Executive looting

The Canadian Centre for Policy alternatives reports that executive compensation is alarmingly high. A sarcastic axe-grinder in the Post says it’s all a bunch of hot air by people with an axe to grind, only admitting at the end that there might be a point in all this.

Executive compensation isn’t the problem.  It’s executive looting.

Let’s have a look at Onex, with the #3 best-paid CEO, Gerry Schwartz @ $16M total package.

Their 2009 annual report makes a big deal out of their option plan, proudly proclaiming that management is the largest shareholder.  They transferred $161M of cash to shares in 2009 (again, mainly to management). The options that can be exercised in the future show up as a liability, which increased $86M to $138M.  They have 13 million share options outstanding, at an average price of $18. The current market price is $30.

ONEX’s share structure lets directors buy back shares (up to 10% of their float per year).  “Onex believes that it is advantageous to Onex and its shareholders to continue to repurchase Onex’ Subordinate Voting Shares from time to time when the Subordinate Voting Shares are trading at prices that reflect a significant discount to their intrinsic value.”

The web page they made to crow about this sham has a convenient number at the bottom: more than $1 billion over 13 years was spent repurchasing shares.  They could have returned $1.40 a year  in dividends instead of the $0.11 our grandparents seem to be happy with.

All this money has gone to people who managed return 5% on their stock price, lost half their business’s value in the collapse of 2008-2009, and have never out-performed the TSX index for any sustained length of time.

Onex (blue) vs. TSX (red) from 2000-2010

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svanegmond

My home page will tell you far more about me than this little square ever could. I tweet as @svanegmond.