Barbarians at the Helm
Maybe you’ve been following the option grant scandals. Primarily technology companies are under investigation, including my recent favorite fallen angel, Apple. The gist is that the companies used their control over the dating of incentive stock options to hand executives the ability to purchase their stock at the lowest possible price from the previous quarter/year etc. Thus, cheating investors by depressing share prices, and counteracting the ‘incentive’ nature of the options by decoupling their value from the performance of the executive during the period after the grant.
If you’re like most people, that probably sounds a little scummy, but relatively minor. Well, there’s a new twist. The Wall St. Journal today contained a little-noticed article on a new twist in the scandal: Incentive option grants for September 2001 were 2.6 times greater than any comparable period in the surrounding five years. So in the aftermath of the terrorist attacks, these executives chose to raid their own companies when they were at their weakest moments. Inspiring.
Hedge fund manager, financial analyst, and contrarian-pundit-at-large Barry Ritzholz sums up well:
What makes this so pathetic is that corporate executives could have stepped up AND BOUGHT STOCKS IN THE OPEN MARKET if they believed they were so cheap. It would have been reassuring to a nation to see the leaders of industry voting with their own dollars. It might have made the subsequent economic slow down and period of tense aftermath less painful. Instead, these weasels decided to loot the treasury at the first opportunity. America was smouldering, the WTC lay in ruins, and this group of classless pigs decided it was time to pocket some cash.
