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A comment on When CEOs’ Equity Is About to Vest, They Cut Investment to Boost the Stock Price. Parent comment

Re:When CEOs’ Equity Is About to Vest, They Cut Investment t... by zombieprocesses on Friday March 02, 2018 @03:17PM (#16505294)
After the financial crisis, people were demanding that CEO pay be tied to company performance. So instead of large salaries, CEOs were given large equity positions ( options ). The politicians/people thought this was a punishment, but it was actually a great boon for CEOs. Not only do they pay 20% on capital gains instead of nearly 40% on salary, they can boost stock prices artificially over the short term by taking out loans ( nearly 0% for the last 10 years ) and then buy stocks back.

This is also a favorite hedge fund raid. Hedge funds open up large positions on companies. Demand board seats. Get board seats and then get the execs to sell assets, layoff employees and take out loans to buyback shares. Get out with a nice profit. And the company is left with a huge debt loan that'll crush them once interest rates rise.

[ Parent | on HN ]
Re:When CEOs’ Equity Is About to Vest, They Cut Investment t... by closeparen on Friday March 02, 2018 @03:26PM (#16505362)
What? You pay income tax on the value of your options, and also capital gains tax on the appreciation in their value after vesting. That’s only a tax advantage if you get options in a worthless company that later becomes valuable. The luckier startup employees are in that boat, not Fortune 500 CEOs. For public companies, you can reap this advantage yourself by buying and holding their stock using your cash compensation.
[ Parent | on HN ]
Re:When CEOs’ Equity Is About to Vest, They Cut Investment t... by zombieprocesses on Friday March 02, 2018 @03:39PM (#16505475)
> You pay income tax on the value of your options, and also capital gains tax on the appreciation in their value after vesting.

Yes. That was my point.

> That’s only a tax advantage if you get options in a worthless company that later becomes valuable.

What? Since 2010, most large companies had their stock prices double, triple or even more.

> For public companies, you can reap this advantage yourself by buying and holding their stock using your cash compensation.

Except you don't get all your salary upfront.

[ Parent | on HN ]