There is a good series articles in this month's Fortune regarding the out of control granting of employee stock options to the detriment of other shareholders:
The Great CEO Pay Heist
fortune.com.
Excerpt: The largest pay component in virtually all these
cases is the stock option, which has mushroomed
from modest use in the 1950s to a source of
breathtaking CEO wealth today. A big reason for its
runaway popularity is the insane way accounting
authorities let companies treat options in financial
statements--a way that's great for executives and
awful for shareholders.
And this article too:
The Amazing Stock Option Sleight of Hand
fortune.com
Excerpt: Unfortunately, when it comes to the question of what all this largesse is costing you the
shareholder, the lack of candor is frightening. While a mine of information about
options is buried in proxy statements and the footnotes of annual reports, the impact of
options is almost entirely invisible in the quarterly financial numbers most investors
follow (earnings per share, cash flow, Ebitda). It's not just that companies are clever
about hiding the true cost of employee stock options, or that nutty accounting rules help
them do it. All of us--investors, Wall Street analysts, journalists--help them do it. By
ignoring the numbers that are out there, albeit squirreled away in footnotes, we've
become a nation of options-abuse enablers.
Another article: This Stuff is Wrong----Interviews with members of executive compensation committees who speak anonymously about how hopelessly screwed up compensation packages have become:
fortune.com
Excerpt: The scandal of what goes on in compensation is how much is paid in the many, many
instances when it isn't at all deserved. But a sub-scandal is the lack of a charge
against earnings when stock options are issued. Companies go along as if these
things are free, when actually they cost the shareholder enormous amounts. If you
think how much more money CEOs have gotten because there isn't an earnings
charge for options, it blows your mind.
By the way, I believe you can still buy Warren Buffet's management of BRK for a simple $100,000 per year with no stock options.
Best, Huey |
