ASU2003

I don't know the anwser to this, so I am posting it on the Internet. Hopefully my guess that they would still be in the highest tax bracket is correct.

But, if Steve Jobs (Apple CEO) cashes out, let's say, $200 million in stock options he has held for more than 1 year, and only makes a $1/year salary. Would he be in the 15% tax bracket? Or does the amount of income you make off stocks (capital gains) not count towards his normal tax rate.

And do CEOs take the $1 salary to get around medicare/social security taxes?

Cynthetiq

according to ZDNet:

Based on the fact he's only walking about with about 1/2 of his shares, I'd say he's not in the 15% tax bracket.

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pan6467

What Jobs is doing is unfortunately not too uncommon.

Who buys the stocks back? The company. So if this is true the were sold back to the company.

This is unfortunate in that it can truly hurt a company's financial status. Apple paying $296 Million to the government along with Jobs $351 Million (if both were to cash out), that's $647 MILLION dollars Apple loses.

This is one reason American industry has taken such huge hits. It's not that the product didn't sell, it was the greed of the CEO's and Board of Directors cashing in on stocks and thus the company has little to no profit.

In some cases the company can turn around and sell those shares back to brokerage houses or hold them and release them when they need cash.... however, in a case like this where a selloff of 9.97 MILLION shares would be had.... it would free fall the price of the stock.

In a situation like this you also stick the government with ownership of a private company or a huge loss in tax revenue, while the CEO walks away with his.

We have abused the purpose of the stock market in the name of greed and it is one of the serious economic problems we face.

The stock market is supposed to be for people to buy shares of a company they believe in, and for the company to use that money to advance, update and become even more profitable. From there the stock is supposed to pay dividends to make a long term ownership possible and profitable. Then as the company becomes more profitable, the price of the stock rises as demand increases and people sell because there is demand and the company can take the hits.

What we are doing today is treating the stock market as a way to avoid taxes and make quick money at the company's expanse. People look at stocks for short term gains and many don't even realize that churning stocks (the quick buy and sells to make cash) hurts a company.

Here's an example: If I opened a company 30 years ago and I made widgets. I needed start up revenue so I sold parts of my company (stock). As I made money, that stock increased in value because of demand. I may have split the stock so that I could sell more. Original investors sell their stock which gets turned over quickly because demand is high. Also, as a way to keep people from selling, I offer dividends that are determined by my profit. I may even offer employees stock ownership to promote loyalty.

But NOW, present day, we see that people aren't buying stocks for the purpose to invest incompanies. They are eager for a quick turn around in their money. Companies no longer offer dividends like they use to. Stock has become a commodity in and of itself... people aren't looking for long term gains they want it now.

So back to my company. Now, I decide I don't really want to pay my fair share of taxes, so I take a pay cut and accept stock options. MILLIONS of them. 20-30 years ago CEO's did this so they had vested interest in the performance of the company and thus if the company profited they did, if the company sank they did.

However, today, I look at the market my widget stock has a P/E ratio of 30 (price to earnings ratio.... 10-20 is good, under 10 means the company probably is just starting and would be great long term..... 25 and over means that the price of the stock is overvalued and will probably crash)....... I think now is a good time to cash everything out, daddy didn't raise any fools.

So I cash in my option for 100's of millions and I now own all this stock. But to pay my taxes I give the government whatever percent. Now, I sit back wait for the stock to hit a price I like and I sell the maximum amount of shares.

Well demand isn't as great as what I sold, computer programs see a huge insider sell and they sell.... and the government before they can react.... just lost millions in revenue. I made mine, but the shareholders lose out because the price took a hit, the company loses out because money that was to go for R&D, payroll increases, new tech and growth.... has been decimated. The shareholders also lose out in that dividends, the money that could have gone to pay them is gone.

See, if I'm a CEO, and I just made $350 million on the sell of my stock and had whatever percentage withheld for taxes rather than making a pitiful $25 million a year in salary that is taxed, I'll do it.

Short term, the government won't say anything because they are making more in taxes.... long term I just put the company in serious financial straits. I'm still the largest shareholder and the board I pretty much get along with and hand picked, do the same thing sooooooo noone is going to kick me out and I can keep doing this until my company is dead.

What do I care, I have cashed out 100's of millions maybe a couple billion the past few years.... sure the company is hurting and employees are having to be laid off..... sure foreign competitors are using their profits for R&D and to improve but I'm set for the next 100 generations. The government sold their soul and maybe ok for awhile..... until the company crashes and all those workers and the communities that depended on those workers money can't put into the tax revenue coffers because they are all unemployed or making a lot less than they were.

This is one of those pesky conservative government types with tax cuts don't want you to know. It's also what those psuedo libs who want to tax more but leave little perks like this alone don't want you to know.

It's something every taxpayer in the US should know, should be pissed about and should demand something be done to prevent these abuses from continuing.

__________________
I just love people who use the excuse "I use/do this because I LOVE the feeling/joy/happiness it brings me" and expect you to be ok with that as you watch them destroy their life blindly following. My response is, "I like to put forks in an eletrical socket, just LOVE that feeling, can't ever get enough of it, so will you let me put this copper fork in that electric socket?"

genuinegirly

wow. what an informative post, pan. thanks!

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"Sometimes I have to remember that things are brought to me for a reason, either for my own lessons or for the benefit of others." Cynthetiq

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stevo

Pan, you left out the rest of the sentence. Jobs just paid $296,000,000 in taxes to the government. How you say he's getting out of paying taxes is beyond me. Steve Jobs was taxed 45.8% when he cashed out his stocks.

