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Strategies & Market Trends : Value Investing

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To: Don Earl who wrote (15116)	8/10/2002 5:40:20 PM
From: Paul Senior	Read Replies (1) of 78773

Don Earl: I like your general rule about compensation amounts. I'll try to be alert to it as I check out companies to invest in. (ed.: building up to a vent, which follows) I used to avoid companies that paid excessively, but I found that the stocks of some of those companies subsequently did very well nevertheless (could've just been the bull market). I will say my standards for pay must be frozen in a different time or at a younger age. Because now it seems to me that SO many execs look overpaid. As a result, there'd be very few stocks to invest in if I focused too much on compensation. In any case, I have voted against options in all proxy forms sent to me. In most of these too, I've voted also against all directors (because they have allowed the options vote to occur knowing that its passage is almost assured). I don't even want to talk about repricing of options. Or giving options to incent or incentivize (whatever the jargon is) 55-year old guys who've already been hugging their companies for 30 years. Or for that matter the issue as to whether it's at all necessary to issue stock options to allegedly incent people when those people are in multi-division operations which have different business cycles. I'm buying a small starter position in a multinational giant where the stock is so low that the last or earlier batches of executive options isn't profitable for those folks. I am finding that there's a new batch of options that's going to be awarded in February. So now I'm in contraposition to the executives! They have an incentive to see that the stock stays low or goes lower so that they can get those options in February at the lowest possible exercise price. I don't call that a desirable incentive. (Aside: Perhaps Mr. Buffett or Dr. Graham would say a further lower price also gives me the opportunity to get more stock bargain-basement prices, and that I should welcome it and try to take advantage of it. It's just that sometimes - like NOW- I am getting tired of these opportunities to average down!!)

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