Exec Comp: nice try but no solutions!

The suggestions that CEO's and other members of the gilded C-suite should be paid with corporate bonds instead of share options or on the basis of some convoluted performance metric are non-starters. The hold that senior executives and their acolytes in academia and the media - not even mentioning mindless holders of their company's shares among the non-fiduciaries in the world of institutional money management or Private Banking - is just too strong. The only way they can be brought to heel is with a simple and fair solution as advocated by Pro Governance, i.e. no special deals (perks, pensions, 'incentive' schemes etc) for the anointed and self-governed few but a simple pay and bonus scheme that treats ALL EMPLOYEES on the same basis. In addition shareholders should have a BINDING vote on compensation for the CEO before it is agreed.
The real problem with CEO Pay (Bloomberg View)
(7 August 2015)

Stock Buy-backs - Poison for the Economy?

There were times and places where companies were not allowed to buy their own shares. This was principally meant to prevent share price manipulation.

Kick-back Fraud in M+A transactions

News that German authorities investigate up to 30 employees of Bayerische Landesbank in connection with the takeover of Hypo Alpe Adria raises an important but often neglected point with regard to Merger and Takeover transactions. We do not even want to delve into the fact that many are value-destroying at least half the time. This has been proven in many academic studies and any experienced investor will have watched in disbelief when supposedly smart managements engage in deals that make no sense for one of the two involved parties. While better corporate governance will help to alleviate many weaknesses of the merger process little attention has been paid to a darker side of this process. As the abuse is incredibly difficult to prove not many instances of outright fraud have come to light over the years. Of course, situations where incumbent management of the takeover target or one of the merged companies is promised attractive new terms in the combined business do not pass the smell test. The practice that option and share awards to management are 'crystallised' and can be cashed in before their nominal due date can also be considered to be a questionable inducement to go ahead with a business combination. Passing on explicit bribes such as hard cash is even more difficult to detect but can never be excluded as long as decisions about major transactions are often made by a small circle behind closed doors. Only the restriction of all decision making to the full body of shareholders - and even then in a process subject to strict regulation - will prevent Merger and Takeover deals from being influenced by corrupt practices.
(28/02/2011)

Outcry, Rebellion pointless - only Shareholder action will do

It is reported that "many companies could face outcry over executive pay and board accountability during their annual shareholder meetings." (Wall Street Journal, 14 Feb 2011). But these emotional reactions will leave entrenched managements and their acolytes in the boards unmoved as they pocket their disproportionate 'Rewards'. Even worse, when shareholders (usually their lame fiduciaries among the institutional investor community) 'abstain' from voting through these 'compensation' awards they really fudge the issue rather than taking a (controversial) stand in defense of the interests of their clients and investors.
(14/02/2011)

Options Self-Service - more from Eliezer Fich

Eliezer Fich just sent us the link to a fresh piece about the abuse/use of special option awards during merger negotiations. Happy reading!

Option Awards - Self-service by greedy CEO's

Again we have to reiterate: the fish starts to smell at the top. If CEO's would not be the main beneficiaries of the gaming of option awards the problem would not exist. Today's report in the Wall Street Journal about egregious abuse of executive share option awards by chief executives of companies that are in the middle of merger negotiations illustrates the unrestrained greed that is seen as acceptable by some executives. It beggars belief that Ronald Rittenmeyer, CEO of Electronic Data Systems Corp. finds no fault in accepting a share award just before a takeover deal allows him to take a profit $13.4 million on these very share options. He even has the temerity to claim: 'I did my job and I did the right thing by my shareholders'. Need we say more?