A stock buyback can increase senior executive pay, unrelated to performance. First, stock buybacks increase the value of long-term performance stock options and other forms of equity pay. Second, senior executives sometimes time their own stock sales to take advantage of the bump in price that usually accompanies stock buyback announcements. Such behavior defeats the purpose of incentivizing a long-term focus. To address our concern that performance pay should not be artificially boosted by a stock buyback, I recently submitted a proposal to Cisco Systems and expect to submit similar proposals to other companies.
Last year, I submitted a similar proposal to GE. The updated submission to Cisco Systems adds a provision to address market timing. As always, I welcome suggestions and comments from interested readers. How can such resolutions be improved? What have I missed? Or, if you disagree, why are my concerns unwarranted? Use the comment section below the post or email me. Continue Reading →