Maximum wealth extraction to top executives is the design of Equity Compensation Plans

Most Executive Compensation Plans and Grant agreements are designed to allow the top officers and directors to extract maximum wealth from the companies. And the designers, the officers and directors and their attorneys all have the same objective.

The designers even ignore Securities Regulations such as Section 16 (b) of the 1934 Act and the Fiduciary Duties of the officers and directors. The companies themselves refuse to enforce the Securities laws, when their officers and directors have clearly violated those laws. They never sue officers or directors for Fiduciary Duty violations.

Can anyone ever remember the board of directors of a company trying to force the CEO to live up to his Fiduciary Duties to the shareholders? Can anyone remember the board of directors filing a suit against an officer or director to recover profits earned by the officer or director for violations of Section 16 (b), when the violation is not 100% obvious? The answer is probably "no" to both questions.

Grants of shares to top executives are generally made prior to good earnings being announced. Can anyone show a substantial grant to a top executive of ESOs days after great earning news?

Officers and directors are often given the choice to deliver shares or cash to pay for taxes or exercise prices, upon vesting or exercise, whereby the issuer must accept the method chosen by the executive. Can anyone point to a top executive choosing to deliver shares, received from RSUs vesting, to the company when the top executive has very positive information information to be made public in 30 days?

When calculations of the values of ESOs, RS, RSUs etc. are made upon the grant date, are factors such as the officer or direction having the ability to trade on inside information considered in the calculation. Answer is No.

Who enforces the laws against short term trading by insiders? The SEC doesn't.


John Olagues


Edited Sat, Jun 10, 2017 10:37 AM

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