the companies that produced the most cumulative cash flow trounced the performance of the companies that burned the most cash flow.