I don't see the problem here. Instead of being paid a salary he's paid in 10million shares of restricted stock he couldn't sell for three years. After 3 years he sold the stock for cash. Explain to me again how this hurts apple. Explain to me again how the government lost tax revenue.

wrong. The whole reason people buy stocks is to invest in companies. Of course people want a quick turn around but unless you're a short seller/day trader (which is a very small percentage of investors) you aren't expecting a quick buck and know you are in it for the long term (> 1 year). Companies still offer dividends, but that makes little difference and no matter what the dividend is, it doesn't keep people from selling the stock. the dividend is factored into the stock price.

he cashed out slightly more than $600 million. What would you rather him do? not get paid? he could have taken a $200mil year salary and it would be roughly equal to his 10million shares of stock. the government would have still taken 45% of it. its not going to kill apple. people aren't getting laid off because steve jobs makes money. Do you think he does nothing? Do you think steve jobs isn't worth what he's paid? Apple thinks he is, or they wouldn't have paid him. apple is a successful company. the iPod and iTunes, Mac and MacBook, Mac OS X Tiger, etc. etc. Do you think steve jobs just plays golf all day smoking cigars, or do you think maybe the billions of dollars in profit generated from the sales of these products might have had something to do with steve jobs? Since 2003 apples profit has been in the billions of dollars - and you don't think its "fair" that steve jobs is compensated with a fraction of that? Because of him thousands of people have jobs and even more people are making money my investing in his company. Look at the stock price since 2003

Apple's a solid stock, its not prices too high. its P/E relative ratio is 23.8 its cash flow growth over the last five years is excellent, its EPS growth in the last 5 years is outstanding. (its over 100, 20 is good) Its EPS rank is 95, very very high.

My point - Steve Jobs direction of the company made this possible. If it wasn't for him apple would not see the profits or rise in stock price they have had over the last 5 years. He is justly compensated.

__________________
"If I am such a genius why am I drunk, lost in the desert, with a bullet in my ass?" -Otto Mannkusser

pan6467

If I'm the CEO of any company, trust me I would gladly pay 50% if I just cashed in $300+million.

I can also guarantee that had I cashed in all 10 million shares and not just my portion the price would have taken a bigger hit. I would have gotten less, and then taxed on that to where I probably would have paid more in taxes and made less money.

If you truly read the post you could see I explained that. But here's a recap:
Quite simply, when 10 MILLION shares hit the market the price drops and Apple is responsible for buying the stock back. The other chunk, 4.57 MILLION shares was given to the government as STOCK. So they undoubtedly cashed it in for less than Jobs did. So to say they didn't lose any is a pipe dream, plus to say that they won't lose any from Apple's taxes (because the buyback of the stock is a tax write off to some degree) not to mention the loss that Apple takes paying to buy back that stock.



Ah but there in lies the rub, computer programs run the game now for the institutional investors and they buy and sell based on certain scenarios.... a CEO selling millions is a certain scenario.

Plus, while companies do still offer dividends (didn't say they didn't said they are a dying breed, I did), the dividends that most companies pay are truly nothing like they were. Before people could do well off the dividends, now, not so much. And don't give me the "inflation" BS because if that is the case then the divedends would have gone up also, instead they have increasingly shrunk.

Dividends use to show how secure a company was, and it encouraged the truly conservative investor.


Thios was NOT an attack on Jobs personally, but on the system as a whole. Perhaps, Apple can afford it, but GM, Ford, Maytag, Sears/K-Mart, Enron, Adelphia, and so on might not be BUT they do it or have done it. And those companies are taking hits.

Wait until Apple has no money in R&D because they had to pay out the stock, or wait till Apple can't pay raises, hire good people in at competitive wages, this type of hit isn't going to show overnight, it will take time.

That's why in the last 6 months, even 3 months it has been dropping like a rock??????

If you look at the industry their P/E is roughly 5% higher than the industry average.

Please by all means invest your money into a company with at this moment in time a 30 P/E........... please.... invest your whole savings.... by all means try to prove me wrong about P/E.

(I think you'll see Apple fall to around 45-47/share before the next year.... but I maybe wrong.)

Stevo, I was in the stock business, I was a broker and I know what I am talking about. If you are so hot on it, invest in it and hold it for a year, I can almost guarantee that what Jobs has done will hurt the company and you'll see a loss, if you are very lucky the full ramifications won't have hit and you'll break even.

And again, this WASN'T just about Steve Jobs, it was about CEO's and what they are doing to their companies by using these tactics to avoid paying taxes. (And yes, it is to avoid paying taxes..... NO ONE ON THIS FUCKING PLANET NEED TO MAKE OVER $200 MILLION A YEAR...... HOW MUCH DID APPLE MAKE IN THOSE 3 YEARS?????????????????)

He made $600 MILLION in 3 years, that's $200 million a year in those 3 years.... how much did Apple make? How much did they pay investors on the dividends????? How much of a percentage went to pay the worker bee? And how much as a percentage went into ONE MAN'S POCKET??????

That's what I thought.....

__________________
I just love people who use the excuse "I use/do this because I LOVE the feeling/joy/happiness it brings me" and expect you to be ok with that as you watch them destroy their life blindly following. My response is, "I like to put forks in an eletrical socket, just LOVE that feeling, can't ever get enough of it, so will you let me put this copper fork in that electric socket?"

