Capital one backdating
The company that received payment was owned in part by Worldcom's chairman, Bert Roberts.While one cannot prove that Roberts took advantage of this situation, investors may assume that Roberts' company might not have given Worldcom the most advantageous pricing.Is the company in which you hold stock being run for the benefit of shareholders, or merely to line the pockets of its management?The proxy statement contains the information you need to find out how and under what conditions management is being paid. (For background reading, see In the proxy, the company will list the base salary for each key member of the management team, such as the chief executive officer (CEO), chief financial officer (CFO), legal counsel, director of sales and other divisional heads.To that end, all investors should review the company's proxy statement and other financial documents, such as the 10-K and 10-Q, for any sign of shady deals or conflicts of interest. Financial institutions and other financial market participants in their daily operations use a number of mechanisms designed to reduce their risk exposure.Take that dollar number and compare it to what other executives received in the past. Stock options, if used the right way, are a terrific way to inspire management to maximize shareholder value.This is particularly true if the current market price is well below the value at which management can exercise his or her stock options and convert to common stock.
But there are (and should be) some limits to those perks.
Longer term deals suggest that both parties (the company and the employee) are looking to partner up for a long period of time to work toward a common goal.
For example, Worldcom's 2002 proxy statement revealed that more than 0,000 was paid out to a company to provide air travel to Worldcom employees.
However, in practice, their functions are intimately linked: where collateral and netting mechanisms are used cumulatively, netting reduces exposure in the sense that much less collateral has to be put up.
Taken together, security/collateral and close-out netting are one of the primary tools of risk management in the financial market. The notion of close-out netting is a relatively new addition to the legal terminology and it is not particularly well-defined.
(For more insight on executive perks, see The proxy will reveal when an executive's employment contract is set to expire.