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John Wayne's Holster: Corporate Executives Are Pillaging Their Companies
John Wayne's Holster
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Tuesday, September 05, 2006

Corporate Executives Are Pillaging Their Companies


Cartoon by Cagle



CEOs and other corporate executives are taking their companies to the cleaners and ripping off share-holders!

The median base salary of CEOs in the US is about $650,000.00. And that figure doesn’t include all the bonuses and perks.

If you throw in the annual bonus, the median salary increases to almost $950.000.00.

Tack on the benefits, and you are looking at a figure over $1.1M!

And that is the median! The top 20% of CEOs get $1.5 to $2.0 million or more!

The other executives (CFO, COO, etc) are making similar salaries.

And in many cases, their companies are loosing money while the executive parking lot is lined with BMWs and Mercedes-Benz’s.

Now if that enough…. These figures do not even include their stock options! That is where the execs stand to make a killing! According to a 2004 Congressional Study, the average executive compensation (salary, bonuses, benefits, stock options, and other perks) was $9.6 million. All of this comes at the expense of the little people – the stock holders and employees.

And in taking profits on stock options – the execs in many companies cheat!

Many companies offer stock options to their executives. But what many people do not realize is that the corporate executives are cheating the system to essentially steal money from their companies – and thus from the stock holders and employees. People like you and me!

How do they do it? Stock options essentially allow the holder to buy shares in a company at a fixed price. In order to lock-in their profits, the date at which the options are awarded to the executives (but not the regular employees) can be back-dated to precede a rally in the stock price, thus guaranteeing the holder of profits.

It is like that scene from Back to the Future when Marty McFly (Michael J. Fox) brings a sports almanac from the 80s back to the 50s. Biff Henderson (his nemesis) steals the almanac with the goal of betting on games which he knows the outcome in advance.

Most people call that stealing! But in the corporate world, it is just the way that the corporate top dogs conduct business.

Back-dating is not the only problem! The corporate execs also engage in practices colloquially known as “spring-loading” and “bullet-dodging”, two nuances on the back-dating scheme. With these shady practices, the grant dates of stock options are set to precede corporate announcements of good news, or to follow announcements of bad news. In both cases, it is done in anticipation of a rally in the share price. Again, the executives are locking in their profits, i.e., stealing.

I don’t know about you, but to me these crooked practices smack of insider trading.

But there is potentially some good news on the horizon. Sen. Chuck Grassley (R-IA), chair of the Senate Finance Committee, has scheduled a hearing on these abuses in executive compensation. Hopefully, something can be done to right this injustice. The hearing will air live on C-SPAN.

I will keep you posted on developments.

4 Comments:

At 9:58 AM, Anonymous Dave Bertocchi said...

Joe:

I must disagree with you on this one. When you consider what some pro athlets, actors, musicians, and news anchors are paid I think CEOs of many major international companies are underpaid. At least the CEOs are producing products and employing thousands of people, not just providing mindless "entertainment".

The fact is that it is hard to find someone who can run a major company. Lots of people like to bitch and complain when someone makes more money than they do, well let them put the time and effort required to move up in a company or they can just continue to play the victim.

 
At 8:16 PM, Anonymous Joe Verica said...

Hi Dave

Thanks for the comments. I always love a debate!

My problem is not so much with executive salaries. I agree that there job is difficult and they are providing a service to the public in the form of jobs (at least the good companies).

My point in bringing up their salaries is to demonstrate that the execs are very generously paid. Although I personally think they are overpaid, that is not the major problem that I see in corporate America.

It is the dishonesty and underhandedness that I have a real problem with. I am talking about the guys are who essentially stealing from their companies. In the end, many of these companies end up with lots of debt. In some cases, they go under. Then there are lots of people in need of jobs.

There is no reason other than selfishness or greed that would cause the crooked execs to play shady games with stock options to milk their companies dry.

 
At 12:31 PM, Anonymous Roy said...

oNice Post Joe! I too must disagree with you. Well partially. I agree that there should be legislation with regards to back dating stock options. However, 1.1 - 2 million dollars is not that much money.

You say "many companies end up with lots of dept" and "some cases they go under" yet you cite no stats such as exactly how many of the top 20 percent of CEO's are running debt ridden companies. Are the companies worse off financially after the CEO took over and is the CEO being held accountable?

You also said your main problem with "corporate America is the dishonesty and underhandedness." In my opinion this is an extreme exageration. Extremely dishonest corporations will not last long. You can only pillage one company before it goes under. America has many of the strongest corporation in the world. This is because we have excellent business men and women. I believe the overwhelming majority of business execs are very good at what they do and they work their asses off to get to the top. Once they get their they continue to work their ass of to stay their.

 
At 8:34 AM, Anonymous Anonymous said...

you americans are so stupid. why don't you just stick to what you're good at - killing brown people and torturing muslims

 

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