Cynthetiq

BoDs approve this type of compensation. SEC approves this kind of compensation packages.

companies like Whole Foods don't like these kinds of packages, and they have internal limits as to how much the CEO can make in comparison to the lowest paid employee. That is their choice to make as a company, just like Apple's choice to make.

Think back to when Jim Scully used to run Apple. He ran it into the ground. He obviously didn't deserve to get compesated anything like this. When he left the stock price was around $15 and dropped to about $13 IIRC. Where is it now that Jobs is there? What has he done for Apple in the past 7 years?

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pan6467

We'll see if it was worth it or not if Apple maintains. There is big difference between Scully and Jobs.... Apple is was and always will be Jobs' purpose in life. He is Apple and Apple is him.

Again, this wasn't just to attack Steve Jobs...... IT WAS A STATEMENT ABOUT THIS PRACTICE AS A WHOLE.

I capitalize because it seems everyone wants to defend Steve Jobs but.... can you defend this practice as a whole.

And yes the SEC and BoDs and every governing body may accept this practice but it doesn't make it morally, fiscally or long term right and good for society as a whole now does it?

__________________
I just love people who use the excuse "I use/do this because I LOVE the feeling/joy/happiness it brings me" and expect you to be ok with that as you watch them destroy their life blindly following. My response is, "I like to put forks in an eletrical socket, just LOVE that feeling, can't ever get enough of it, so will you let me put this copper fork in that electric socket?"

Charlatan

How is Jobs (or any other person who cashes in stock options) different from any other investor that cashes in their stocks?

Company executives, like Jobs, invest their time and effort into making the company a success. Their reward is that their options increase in value. All I did for my stocks was invest the money in them. When I sell them I expect to turn a profit.

__________________
"My hands are on fire. Hands are on fire. Ain't got no more time for all you charlatans and liars."
- Old Man Luedecke

stevo

I said before, the P/E relative ratio is 23.8, while the P/E ratio might be 30, when taken together you get more information. the 30 P/E doesn't look so bad.

well the open interest for a Jan 2007 put option with a strike price of $55 is over 30000, there's considerably less interest (9000) in the $47.50 put. The market doesn't seem to think its going to drop that far.

envious much? - what gives you the right to dictate how much someone should make? In the three years that Jobs held those 10million shares valued at appx. $600 million Apple's Net income was $1,680,000,000. Again, how did jobs avoid paying taxes if he walked away with on 54.2% of what apple "paid" him?


nothing in dividends, but investors weren't buying the stock for dividends so that moot. If I bought 100 shares of apple in 2003 @ $9/share and sold today, I would have made $4,100 off a $900 investment over 3 years. Not too shabby. Thanks Mr. Jobs.

Apple's costs of goods sold since 2003 is $19,875,000,000 - Thats 19 BILLION, 875 MILLION dollars Apple paid people for goods and services related to manufacturing and selling their products. Thats money that goes to the workers' pocket.

__________________
"If I am such a genius why am I drunk, lost in the desert, with a bullet in my ass?" -Otto Mannkusser

Cynthetiq

As a whole I support it.

Yes there are some bad eggs out there, Enron, Adelphia, Tyco are good examples of golden parachutes and compensation package mayhem.

But as an employee of a major media company, I see how much our company has grown under the leadership we have. I watched people develop from sales people to heads of divisions, they put in the hard work and made sacrifices. Those sacrifices should be rewarded accordingly. I think that these are fair compensation when attached to performance.

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pan6467

There is a huge difference when a CEO sells his stock the second he can and an investor.

#1 is the amount..... I seriously doubt you or any private investor just playing the market has 10,000,000 shares. THE COMPANY HAS TO PAY THE BUYBACK.... I don't care what company you are or who you are when you expect a company to pay $600 MILLION in a single day to buy back your stock you obviously aren't looking out for the best interest of the company.

#2 the institutional programs see the CEO, Director, executive selling that much stock they begin selling off....... thus it is not just 1 person but all of a sudden the stock starts taking a dump and the private investor who saw Apple jumping and bought at $65/share is now taking severe hits.

Will the stock go back up? Probably, but what does it say for the confidence of the CEO to turn around and sell every stock option he had the second he could?

Tells me he doesn't have much confidence in the company.

Again, you keep harping on just Jobs.... what about Enron, what about GM, Ford, Sears, Maytag or any other company out there doing this or has been doing this for some time and is now in financial straits, telling everyone it is the workers and the unions, and the government and whatever excuse they want to give but the truth?

That truth is, NO COMPANY can absorb those kinds of hits and expect to grow, and if they do grow it is because they have gotten rid of the bad apples, refuse to do this type of incentive and are working their asses off to correct their mistakes.

Anyone who believes a company can afford to do this is either insane, totally greed driven or truly doesn't know that this type of practice will destroy the company faster than any CEO made it.

__________________
I just love people who use the excuse "I use/do this because I LOVE the feeling/joy/happiness it brings me" and expect you to be ok with that as you watch them destroy their life blindly following. My response is, "I like to put forks in an eletrical socket, just LOVE that feeling, can't ever get enough of it, so will you let me put this copper fork in that electric socket?"

Charlatan

Seems to me that if you want to change this situation, you have to change the nature of the corporation itself.

In the end, it is up to the board of directors and the SEC to decide if this is something they want to happen. Why should the market (as a whole rather than the stockmarket) care whether one company survives or not? If a company shoots itself in the foot and comes crashing down there is little anyone can do.

