You hear a lot about CEOs making scandalous bonuses in stock but I was under the impression that they can’t sell massive quantities of stock all at once otherwise the price might drop. I also hear they can get loans using stock as collateral but don’t those loans need to be paid back? Also, apparently hardly anyone pays dividends anymore. Does this money “exist”? Can they purchase stuff worth millions of dollars? Or are they actually cash poor?
In: Economics
First off, CEO’s aren’t typically getting bonuses that are so much stock as to move the market. 50k or 100k shares on a stock that trades 1m+ daily isn’t really enough to make that big an impact. But they typically don’t sell it all in one fell swoop. Partly because the market wants to see C-level execs with skin in the game, so to speak, by holding shares — that’s the reason they’re granted in the first place. CEO’s and other top exec often have recurring trades set up to sell smaller amounts on a regular basis, both to spread out the volume but also to remove inkling of insider trading, while being able to take some money off the table to spend, diversity their investments, etc. So they may have something set up to, for example, sell 5,000 shares every quarter one week following their earnings report.
But even if they wanted to buy a yacht or something and needed eight figures, that amount of money transacting in shares is not all that dramatic. Companies performing stock buy backs are dealing with much larger quantities of shares, but you don’t really see even tens of billions being spent to buy back Apple shares, let alone if Tim Cook were to sell off $5m in shares.
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