“…if management steal less money than they stole last year”
He was talking about Russian oil giant, Gazprom, at a conference I attended back in 2004/5
But I wonder how this differs from the excessive executive compensation I see in the US
Yes, I know it’s not “stealing” because Exec Comp plans are derived by “Independent Remuneration Consultants” (IRCs) who justify their existence with a changing list of benchmark companies & complex plans that are approved by Shareholders at AGMs
But the trouble is most shareholders are Passive these days..
Take Dollar General (DG) where the share price is back to 2018 levels – down 59%
In the 3 years, 2020 – 2022, the former CEO was paid $117m – so says their 75pg 2022 Proxy statement
Except this uses the value of stock awards at grant date, not what he cashed in..
That was $279m according to SecForm4. com!
Now DG’s Annual Report shows they spent $7.8bn repurchasing shares in the 3 years to Feb 2023 at an average price of $214
It’s currently $108
In June 2023 they said “.. in order to maintain financial flexibility & stay in line with our goal to maintain our investment grade credit ratings & our associated debt leverage ratio target, WE DO NOT PLAN TO REPURCHASE SHARES IN 2023.”
Yet only 10 mths earlier on 25th August 2022
“The Company’s Board of Directors increased the authorization under the share repurchase program by $2.0 billion”
Why increase buybacks by $2bn when the company:
– had $22bn of liabilities,
– only generated $300m of FCF in the prior 6 mths,
– was trading on a PE of 25x (earnings yield of 4%)
– had to issue debt costing 4.625% a month later!
Who thinks borrowing at 4.6% to invest at 4% makes sense, even with a tax break?
I guess when Directors receive share awards exceeding what’s paid in cash, maybe they focus on the share price 😉
And when those IRCs make management’s incentive target “Adjusted EBITDA”
management doesn’t worry about Interest
But how about this?
In the SEVEN days after the $2bn buyback announcement, SecForm4 .com tells me the former CEO
SOLD 339k shares for $82m!
Now maybe he needed the money..
except my new favourite website says he grossed $75m only 8 months earlier on the sale of 337k shares
So if buying shares was such a great deal for the company,
why was the CEO selling?
With the share price halving, we now know the truth – it wasn’t a great deal for the company
But spare a thought for their 163,0000 employees
The new CEO earned $12.9m or 702 times the $18k earned by the “median compensated employee” according to their Proxy’s Pay Ratio Disclosure
But using the former CEO’s “cashed out” $82m gives ME a ratio of
4,495 times!
i.e. he earned more per weekday ($328k) than a median employee earns in 18 years!
Is this the Capitalism we want?
So read the Proxy, Vote & monitor Form 4’s
You don’t even need to speak Russian