That's how the rules work. The example of something like Enron or Worldcom are examples of people who are not playing by the rules... these sorts of actions are different from what someone like Jobs (or any other legitimate sell off of stocks).

If Apple (or another company) founders because of these actions then so what? If there is a need in the marketplace for the services that that company offer then someone else will step in and fill the need.

If this was a privately held company and the owner decided to keep that amount of profit rather than reinvesting the amount into the company, the same thing would happen (regardless of what that "thing" might be -- continued success, failure or stagnation).

A corporation is only beholden to its shareholders. Employees are just cogs in the machine. A corporation has no conscience.

Like I said, if you want to change things, you have to change the nature of the corporation.

__________________
"My hands are on fire. Hands are on fire. Ain't got no more time for all you charlatans and liars."
- Old Man Luedecke

pan6467

Come December, we'll see who's right then won't we. I believe it will be closer to the 45-47 then the 55.

And even at 55, it is still quite a downturn from where it was before Jobs sold isn't it at what 65-66/share?

Where did I "dictate" how much a CEO or anyone should make????? I am stating my educated opinion on a certain area and explaining why I believe this is an extremely bad practice.

No I don't believe anyone is worth $200 Million a year. But again, that is MY OPINION.

Am I envious? No money doesn't buy happiness and regardless of what one believes there is a point where you reach too much and money means nothing to you except making more and believing you have more power and more money than anyone else.

But in all honesty, I don't want to get to that point..... I'm very happy in my life now, I don't need to make more than I could spend in 100 lifetimes.... I'll be happy making enough to spend in this lifetime and leaving my son a little so that he can get a nice start in life.

As far as the taxes...... I'm not going to keep repeating myself because obviously you aren't listening to what i have to say on that issue.

Cool, did you buy the stock then?

And again, exactly what percentage of that net income went into Jobs pocket?

And obviously you cannot find anyone else to show this is a good practice with other than Jobs..... whom I have stated this isn't about.

It's the practice of this that is wrong and is destroying companies. NOT JUST Steve Jobs.... and the jury is out as to whether this is a long term good thing for Apple or the beginning of the end.... I predict it is the beginning of some very hard times at Apple. But again, that's just me.

Again, I am just giving my educated opinion on the practice and what happens in the long run because of it.

Your post basically makes me feel that my "OPINIONS" are valueless because you believe the opposite and well..... I either need to change the system or basically shut the fuck up.

Is that what you are saying? Because that post sure did seem like it.

__________________
I just love people who use the excuse "I use/do this because I LOVE the feeling/joy/happiness it brings me" and expect you to be ok with that as you watch them destroy their life blindly following. My response is, "I like to put forks in an eletrical socket, just LOVE that feeling, can't ever get enough of it, so will you let me put this copper fork in that electric socket?"

Cynthetiq

Forbes.com compensation
Michael Eisener, Disney Corporation
Tom Freston, MTV Networks (now head of Viacom)
Bill Gates, Microsoft
Frederick W Smith, FedEx
Sumner Redstone, Viacom

those companies are doing quite well and have had phenomenonal growth this past decade. The Forbes list has more obscure names and companies that aren't so "branded" but still these CEOs have some good compensation packages.

__________________
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stevo

Of course when an insider sells 10,000,000 shares there's going to be a downturn in the stock. If it was going up he'd keep it.


hmm. let me see.... oh there it is...
Ok, let me get this straight. Steve jobs has $600,000,000+ in stock. he wants to cash out. Apple withholds 4.57 million shares, or nearly $296 million to pay income taxes related to the vested shares and you claim Steve Jobs is skimping on taxes


The net income was $1.68 billion over the three years - the cost of goods sold over the same time period was just under $20 billion. Steve Jobs made $600 million.

obviously.

Then why does the long run picture of the stock market look like this:




My educated opinion shows an upward trend and wealth building. I wonder when the stock market will realize its doing it all wrong?

__________________
"If I am such a genius why am I drunk, lost in the desert, with a bullet in my ass?" -Otto Mannkusser

pan6467

You're sure Disney is doing ok? That's why they threw Eisener out right... they were doing great? Since losing Eisener, the stock has been able to move upward, they brought in Steve Jobs, were able to get Pixar distribution back and have released some better films.

Viacom is doing so well they have to sell properties off like their amusement parks division, and why their stock has been dropping like a rock.

Plus, Sumner has bought far more than he has sold. Tells me has has more faith in Viacom than Jobs has in Apple.

Yet Viacom also shows a 9% loss over last year and last year also included a net loss of 12 million in discontinued operations. Which without that they have a 12% decline in earnings over last year.


Entertainment is hard, it is an animal all to itself. It's based on what movies, television shows and the advertising dollar. It is it's own beast. Viacom/Paramount, Disney(whatever studio), NBC/Universal, AOL/Time etc can all make huge profit on a couple good low budget movies or lose their asses on a couple bad big budget films.


(Just OT for a second:There are stockbrokers, who deal solely in entertainment stocks that can tell you more about movies, television and the ad revenue than they can the stock.... and yet if you find one of these utilize him to the best of your ability because they will make you money in the market on these stocks......) That actually felt good just giving good advice although I am sure someone will have to argue about that.....

Gates is Gates.....

Frederick Smith...... has acquired (bought not just threw options) far more than he has sold....

The point is, if you want to give your CEO thousands or millions of shares of stock that's one thing..... it can be very good incentive to keep pushing the company to advance.

