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| Subject: executive stock options An employee stock option is a call option on the common stock of a company, issued as a form of non-cash compensation. Restrictions on the option (such as vesting and limited transferability) attempt to align the holder’s interest with those of the business’ shareholders. If the company’s stock rises, holders of options generally experience a direct financial benefit. This gives employees an incentive to behave in ways that will boost the company’s stock price. Stock buyback shenanigans By John Schroy, on July 20th, 2006 |  Leave a comment  In a major exposé of the misuse of executive options, the Wall Street Journal ran a front page article on July 15, 2006, reporting that as stocks sank after the the 9/11 attacks, scores of companies rushed to issue options to top officials. Some executives reaped millions. The SEC provided cover to this fraud, relaxing the already lax SEC Rule 10b-18. Executives were able to play on patriotic sentiment to personal advantage, diverting shareholder funds to their own pockets. July 20th, 2006 | Print Article |  Email Article |  Topics: back-dating of options, common stock legend, executive stock options, fraud, intrinsic value, Jeremy Siegel, SEC Rule 10b-18, Stock Buybacks, US SEC, Wall Street Journal, Warren Buffett | Category: Stock Buybacks, featured | Leave a comment |  Short urlThe Enron scandal By John Schroy, on July 7th, 2006 | Leave a comment  Unfortunately for society, Jeff Skilling of Enron told the truth according to tenets of moral relativism learned at the Harvard Business School and with McKinsey and Company, when, on being sentenced to decades in prison, he said, “That’s the way the game is played. You win some, you lose some.” Skilling was a representative of corporate executives of his time. He did not work alone, nor was he an isolated ‘bad apple’. July 7th, 2006 | Print Article | Email Article | Topics: Adam Smith, CFA, Corporate Governance, CPA, Derivative Strategy, Enron, executive stock options, Harry Markowitz, Harvard Business School, Jeff Skilling, John Maynard Keynes, Ken Lay, Leverage, Long Term Capital Management, McKinsey, Miller and Modigliani, Myron Scholes, risk, Robert Merton, Sarbanes-Oxley Act, securitization | Category: Security Analysis, featured | Leave a comment | Short urlRecipe for fraud? By John Schroy, on July 3rd, 2006 | Leave a comment  Stock buyback programs are a legalized form of market manipulation, sanctioned under SEC Rule 10b-18 and that serve to drive up the price of a company’s stock and to give false value to executive stock options — something that the SEC considers a “legitimate business reason” for rigging the market. However there is no safe harbor for insider trading. July 3rd, 2006 | Print Article | Email Article | Topics: executive stock options, hedge funds, insider trading, SEC Rule 10b-18, Stock Buybacks, US SEC | Category: Stock Buybacks, featured | Leave a comment | Short urlFeatured articles on inside pages
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