Here's A Question

V

vanzandt

If a President and CEO's compensation package has stock options tied to it.... how is it fair that that same CEO can authorize share buybacks that put a floor under the price of the stock and also lower the multiple making it more attractive to institutional buyers?

How does that work? What a crock.
 
vanzandt said:
If a President and CEO's compensation package has stock options tied to it.... how is it fair that that same CEO can authorize share buybacks that put a floor under the price of the stock and also lower the multiple making it more attractive to institutional buyers?

How does that work? What a crock.
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I agree. Companies also borrow money at lower rates (Fed induced low rates) and do share buybacks. So yes, they go into more debt to do this. The thing is, there's a lot more "crock" than just share buybacks in the corporate world.:rolleyes:
 
BONECRUSHER said:
I agree. Companies also borrow money at lower rates (Fed induced low rates) and do share buybacks. So yes, they go into more debt to do this. The thing is, there's a lot more "crock" than just share buybacks in the corporate world.:rolleyes:
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One of my favorite examples of this is AZO. 5 Billion+ in debt and yet it uses its FCF to bolster EPS Q after Q.... CEO got 10.25 Million exercising options.
Must be nice.
 
If the stock price goes up because of the company put a floor via buybacks, then all the shareholders benefit, which is why he's compensated via options.

That's the theory anyway.
 
newwurldmn said:
If the stock price goes up because of the company put a floor via buybacks, then all the shareholders benefit, which is why he's compensated via options.

That's the theory anyway.
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Just issue more debt. Everybody wins! I love it. ;)
We don't need no stinkin' dividends.
 
This is a pretty classic principal-agent issue. Bondholders protect themselves with certain covenants. If a company can issue debt (to pay dividends) while staying within these covenants--good for them.

Also remember that the CEO reports to the board and I typically the board would have the final say on authorizing share repurchases.
 
atrp2biz said:
This is a pretty classic principal-agent issue. Bondholders protect themselves with certain covenants. If a company can issue debt (to pay dividends) while staying within these covenants--good for them.

Also remember that the CEO reports to the board and I typically the board would have the final say on authorizing share repurchases.
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Just give the board stock options too! "All in favor...say Aye".... its a beautiful thing. Everybody gets a mansion.
 
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