But this is not the case we are discussing here. What we are discussing is the sell-off of the stocks AND THE DAMAGE DONE TO THE COMPANY.

Not one of those you mentioned (except for Eisener who was bought out) has truly sold their options, thus not damaging their company nor the value of the stock.

Unlike what Jobs has done.

But I am willing to see you give me someone who has sold all their optioons and their company and stock kept growing..... if you can find one.


I refuse to argue with you. This isn't about the stock market as a whole..... this is about certain companies.

Your personal attacks and the condescending way you choose to discuss and debate with me are getting old..... if you choose to change your tone I'll be glad to continue discussing MY OPINION and the facts against you opinion and facts.

I doubt either of us will change our opinion but we may enlighten the other or at least open the other's mind to a differing view.

__________________
I just love people who use the excuse "I use/do this because I LOVE the feeling/joy/happiness it brings me" and expect you to be ok with that as you watch them destroy their life blindly following. My response is, "I like to put forks in an eletrical socket, just LOVE that feeling, can't ever get enough of it, so will you let me put this copper fork in that electric socket?"

stevo

you have got to be kidding me. personal attacks come on now.

The "condescending way I choose to debate" might have something to do with the "holier than though I know injustice when I see it ALL CAPS YELLING" way you like to discuss things.

I really don't care to change my tone. thank you very much.

__________________
"If I am such a genius why am I drunk, lost in the desert, with a bullet in my ass?" -Otto Mannkusser

Cynthetiq

pan,

Eisner built it to a point, you remember where Disney was when he came in? It was in the throws of a hostile take over that was to be financed by selling off the animation library. He couldn't push it forward anymore than he had, not wanting to invest in new delivery methods and technologies.

While they amass more stock via purchase and more option grants, they also sell thier options on a routine basis. They shed stock to get paid since their options were at a low amount and when they excercise them they are at a high amount. What's wrong with that?

Jobs isn't doing anything different than Bezos, Dell, Ellison. These people don't just excercise their options without thinking it through because they know that their sales can trigger the price to go down and be driven down by continued sell offs.

__________________
I don't care if you are black, white, purple, green, Chinese, Japanese, Korean, hippie, cop, bum, admin, user, English, Irish, French, Catholic, Protestant, Jewish, Buddhist, Muslim, indian, cowboy, tall, short, fat, skinny, emo, punk, mod, rocker, straight, gay, lesbian, jock, nerd, geek, Democrat, Republican, Libertarian, Independent, driver, pedestrian, or bicyclist, either you're an asshole or you're not.

pan6467

Very true but how much was Ovitz and how much was Eisener. Once he got rid of Ovitz, Disney started suffering again. EuroDisney was a bomb, Eisener pretty much was the reason the only money maker at the time for Disney's studios left (later to come back solely because they got rid of Eisener and put Jobs on the board).

I like Disney but I also believe they keep trying to bandage a hemoraging company that is dying a very slow painful death and relies more on it's name and past than tries to create new product. (i.e. all the cartoon sequels that go direct to video..... it's a shame... Walt has to be spinning in his grave.)

Perhaps, Jobs with Pixar and some new production studio blood can instill some much needed life into Disney.... looks like they have so far but it's still too early to tell.



That's true, but the great CEOS and the ones looking out for the best of the company (like Redstone, like Smith, like Turner was etc.) also buy big blocks of stock. When they do sell, the good CEO's, they do as you say, take into consideration what the after effects will be and usually sell off small chunks at a time so as not to disturb the price that much or trigger the institutional programs.

Unfortunately, Jobs and people like him are the opposite showing they care only about the money and not the stock, the investors or the company.

Eventually, shareholders and the public at large have to ask how much is enough for a CEO. I mean as demonstrated above Jobs taking $600 Million in stock (which equals more than 33% of the profit) is a hit no matter how you slice it or what you WANT others to believe. It's damaging to a company and can do serious damage to the point the company may never recover.

Michael Dell's last 4 transactions have been buys.... granted at discounted rates but still buys.... LINK: http://finance.yahoo.com/q/it?s=DELL

Bezo's last sales were in November of '04 and if you look at the history, it was on the downside and has not yet achieved those highs again. Plus the P/E is at 46.98 and that means they are looking at seriously over priced stock that is going to take a severe correction sooner or later.... I wouldn't hold it..... and if you look at the history, you can tell pretty much the insiders have gotten out as much as they can.

It could be a company primed for a takerover/merger very soon also. I'd keep an eye on it. I wouldn't put money into it until it devalues and corrects the P/E, or until I started seeing something about takeover.

As for Ellison, it doesn't look like he moves his stock much, however, Jeffrey Henley, the Chairman, and most of the directors look to get options that sell shares short at the going rate and then those executives buy them back at discounted prices. Thus, keeping their shares. This does 2 things, promotes them to keep working to make the company stronger and allows them some form of compensation for a job well done.

Oracle as a whole looking at the stock, looks like a steady stock, a 25.25 P/E that is a bit high, but if they are growing and the revenue goes up it could be a strong stock, definately a watcher that you would buy testers on (small amounts that you qualify with an order to sell off if they drop a certain percentage or price).

__________________
I just love people who use the excuse "I use/do this because I LOVE the feeling/joy/happiness it brings me" and expect you to be ok with that as you watch them destroy their life blindly following. My response is, "I like to put forks in an eletrical socket, just LOVE that feeling, can't ever get enough of it, so will you let me put this copper fork in that electric socket?"

