Microsoft Execs Get Millions in Awards. Huh?

You're right! These execs are greedy b's, and as usual the stockholders lose or remain even. I have MSFT, and also some oil stocks. The oil companies are making huge profits, but nothing has gone to the shareholders but a small increment to the stock value. I'm sure the oil company executives are taking as much of the extra profits as possible in bonuses, etc. Unfortunately, the stockholders have little power and control over any corporation.

At Microsoft’s scale these figures are meaningless in dollars. They are huge though as a symbol in terms of shareholder equity being given away. Now add to that Microsoft and other companies giving away stock (options) than announcing they want to do stock buy-backs because the shares they gave away over the years diluted shareholder equity.

The buy-backs do increase the per share value of the stock but not the actual worth of the company. It's just fewer shares at a higher price not changing the capitalization. This is where value is passed to insiders holding options that shareholders don't see. The higher per share value moves more options to "in the money" and the sale of these options undermines shareholder value in the long run.

With the size of MSFT capitalization, it is no wonder the average small investor feels powerless to affect the apparent "nepotism" that is inherent in stock bonus to corporate insiders. My relatively few share would just be straws in a huricane as a protest at this giveaway. But what about the institutional investors, the pension funds and mutual funds? Their money, or that of their stakeholders, is being given away. With hundreds of thousands of shares and the opportunity to coordinate with similar funds, an expression of protest would seem likely to get immediate attention. The answer is that these fund managers come from the same culture and expect to profit from the same practices in their future. Unless an effective means is found

Vesting in 2 years is outrageous. Typically, it's 4 years.

http://mrwavetheory.blogspot.com/2006/09/posts-of-note.html

Good article, Tom. Issuing stock grants or option grants in order to align executives & shareholders interests sounds like a good idea, but linking executive's salaries and employees 401k's to the stock price could create some problems. Sheldon mentioned one of the problems. Issuing stock grants to one group of people and then announcing a stock buy back seems like a good way to transfer wealth from investors to employees. Good point Sheldon, I'll add that to my list of reasons of why the "buy & hold" theory is flawed.