Stock buy-backs
An effective way of increasing senior management bonuses through the back door (by artificially inflating the share price).
At this rate, in about 25 years IBM will be a privately held company. IBM's board of directors, which is always ready to let Big Blue's upper management go down to the New York Stock Exchange with dump trucks full of cash to buy up shares to retire them, has done it again. The board has authorized another $7bn in share …
I suppose it's pointless arguing about artificiality when you're talking about such an artificial concept as shares in a limited company. But for clarity:
I have a million share options to buy at $20. Share price is $20. Share options are worth zip.
Buy back 5% of shares. Price rises to $21 (other things being equal*). Share options now worth $1 million. Not bad for a day's work.
* admittedly you've reduced cash by an equivalent amount. But share values are (supposedly) more forward looking, so the 5% rise is probably close to reality.
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