Comments on: Is executive insider trading a problem?

By: Rom20F

Rom20F — Thu, 29 Nov 2012 13:10:44 +0000

Insider trading from corporate executives is a real issue, but even though it raises many concerns, still executives pays have to be linked to performance indices. Executives’ interest must be aligned in some kind of way with the one of shareholders. Of courses, others metrics can also raise issues, for example linking bonus to earnings performances can lead to accounting manipulations. I believe the best way is to diversify the executive’s pays and keep bonus at a reasonable level.

I strongly think that incentives measures have to exist; the system just requires more transparency from the employees and more compliance rules from the company side.
Plus the question of equity holdings can also be extended to executive’s relatives. Should the CEO’s husband or wife disclose his or her holdings in the company?

By: y2kurtus

y2kurtus — Thu, 29 Nov 2012 03:12:07 +0000

The simple and unanimous answer is yes. C-Level and BOD level people destroy the faith in the entire system when they sell GMCR at 100/share and ten weeks later it’s $20. One example out of a thousand.

Like many other frequent commentators on this blog I’m loathe to see more regulation or limitations on personal freedom. Having said that I don’t see why on earth a CEO of an publicly traded company would need to sell shares during their tenure with the company. Let the corporate leaders subsist of their cash compensation and the DIVIDENDS paid on the stock they would be unfairly forced to hold until the day after they retire.

This is one real issue which would be REALLY easy to fix!

By: QCIC

QCIC — Wed, 28 Nov 2012 20:53:07 +0000

The idea that executives are not BY DEFINITION insider trading most of the transactions they make with the stock of companies they run is so farcical as to be beneath discussion.

Whether this is a good or bad thing or should be prosecuted is another question, but the idea that they don’t use private information to inform their decisions is just ludicrous.

By: csissoko

csissoko — Wed, 28 Nov 2012 19:24:13 +0000

I also don’t get why executives “should” be allowed to sell their shares. If they’re given them to align their interests with those of the shareholders, why not make them keep them until, say, three years after they’ve left the company.

By: linda53

linda53 — Wed, 28 Nov 2012 18:32:12 +0000

I haven’t read the whole article, but it appears to miss the fact that sales by senior executives, particularly the CEO, are themselves are considered a negative signal by the market, no matter what the stated reason. IIRC, that was an unresolved issue in the Martha Stewart case — whether advance knowledge of a CEO sale was “material inside information.”

By: richclayton

richclayton — Wed, 28 Nov 2012 15:17:57 +0000

Why not just prohibit executive pay in the form of corporate equity? Originally, the ideal of paying executives in stock was to align their interest with shareholders and improve perfromance. But essentially every study done of executive pay, and in particular executive pay via equity issues (including options and restricted stock) shows an at-best-very-weak link to performance, plus you have a lot of headaches in terms of establishing a system that doesn’t unfairly privlige executives vis-a-vis outside shareholders in terms of the timing of their stock sales. Why can’t we just admit that this experiment is a failure, and pay executives in cash?