adespoton , 22 days ago

Executives need to present company forecasts to shareholders at annual business meetings. If they mess up the forecast so the business plan doesn’t match the reality, they scramble to make the books balance somehow — the easiest place to do this is by cutting staff so that expenditures line up with earnings. Modern accounting means that even though they still have payouts to employees, they can count this in a separate loss bucket so that the bottom line item that investors watch still comes out where they “predicted” it would, which props up the stock price, making investors happy and preventing them from replacing the executives.