ASU2003

This thread kind of went off on a tanget...

I still don't understand the difference between the CEOs and the rich indivdual investor. Doesn't both use after tax dollars to buy shares, or is the CEOs shares different? If Jobs or Gates invested $10,000 of their own money starting the company, when it goes public and their is an IPO, are the shares of what ever percentage of the company the CEO owns given to them in pre-tax dollars then, with income taxes being paid when they are sold?

Could Jobs buy back $351 million shares of AAPL with after-tax dollars when it goes down after this sell-off? And then, if he holds them for at least a year, he would only have to pay 15% taxes on the gains like other investors? Is this a way for CEOs to get around taxes in the future. What happens if AAPL goes to $200/share, Steve Jobs would have to pay the government the same 45.8% on the increased amount. Now, he would only have to pay 15% on the change from the $68 level it is now to the $200 ($132) one. Or are there SEC rules against a CEO doing something like that?

pan6467

Basically what it boils down to is this, Jobs or any CEO is given those shares as compensation, they are not taxed until they are sold. As a director of the company and it being considered compensation, it is taxed as such, not as a capital gain or any other type.

As for putting up your capital on a starter company and then going with an IPO and watching that percentage rise.... that is taxed as a capital gain, I believe since it was an investment and not compensation.

I maybe wrong and I am sure we'll have clarification, but I believe that is pretty much the basics.

__________________
I just love people who use the excuse "I use/do this because I LOVE the feeling/joy/happiness it brings me" and expect you to be ok with that as you watch them destroy their life blindly following. My response is, "I like to put forks in an eletrical socket, just LOVE that feeling, can't ever get enough of it, so will you let me put this copper fork in that electric socket?"

Helpher811

Perhaps I am not understanding the discussion, however I fail to see the bad behavior of Steve Jobs, or the exact types of behavior that seems to hurt the company.
If I could bring it my simple level of comprehension, Executives that sell off their stock at the earliest opportunity are not acting in the best interests of their fellow stock holders, institutional and otherwise?
If that is the argument, should these Executives be compensated purely on salary and other "perks", and the stock be kept away from them ( do textbooks refer to this as the Agency problem?? ) Wouldn't that make the position less attractive compared to other opportunities? Should executives be working for a company based mostly on their belief and the chance for a nice bonus in (taxable income) cash from the Board?

I wonder in this case about Vonage, where the stock is not doing fantastic, as I have heard at the water cooler, and the executives and other shareholders are not particularly pleased. Isn't the stock incentive to the management tactic doing what it should, communicating their lack of effectiveness? Or is the article in the WSJ accurate about short-selling mayhem unfairly hurting the stock (which I thought was a buying opportunity for investors because it is severly undervalued. So someone holds, because the company can do much better).

And as for the taxes, while there many be some loopholes or details I'm not aware of ( being at median income limits my experience ), are there not significant efforts both, on the regulators and corporate managers that make tax-paying a running lobbying/lawyering game? nothing new there...
It seems that if taxes are considered for financing or operating a company, the true profits/revenues of a company should be reflected in the stock price ( which I think it is ). Therefore, ... therefore something. Perhaps your patience has been exceeded on the tax argument, I'll drop that....

And maybe it's the Jim Cramer luster of life I see in your posts, but pan6467, if Apple does end up doing well, either by another series of innovations or good management of iPod and Intel, or whatever, and their stock price continues on their climb, does the present CEO Steve Jobs deserve any of that additional recognition and therefore money, or has the Board gone nutso and should break whatever contract there is with him, fire Jobs and get someone cheaper?

On the other side, if the stock does go down, is Mr. Job's sell off completely to blame? While I accept the idea that he has siginificant weight over there, I also do believe the "investors" in Apple are a strange bunch. The company has had a roller-coaster life, and very few people in the past have been able to make it consistently a winner in anyone's book.

Unfortunately, I think personality plays a huge part in the management of that company, and probably others like it, and even if the cost for keeping him are outrageous, no one can easily predict if the company would even exist or profit without him. The winds appear to be in his favor now, and Mr. Jobs is taking the cash, which I find hard to view as pure greed.
Or should Jobs only sell a small amount at a time to lessen the impact onto the stock price (spread out over a few years, let's say)? Which, I think, doesn't really mean anything about the strength of the company or his greed, but keeps it under the radar so people don't jump on news.... or posts in a forum....

But then, I could be all wrong.....

pan6467

Again what it boils down to is this. When the executive sells off his stock, the company is buying it back. The computer programs recognize a sell of large quantity and begin selling also. Again the company buys back the sock.

I don't care how "rich" you company is a $600 million hit is going to hurt your finances, Research and development, pay raises for the little guys, etc.

And yes, if Jobs truly cared and wanted Apple to succeed he would have sold off smaller bunches.

Look at the price from when he sold...... roughly 66-67 a share to what it is now..... to 58.96 at this moment. That's more than a 10% drop.

Now it could be Jobs intends to put the money he got and invest it back into the company by allowing the stock to drop correct its P/E and then buy stock back, which would raise the price.

Another scenario is that Jobs realizes there isn't much left in Apple and is preparing to step down, go to his newest baby Pixar and leave Apple blowing in the wind, with an R&D department probably decimated.

Or Jobs could have used this a leverage threatening to pull out if the BoD and the decision makers didn't want to listen to him.

