Executives get 500k yr and stock?

Discussion in 'Trading' started by Melicious, Feb 4, 2009.

  1. OK bear with me here. BAC needs more TARP money (the 2nd half anyway) so they will be under the 500k executive pay stipulation to get the additional help. Under the plan, as I understand it, the executives must be paid anything over $500k in stocks instead of pay. So Ken Lewis can get $500k and x# of shares as his 2009 compensation. That's it. Right?

    So if BAC stock goes to zero, what good is the stock as part of the payplan? I'm asking because I'm considering jumping on a short position on BAC since everyone I know and everything I hear and read is that the stock is headed to zero. Sounds like easy money to me but this $500K a year and stock thing has me wondering. Am I looking at this like a crazy woman would?
  2. You don't really think the government is going to allow BAC to go to zero, do you? I don't see any easy money swing trading this stock, but your mileage will vary of course.
  3. I would never have thought BAC would drop to under $10 a share, much less under $5. There isn't a lot of room left from here but 20,000 shares from 4.60 to 1.5 or so would be nice too.

    But this stock as compensation thing makes me feel like the stock can't hit zero like you said so my theory becomes not so good at that point. :p

    But sheesh, have you seen what BAC has done lately? And it doesn't look like a bounce is forthcoming anytime soon. More bad news on the horizon for banks with the hearing next week. Those politicians are going to EAT those CEOs for lunch. Worse than the Auto execs were eaten to be sure.
  4. Why can't the stock go to zero just because CEO's are granted stock or options? Makes no difference. Cost the company nothing if they remain in the shithole, and rewards the CEO's if they miraculously pull out of it. Whats the maturity date like on those shares?
  6. Melicious it happens all the time. I have an uncle who has LOTS of GE options that are now expiring worthless. They were worth millions just a few years ago.

    Stock motivates executives both when they are employed and to choose good people to follow in their footsteps. Ken Lewis isn't going to receive shares, he'll get options at a price.
  7. I heard it explained on the radio today. It does not apply to anyone that has already gotten money. BAC and Citi are grandfathered in. It only applies to new companies that pop up.

    Hugh Hewitt had a guy on there explaining it.