Forum Post: If the CEOs are doing such a great job, why do they cash in their share options the instant they are able to?
Posted 13 years ago on Oct. 24, 2011, 4:13 a.m. EST by Krankie
(140)
This content is user submitted and not an official statement
We keep hearing about what great visionaries our CEOs are, about the record-breaking profits they are making, and how they are preparing their companies for the future - all these are put forward as excuses for the unbelievable compensation these people are given by their rubber-stamp boards of directors.
If all this is true, why does no one question why the same CEOs dump their share options the instant they are able to? If they REALLY are setting up their companies for the future, rather than pillaging them to achieve short term bonuses, why do none of them buy shares in the companies they are running. This information is available to anyone that wants to look - just go into http://finance.yahoo.com, select your company, and click on Insider Transactions and see how many of those transactions are BUYS versus SALES. But, of course, asking questions about this behavior is one step in the direction of saying that the emperor has no clothes, so we couldn't do that....
Because the economy is going to shit in this country. No stock option is considered a sound investment when even the US AAA credit rating has been downgraded for the first time in history. If I didn't have a negative net worth right now, I would keep my assets as liquid as possible too.
And why do you think the economy is "going to shit"? Because "American" corporations are turning their backs on this country and moving jobs and purchases out of the country as quickly as they possibly can. And why? To maximize their own bonuses until the companies implode, at which point they will be the first ones in line, looking for their golden parachutes. I honestly cannot comprehend how a CEO can be allowed to run a company into the ground AND profit so enormously themselves in the process. Does ANYONE care about anything beyond the end of this quarter?
Its simple, if they cash it out they pay 15% income tax on it as dividend income. If they leave it in the company they pay 35% corporate tax on it as profit. They buy the shares right back probably. Its a huge gift to the CEO's from George Bush, funded by you and me.
No, that is not correct. I have a few share options (nothing to get excited about) and when I cash them in, I pay income tax at my marginal rate. But then I am just a lowly worker - maybe the CEOs have some sort of sweetheart deal where they get a type of share option that is treated differently? But I DO know, for a fact, that our CEO has cashed in FAR FAR more share options than the number of shares that he still holds.
I may be interpreting it wrong but please take a look at the table contained in the following link.
http://www.salary.com/Articles/ArticleDetail.asp?part=par414
There are various types of stock options. From what I see there is a so called "super stock option" that is not taxed when the option is exercised but is taxed at 20% when it is sold as long as it is at least 1 year later. When the option is exercised, is deductible for the company. I think this is more or less what I was talking about.
I may be looking at it wrong so if you know something more please let me know.
I am having a hard time determining if the "super stock option" is real or if it is just a proposal. It doesn't explicitly say.
CEOs only care about short-term profits, because that's where the incentive lies, and that its required by US law
How is that required by US law? The law doesn't stop anyone from running their company in a responsible manner and re-investing your own money in it. Don't excuse their destructive behavior by saying that it is the law's fault.
of course, I was merely commenting on the fact that CEOs aren't allowed to take actions that would result in a short term drop in profits, even if for the good of the future of the company. You misunderstood me. I believe corporations are to blame, but the laws definitely don't provide any incentive.