It's an Inflammatory Read, and it Should be!

So, the shareholders are taking it on the chin, and the directors are doing their usual marvellous job of protecting the shareholders' interests. Management? Big bonuses at Goldman, as usual. And, as the article points out with remarkably restrained words, when an chief executive is forced to go, like at Merrill or Bear Stearns, he gets to keep his stock options. Look closely at the following beautifully, bluntly honest quote:

"The employees and executives at Bear Stearns own a significant portion of the firm; as such our interests are closely aligned with outside shareholders,'' company spokesman Russell Sherman said. ``We are intensely focused on delivering value to our shareholder base.''

By making themselves as big a part of the stockholder base as they can???

I'm waiting for an ETF holding profitable companies with dividends, without larcenous stock options programs camouflaging dilution by stock buybacks, and with directors militantly committed to defending stockholder interests, specifically minimizing management influence over the board. Haven't seen one yet!. We've got everything else! If the name isn't taken, they could call it the Governance Leaders Fund! An ETF with contrary practices could be called the Sticky Fingers Fund!


Bloomberg.com: Exclusive

'Buyback Boondoggle?' -- Matthew Hougan's blog at Index Universe

I've blogged on this a few times. See, I'm not nuts on this.

A quote: “The decline in dividend increases is disturbing, especially in light of continuing moderate earnings growth and the abundance of corporate cash,” [Howard] Silverblatt [senior analyst at Standard & Poor's] said in a statement. “We believe the present wave of corporate buybacks is contributing to the slower pace of dividend growth in 2007."

Hougan's take: "[They] strike me as tantamount to deferred pay raises for corporate employees. Whereas dividends are paid out to current shareholders, buybacks – by reducing the number of shares outstanding – represent payments to both current and future shareholders ... including the holders of vested and unvested stock options."

His bottom line on this: "It seems like a blatant conflict-of-interest for managers – who often hold large options positions – to make decisions about whether to buyback stock or boost dividend payments."


BLOG IU.COM - Buyback Boondoggle?

Stock buybacks are a good thing, right? -- USA Today

Good article. I noted particularly the problem of "companies announcing stock buybacks from 1981 through 1995 averaged 24% more shares outstanding five years later, says Akhtar Siddique, economist at the Office of the Comptroller of the Currency." The ugliest possibility is that the buybacks were just "camouflage" for the dilution of shareholder value due to outsized stock option plans transferring the stockholders' company and its earnings into the hands of managers and favored employees. Cash dividends are a more honest way to reward stockholders. Of course, when the directors are management and management toadies, then that dilution can be seen as a very good thing. To get a simplistic approximation of the percentage of the annual earnings given away, you have to get into the annual report, find the number of shares reflected in the options grants, find the market value per share, calculate the total current value of that many shares, and compare that number to the company's earnings after tax. You may be shocked.


Stock buybacks are a good thing, right? - USATODAY.com