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OklaBoston (68.30)

Insider Stock Options

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August 31, 2013 – Comments (2)

Something that's been bothering me lately is how quick some Fools are to critiize insiders for exercizing the company granted stock options that are part of their pay packages. 

 People should remember that director and officer salaries come out of a company's cash flow and thus are unavailable for use in facility maintenance and other operational requirements of running a business.

The profits directors make from exercising options and selling the stock do not! So CEOs, etc. are not shortchanging shareholders by increasing their cash incomes that way. And when they exercise options that are on the verge of expiration and KEEP the resulting shares it's an expression of confidence in the company's future. 

 To quote Warren Buffett: "Insiders sell for a multitude of reasons but buy for only one. They expect the price to go up."

 Couldn't  something similar be said for holding on to the stock you acquired via options? 

 

2 Comments – Post Your Own

#1) On September 02, 2013 at 5:31 PM, Mega (99.95) wrote:

Granting options is dilutive, so that shortchanges shareholders.

I certainly wouldn't criticize someone for exercizing their options. I would criticize the board for granting them an excessive amount of money, if it's out of line with performance.

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#2) On September 02, 2013 at 9:06 PM, OklaBoston (68.30) wrote:

It may be dilutive, but that's preferable to reducing investment in operations, isn't it?

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