Which is right, which is wrong? We'll have to wait and see.



BTW personal opinion question....... Say you get 10,000,000 shares as a CEO of your company for "incentive and pay".

Now you have 3 options.....

Sell all shares and know the price will take a hit, as will all the departments and it will hurt the company, and showing no faith in the company's future.

Hold onto all of it, promising that when you take the company to the next level you will sell at double the current price, showing you have faith and a drive to better the company. The company doesn't take that immediate hit, in fact, the price may go up a little on just that, and every one from the BoD, the investors and the public look at what you said and did and it elevates their opinion of the company.

Finally, you could sell off shares in small enough blocks to not affect the market or the company's finances that much. Basically, you sell off what you know the company and the stock market value can afford at that time.

__________________
I just love people who use the excuse "I use/do this because I LOVE the feeling/joy/happiness it brings me" and expect you to be ok with that as you watch them destroy their life blindly following. My response is, "I like to put forks in an eletrical socket, just LOVE that feeling, can't ever get enough of it, so will you let me put this copper fork in that electric socket?"

DDDDave

pan,

I've been following this thread all along and think by now it probably belongs in Tilted Paranoia

You obviously disagree with some of the practices of corporate Amerca but IMO you should not have used Steve Jobs as your example. As you have since clarified, this is not about Steve Jobs but that is the only real example you have used.

Your original premise was that the sale of a large amount of stock drives the price down and therefore hurts the stockholders, investors, and all manner of beast and fowl in the universe. As you are probably aware there are strict rules as to when and how executives buy, sell, and otherwise acquire and dispose of stock. These rules are in place to prevent the consequences you describe. You are probably also aware that the AAPL transaction you referred to was a 'non-market' transaction. There was no stock actually bought or sold, only the net effect. The net effect being Jobs gets cash and the gov't. gets their taxes. Agreed, it comes from AAPL's bank account but I'm pretty sure they have the money. Obviously, the BoD awarded Jobs this money for a job well done and I have no doubt that the transaction was structured in such a way as to minimize the amount of taxes paid, both by AAPL and Jobs. As a shareholder, I would expect my BoD to do so.

As we have all agreed, AAPL is Jobs, and Jobs is AAPL. The amount of compensation he recieved works out to 5% of the profits. Seems fair to me. I would encourage everyone to use Yahoo and research AAPL's current financial condition. Not what the stock price is today or yesterday or tomorrow but the overall financial health of the company. Some highlights:
total cash- $8.23 Billion (with a B), total debt- $0, operating cash flow(ttm) - $1.38 Billion, quarterly earnings growth(yoy) - 41.4%.

I used to work for a large Bank and had occasion to have to sell off large blocks of stock to settle estates. There was always the concern that these sales would affect the price of the stock. Say we needed to sell 6 million shares of AAPL. The stock trades 33 million shares every day or 165 MM a week. We would call Goldman, Merrill, and State Street and tell them each that we neede to sell 2 million shares in the next two weeks. This is not a mass 'dumping' of stock. In fact it is about 1.8% of volume for those two weeks. Certainly not enough to move the market. Everything needs to be looked as as a whole and not as an individual transaction or assume it is part of some nefarious scheme. The transactions you read about in EDGAR or other reporting services have already happened.

My premise: The sale of the stock does not move the market, how the market percieves the sale does.

As to the perceptions.....Well, they are exactly that. That is what makes markets.



BTW, I think the discussion has been civil by everyone so far. We all just believe passionately that we are right.

__________________
I am just a simple man trying to make my way in the universe...

"Go confidently in the direction of your dreams. Live the life you have imagined." - Thoreau

"Nothing great was ever accomplished without enthusiasm" - Emerson

pan6467

Some very good points (especially your last sentence).

I just tend to believe that when you see a CEO selling off 10,000,000 shares (or rather his percentage while giving the gov't their percentage), the perception is there is a lack of trust by the CEO, and the fact is the company is the one taking the biggest hit, presently and in the future as that hit will affect earnings at the very least for this year.

I just truly believe if you are going to compensate a CEO in this way, then you need to make stipulations on a maximum amount he can sell per quarter. Because, while a CEO that sells his options all at once may still care about the company, IMHO, he may not give his all any more because he has his.

I find it odd how people on one hand can say "this was incentive so that he would strengthen the company".... can turn around and say "so he sold off all his shares, he still cares and believes in the company. He's entitled to all that money for his hard work." While the company takes a huge unneeded, unnatural, hit that may take years to get over.

__________________
I just love people who use the excuse "I use/do this because I LOVE the feeling/joy/happiness it brings me" and expect you to be ok with that as you watch them destroy their life blindly following. My response is, "I like to put forks in an eletrical socket, just LOVE that feeling, can't ever get enough of it, so will you let me put this copper fork in that electric socket?"

Cynthetiq

From my experience there are rules like that, stated by the SEC, the individual BoD, and the company that grants and issues them.

__________________
I don't care if you are black, white, purple, green, Chinese, Japanese, Korean, hippie, cop, bum, admin, user, English, Irish, French, Catholic, Protestant, Jewish, Buddhist, Muslim, indian, cowboy, tall, short, fat, skinny, emo, punk, mod, rocker, straight, gay, lesbian, jock, nerd, geek, Democrat, Republican, Libertarian, Independent, driver, pedestrian, or bicyclist, either you're an asshole or you're not.

DDDDave

'Earnings' will not take a hit because of this transaction. It has already been factored into AAPL's cost of doing business. In fact, AAPL has grown 40% y/o/y in spite of this 'largess'.

