Not normally one of my favorite reads, but some interesting stuff none the less. Interesting parallels.
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financialweb.com
5. Watch out for excessive executive compensation!
Meet Angelo S. Morini, Chief Executive Officer of Galaxy Foods Company (Nasdaq SmallCap: GALX). During fiscal year 1996, Morini received a base salary of $250,000. He owns 18 million shares of company stock, worth $13-$14 million at current market value, which he purchased not with cash but with a note payable due in 2000, when he may extend the note for up to five additional years. Galaxy Foods covered $9,107 in lease payments for Morini's automobile and $5,597 in club dues during fiscal 1996. Again, it's all in the company's financial statements.
Galaxy Foods suffered nearly $8.5 million in combined losses during fiscal years 1995 and 1996. So Morini is rewarded handsomely for his questionable leadership of the company. And there are lots of Angelo Morini's in the world of small-cap stocks.Boy don't we know that.
The controversy over excessive executive compensation isn't unique to small companies, of course. But capital at small companies is far more scarce, and limited resources usually are needed to fund ongoing operations and stimulate growth. High salaries, generous options and other perks are all legal, but not exactly a sound strategy for successful long-term business development. Do you really want to invest your hard-earned money so that someone else can live a life of luxury? Good question.
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