Re: Why is Lou selling some shares (from Midrange-L)

[Chris Rehm <javadisciple@xxxxxxxxxxxxx>]

Jim Damato wrote:

>Chris,
>I agree that assessment of guilt is preceding actual charges and
>investigations.  This is why I can't stomach those pundit panel programs on
>Fox News, CNN, MSNBC, et. al.
>
Agreed. Too much ax grinding, not enough truth.

>When and how executives choose to exercise their stock options is rightly
>the subject of much scrutiny because the timing of their decisions can be
>telling.  As you've suggested, these actions are best scrutinized within the
>legal system, not the entertainment industry.
>
I am firm in my belief that an executive looking to take a position with
a company considers what his potential earnings are complete with stock
option income. I am certain that an exec will happily pass over a $2
million per year salary with $10 million possible in options for a $1
million salary with $100 million possible options.

I am pretty familiar with the reasons for options (it does seem sound to
tie an execs compensation directly to how well the company is
performing) and how and when execs often exercise their options and sell
off stock.

I am in no way saying there is no potential for fraud. It is possible
for an exec to know that the company is failing and that stock is
worthless, fail to report these facts and instead sell holdings. But it
is just as possible for an exec to firmly believe their company is
viable if they can "just get over the next hurdle", and be wrong.

I hope they'll look for truth. Witch hunts aren't likely to bear fruit.

>I believe you're right again.  Usually 401K investments in company stock are
>frozen according to plan guidelines because the company hits certain
>financial or audit conditions, not because of executive edict.  The popular
>criticism is directed at evil senior management at Enron for locking down
>employees 401K's.  Many feel that this criticism is misdirected.  Most rank
>and file employees invest 401K allocations in a company stock plan as if it
>were just another high risk fund in the plan.  It's their own fault for not
>reading the terms, but usually they don't know that they can be frozen out
>of changing contributions to this fund if certain conditions occur.  Holders
>of stock options know that their ability to trade is subject to blackout
>periods and restrictions.  Most folks don't understand that the company
>stock opportunity in their 401K program can be subject to different rules
>than the rest of the program.  For this situation the real solutions are
>better education on the details of a 401k plan and possibly restrictions on
>the amount of investment an employee can tie up in a company stock fund.
>
This is so very important. People need to be aware where their
investments are. I have worked with companies that gave the option of
buying stock at preferred rates and I enjoyed that. But that is far
different from having your retirement account being primarily or even
significantly buried in a single stock.

The issue of possible fraud and the issue of the employees' losses from
the 401k issue are two different things. If the latter is buried too
deep in the former, I think it will leave many ignorant employees
sitting around whining about "big company fraud" and not bothering to
inspect their own retirement account.

>I think.
>
Which, all in all, is a good thing. ;-)

>-Jim
>

--
Chris Rehm
javadisciple@earthlink.net

Beloved, let us love one another: for love is of God; and every one
that loveth is born of God, and knoweth God. 1 John 4:7