The dividend rule is dumb. Companies who pay out dividends are actually more responsible businesses, who return capital to shareholders. Just because they generate profits doesn’t mean they are also not in need of aid to maintain operations. Certainly it makes sense to prevent them from issuing future dividends based on aid, but why a businesses ability to return profits to shareholders implies anything about their cash flows sensitivity to covid is beyond me. Not to mention, this rule will give aid to profitable companies who chose to not return those profits to shareholders, an additional bizarre distinction.
That’s not to say bailout money shouldn’t be restricted, it just seems like a dumb rule. Why not delimit it based upon a company’s behavior, such as excessive risk taking or over leverage? The companies that were not anywhere near robust to financial shocks deserve to die, but dividend issuance seems a poor way to select for these.
> Regeringen og alle Folketingets partier enige om, at der i den forlængede og udvidede ordning for faste omkostninger, indføres en betingelse i kompensations-bekendtgørelserne om, at ansøgende virksomheder som en forudsætning for at modtage kompensation i den forlængede periode på tro og love skal erklære, at virksomhederne ikke vil udbetale udbytte eller foretage aktietilbagekøb for regnskabsårene 2020 og 2021. Betingelsen vil gælde for virksomheder, der modtager mere end 60 mio. kr. i kompensation i 2020 i kompensationsordningen for faste omkostninger. Virksomheder vil senere kunne frigøre sig fra disse begrænsninger ved at tilbagebetale udbetalt støtte efter denne ordning ud over 60 mio. kr.
That’s not to say bailout money shouldn’t be restricted, it just seems like a dumb rule. Why not delimit it based upon a company’s behavior, such as excessive risk taking or over leverage? The companies that were not anywhere near robust to financial shocks deserve to die, but dividend issuance seems a poor way to select for these.