Tag Archives | buyback

Apple Inc. (AAPL): How I Voted – Proxy Score 89

silver-apple-logo-apple-pictureStockUnderValueExtraxtionApple Inc. (NASD:AAPL) is one of the stocks in my portfolio. Their annual meeting is coming up on 2/28/2014. ProxyDemocracy.org was down for maintenance when I checked and voted on 2/19/2014, so no voting advice there. I checked a few other sources such as CalPERS, Florida SBA and OTPP but none had disclosed their votes on their sites as of yesterday. I voted with 89% of the Board’s recommendations. View Apple’s Proxy Statement. Continue Reading →

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Proxy Access is Needed at Apple

silver-apple-logo-apple-pictureDespite the Apple Board’s best effort to obtain a “no-action” letter to exclude my proxy access proposal, it is included among the items to be voted on at or before the annual meeting to be held on February 28 at our Company’s principal executive offices in Cupertino, CA.  See Apple’s proxy, Proxy Proposal 11, ‘Proxy Access for Shareholders’ on page 63. (A minor gripe – why doesn’t Apple provide a linked index to our proxy so that shareholders can easily flip to the subject they are looking for? Let’s hope part of their strategy isn’t making it too hard to analyze the issues and vote.)

Here’s the thrust of my argument. We need directors who can address the big money pile – not with short-term buyback strategies that facilitate extraction of value but with long-term strategies that create value. Investing $150B in Treasuries or money markets is not efficient use of our money. The returns of Google Ventures, for example, are far above the industry’s mean. There is no reason why Apple couldn’t also put our money to good use though an Apple Ventures type of vehicle or through a revamped and enhanced Blue Sky program.  Continue Reading →

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Do Weak Governance and Unclear Accounting Rules Explain the Explosion in Corporate Buybacks?

Corporate buybacks are now a daily news item. In 2007 US companies spent an astounding one trillion dollars on stock buybacks that exceeded dividends paid and accounted for two-thirds of net income that year.  Since 2000 those same companies distributed three trillion dollars to shareholders through buybacks.

By any measure, these amounts are staggering and evidence a substantial distribution of cash to shareholders, which might otherwise be put to other uses, like investing in new technologies and creating jobs!

exclaimed Paul Griffin, who recently completed research with Professor Ning Zhu focusing on why executives and boards spend these substantial sums. Their work was recently published in the June 2010 issue of Journal of Contemporary Accounting & Economics, titled “Accounting Rules? Stock Buybacks and Stock Options: Additional Evidence.”

When a company engages in stock buybacks (buying its own stock) it removes stock from the market thus increasing earnings per share and, hopefully, stock price.  Buybacks are meant to benefit all shareholders, but Griffin and Zhu found that weak governance and unclear accounting allow companies to tilt the playing field in favor of their executives, who receive additional compensation because the buyback makes their stock options more valuable.  Previous research did not show a reliable relation between higher CEO stock option compensation and the decision to engage in a buyback. Explained Griffin,

This is how managers can receive additional compensation, and for some, especially in recent years, this aspect of compensation has been sky-rocketing. Few people are aware that these buybacks are being used to enhance CEO compensation, and certainly not the regulators.

The researchers also discovered a positive relation between CEO insider selling following a buyback and the number of shares repurchased, also consistent with governance not protecting outside shareholders.

Professor Paul A. Griffin is an internationally recognized specialist in the areas of accounting, financial valuation and the role of information in security markets. He has published extensively in leading accounting and finance journals, and has written research monographs for the Financial Accounting Standards Board and case books on corporate financial reporting.

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