As Cyn said, these type of transactions have all been approved in advance by AAPL's and SEC legal departments.

As far as Jobs 'not giving it his all' , I really don't think this is an issue. He certainly does not need the job...or the money. You do realize he is #67 on Forbes 400? Net worth $3,300,000,000. He has earned his fortune by his own hard work and ingenuity. (Not a Walton heir) I think he took on the challenge of turning AAPL around because he has a passion for it. He takes the money because that is how big boys keep score. He hasn't taken any money (except the $3 ) from the company for three years.

Once again, it appears we just have a different perception of the same transaction. I seem to see it as a glass half-full situation, you as the glass half-empty.


But like I said....that is what makes markets.

__________________
I am just a simple man trying to make my way in the universe...

"Go confidently in the direction of your dreams. Live the life you have imagined." - Thoreau

"Nothing great was ever accomplished without enthusiasm" - Emerson

3Z3VH

It's a shame more companies aren't formed so that the CEO gets their majority share of stock in their company, and cannot ever buy or sell ANY of their own stock.

This would make his only source of income from that stock through dividends, which get distributed to all the owners of that stock, as well as the CEO. If he wants to line his pockets, he has to give his investors their percent of what that CEO wants to take from the company. This would drive people to actually buy stocks for that company that is doing well, since they would actually get dividends from it, and the market would work the way it is SUPPOSED to in this particular case.

pan6467

This just occurred to me also..... speaking on drive and pay in another wage type thread (where this question is alo posted).......

If the CEO decides to cut jobs in the US and move production (to say) Indonesia, knowing that they cannot make widgets as good as the workers here but those workers will do so for far less thus drivng up the profit (even if sales go down)..... is that truly a CEO with drive or is that a CEO just abusing the system and showing no ingenuity or drive to truly better profit through new ideas and better product????????

So yes he drove up profits but destroyed the social fabric of a whole community.... does this man deserve millions in bonuses and pay?

He truly didn't strive to better anything..... except his own finances.

__________________
I just love people who use the excuse "I use/do this because I LOVE the feeling/joy/happiness it brings me" and expect you to be ok with that as you watch them destroy their life blindly following. My response is, "I like to put forks in an eletrical socket, just LOVE that feeling, can't ever get enough of it, so will you let me put this copper fork in that electric socket?"

Cynthetiq

actually, he increases the social fabric and community of another location. If you look at the local economies of the growing outsourced places, Indonesia, Malaysia, China, India, the people taking these jobs are increasing their lifestyles. The middle class is growing in both those countries.

__________________
I don't care if you are black, white, purple, green, Chinese, Japanese, Korean, hippie, cop, bum, admin, user, English, Irish, French, Catholic, Protestant, Jewish, Buddhist, Muslim, indian, cowboy, tall, short, fat, skinny, emo, punk, mod, rocker, straight, gay, lesbian, jock, nerd, geek, Democrat, Republican, Libertarian, Independent, driver, pedestrian, or bicyclist, either you're an asshole or you're not.

ASU2003

But they still can't buy ipods or mac laptops or any other product made in the US at our prices. Yes, making them work and be part of a global economy has prevented possible wars and other problems, but if there is a depression in the US, it will effect the rest of the world much more.

I used Steve Jobs just as an basic example. He does deserve the credit and money for making Apple the success it is. Insider trading always has implecations on the price, but I am concerned about taxes. If all of the stockholders lose money, I guess their loss taxes and capital gains taxes would be effected.

I do like the dividend idea, it would prevent CEOs of failed companies from having a multi-millionaire lifestyle after their company tanks. Most of the time CEOs probably sell off their stock to diversify their accounts.

That makes sense. Now, if the company board gives the CEO $1 million in stock that gets taxed at the income level when sold (~38.5%, I think), is this a way around medicare/social security taxes? If the board gave the CEO a salary of $1 million, there would be a bunch of other taxes, right?

pan6467

No, because all compensation (in even the form of stocks) still gets taxed.

Besides, once a person pays into SS the max per year, (which I am unsure what it is but I am sure someone who makes a few million easily maxes), the tax stops being taken out.

The only way out of SS is to either be an owner of a private company (like when I owned my Pizza shop) or independant contractor. You still pay taxes but they do not have to come out of your paycheck.

When I owned my pizza place I didn't pay a penny into SS/unemployment for myself... my business paid whatever it had to for the hourly employees... (had they been ind. contractors I wouldn't have had to pay for them either).

But, in my doing so my SS benefits and unemployment benefits were lost, because I didn't add into them.

__________________
I just love people who use the excuse "I use/do this because I LOVE the feeling/joy/happiness it brings me" and expect you to be ok with that as you watch them destroy their life blindly following. My response is, "I like to put forks in an eletrical socket, just LOVE that feeling, can't ever get enough of it, so will you let me put this copper fork in that electric socket?"

Cynthetiq

an interesting article from Wired.com

__________________
I don't care if you are black, white, purple, green, Chinese, Japanese, Korean, hippie, cop, bum, admin, user, English, Irish, French, Catholic, Protestant, Jewish, Buddhist, Muslim, indian, cowboy, tall, short, fat, skinny, emo, punk, mod, rocker, straight, gay, lesbian, jock, nerd, geek, Democrat, Republican, Libertarian, Independent, driver, pedestrian, or bicyclist, either you're an asshole or you're not.