Executive Compensation

1. Why didn’t the SEC accuse Mark Cuban of traditional illegal insider trading, considering he was the largest, individual shareholder of Mamma.com?

The right compensation program will depend on the organization’s business strategy and goals. To achieve these, an organization must recruit and select the best possible employees. To attract such employees, there must be an attractive compensation plan. Competitors will be offering different payment options, this may be based on pay rate or special perks, and a company’s stock options. Organizations must be aggressive yet reasonable to compete with competitors. Retaining and encouraging employees to perform at their best may be achieved through an immediate incentive award

The argument that I am making should be addressed to Baconivic and the people that agree with his business ethics. Instead of having a Carr mindset, I have more of a Drucker mindset. With my Drucker mindset, I would address Baconivic and these people about how spreading insider information to only a select few is against the law and how it could ruin their image as people in the working field. No matter whether you are a senior broker or assistant, ruining your image in the working field does no good to anyone. All their hard work up to that point will diminish and trying to gain back a good reputation will be difficult. As many parents tell their children, Baconivic and his supporters should put themselves in the shoes of other shareholders that will fairly lose money from their investments in the ImClone company. By doing so, they will be able to mentally see and feel the loss that happens through stocks. Instead of trying to give certain people unfair advantages, higher authoritative positions in companies should be more ethical and try to give reassurance that the stocks will raise

Insider trading has brought competition to the market place by giving shareholders, private investors, and other interested individuals the opportunity to bring in revenue. The average American household lives paycheck to paycheck. The stock market opens a new world for those individuals that are wanting to own electronic currency or a tangible good. This can also create another source of income for them as well “…the long-term investors who hold their stock will share in the price rise that good news will bring, and their holdings will be worth a greater amount in the market” (Henry B. Manne, Insider Trading and Stock Market (1966) p.457). Another benefit that insider trading bring, is it that creates new competition in the market for companies to strive more on making their product worth more. Therefore, their stock will be worth more as the company continues to rise above the

Read the discussion case "Executive Compensation" on pages 190-192 then answer/discuss questions 1-7 that follow.

In the criminal case, US v. James Herman O'Hagan (1997), and in the civil case, McDonald v. Compellent Technologies, Inc. (2011), both cases involved the criminal act of insider-trading that were tried in different court systems. Insider-trading is an illegal act involving an individual who has access to nonpublic information about a public company’s stock or other securities who uses the information to make profits that are not available to regular investors. The seriousness of insider-trading relates to the economic downfalls related with the act that affect economic markets. Insiders have an abundance of information that is not yet available to the public, thus, making the insider-trades unfair and illegal of insiders who take advantage to profit from information that has not been released to the public for public trading and transparency (Cui, Jo & Li,

Currently, the financial packages provided to most CEOs are generated by a compensation committee, a

Insider trading mostly occurs by individuals close to the upper level management of an organization. This type of unethical behavior undermines the stability of the organization. In the ImClone scandal where Martha Stewart was indicted for her involement, the stability of her company suffered and the companies and people associated with Ms. Stewart suffered as a result of her decision. In this essay I will examine the parties that were privileged to knowing ImClone’s stock was going to drop and those who did not know. I will look at the effects of Ms. Stewart’s action, what she could have done different, and the consequences of her actions. Ethical and public issues must be considered when a business executive makes a decision

Like consideration # 1, Executive Benefits Network can equip you through executive compensation education and help you craft CEO plans in line with current market trends. Again, two methods we can help with are Short-Term Incentive PlansBenefits and designing Nnonqualified Pplans which will provide a highly flexible way to provide tax deferred benefits to key

Such a classic corporate insider, who owes fiduciary duties to the corporation and its shareholders, has a duty either to abstain from trading or disclose such information before trading” (Kaplan, Matteo, Pfeffer). Generally the simplest forms of insider trading are categorized under the Classical Theory.

There needs to be a balance, shareholders want to know their investments are safe, but business practices must be performed in an ethical manner according to SEC guidelines.

So shareholders and managers can share the information they have with one another, which could hardly be considered unfair to the shareholders. Then there are others who still believe insider trading should remain illegal because it is unfair along with many other reasons. During the early days of regulating insider trading the system searched for an internally consistent justification for banning such trading. That was culminated by the decisions the supreme court handed down in the early 80 's on two important insider trading cases the first was Chiarella v. United States and the second was Dirks v. SEC. These were the two cases that brought some sense of what the law meant by inside information regarding the insider trading law. Then in the early 1990 's is when the judgment was used again in the two cases involving insider trading the first was criminal was Ivan Boesky and the second was Dennis Levine. Both of these men were sentenced to jail, and boesky was banned from ever trading again and also ordered to repay 100 million in illegal insider trading profits. Then with the prosecution of Boesky it unveiled a ring of insiders and led to Michael Milken, the famous junk bond deal maker for Drexel Burnham Lambert. Junk bonds are of fairly high risk, but they also pay out at a higher rate of interest. These junk bonds were commonly used to raise capital in the early 80 's when companies needed money to buy out other companies. So in

It has been observed that companies tend to underperform when their insiders use trading plans to sell stock. New research also points to the conclusion that more aggressive plans are associated with the lowest performances. Gradient Analytics Inc., an independent research firm, followed insider sales of 30 companies and concluded that “aggressive” trading plans resulted in a 9.7% average underperformance in their companies’ stocks over 6 months. Insider-trading plans (also called 10b5-1 plans) are arrangements that allow the insiders of publicly traded companies to sell stocks they possess. To determine whether a trading plan can be considered “aggressive”, Gradient had specific measures. Gradient noticed in the summer of 2007 that Novatel Wireless Inc. executives had started selling through trading

For example, Manna (1966) states that insider trading should be allowed because insider trading is the most effective way to compensate to insider to generate new economic information in firm. Hirshleifer() states that for insider, good information is as good as bad information to make profit but this profit may not be related to economic contribution of insiders in corporate. Proponents of insider trading suggest (Carlton and Fischel (1983) that insiders are the most informative member in the market, and by trading, they bring new information to the markets and causing prices to change toward their true value and, therefore, promoting the optimal allocation of resources. On the other hand, Scholars (Benabou and Laroqu, 1992) say that insider trading may provide incentive to corporate insiders either to delay the announcement of price-sensitive information to public or to prevent to release price sensitive information, which in turn makes stock prices less informative. However, Georgakopoulos (1993) argues that restriction on insider trading may have little adverse impact on market efficiency but it reduces the cost of transaction that burdens on uninformed traders

Once executives were getting these highly substantial payments, shareholders quickly questioned executives for their integrity and motive due to this high increase in payment amounts. There have been many debated reasons in support of and against golden parachutes on account of the increase in payment amounts and how the terms of their severance package were written out.