We take some questions

Katie Martin (0:06)

Pushkin. Over here at the Unhedged podcast, we love getting questions from our listeners. Questions like, why does Rob Armstrong look like Eddie Rama, the Prime Minister of Albania, rather than Cary Grant? And how do you make your own dishwasher tablets? But as we stumble, bleary-eyed, and frankly, rather beaten up into the end of 2025, we put out a bat signal asking you lot, listening out there, for questions about markets and finance that you'd like us to answer on the show. We had loads, thanks very much, although hardly any, maybe in fact none, from women. Girls, come on now, don't be shy. I've made a career out of asking stupid questions, and Rob certainly has. It's fine. Anyway, today on the show, we're going to answer as many questions as we can. Sorry we can't get to them all, and we're going to try not to mess it up. This is Unhedged, the markets and finance podcast from the Financial Times, and Pushkin, and Katie Martin and Mark It's columnist at festive FT Towers in London. Pre-recording this show so that by the time you listen to it, I'll be stuck in to my third snowball of the day. Joining me down the line all the way from the North Pole is my chief elf, Robert Armstrong, the largest of elves who is taking time out of fashioning small toys out of pieces of wood for all the good girls and boys at this busy time of year. Rob, tell me, are you a Christmas person or are you a Humbug person?

Robert Armstrong (1:31)

I'm a Christmas person, although it takes me a long time to get into it. I've often said that when I am king, anyone who puts up a Christmas decoration before Thanksgiving will be summarily executed. I think Christmas should be a short, intense period rather than an endless cycle of tiresome decorations. So I get into it around Christmas Eve, but then I'm super into it for 48 hours, and it's over. But I have a question for you, Katie. Is a snowball a kind of beverage? You just mentioned the snowball.

Katie Martin (2:12)

I love a snowball. I was going to ask you whether you have snowballs. It sounds disgusting, so you're going to have to bear with me. It's like an eggnog, boozy eggnog drink to which you may, if you want to, add more booze in the form of vodka, and then you top it up with lemonade, which makes it go all kind of fizzy and like a snowball, and you squeeze some lime into the top of it. Delicious. So good.

Robert Armstrong (2:36)

Never heard of it.

Katie Martin (2:37)

Sufficiently sinful and sweet and boozy, that you should consume them at Christmas only.

Robert Armstrong (2:42)

Only, yes.

Katie Martin (2:45)

So I was going to ask you snowball or Negroni, but I'm guessing you're going to say Negroni.

Robert Armstrong (2:50)

I do like just an eggnog. I think eggnog is good. Any excuse to drink cream.

Katie Martin (2:56)

What could possibly go wrong? So, okay, let's get stuck in, because like I say, we did get like a heap of questions from listeners. Tom emailed and apologized for a stupid question. It's not actually a stupid question, Tom. He asked, why do companies care about their share price? What difference does it make to a company if their share price is going up or down? Good question.

Robert Armstrong (3:18)

Rob, what are you saying? It actually is a very good question and one without a simple answer.

So, I mean, there are simple answers, but they're incomplete, and then you quickly get into the complicated answer. Simple answer number one is the CEO's pay is often linked to it. Right? So, the executives of the company get stock option grants or actual stock or whatever. And the idea is that this will align the interests of the people who run the company with the people who own the company. Solving the so-called principal agent problem of corporate finance. This works sort of well, I guess. I think it's probably good overall that executives are paid this way. But the problem is, even if you don't let the executive sell for, say, five years after his or her stock grant, five years may not be the ideal planning period or decision horizon for a really good chief executive. So if the chief executive has a hard decision to make, and the right thing to do is going to be one that might spook the shareholders, this will discourage them from doing it. So you don't get perfect management incentives out of this, but this is reason number one. This is how people get paid.