There's more than one way to skim a Corp

In Losing Money By Buying Stock Back (a useless link, given TimesSelect), Floyd Norris (in today's NYT) talks about how companies use stock buybacks during rich years (buying high, selling low) to improve their company's reported earnings (because cash spent on stock buybacks apparently doesn't reduce earnings) per share. And, how this isn't great for the company or remaining shareholders -- as it involves, obviously, spending more for the stock than it's worth.

What he doesn't say (but pretty strongly implies) is that this is really yet another way for executives to loot the companies in their care. By timing stock buyback programs to coincide with their exercise of stock options, executives can keep the stock prices high despite dumping largish amounts of stock on the market, since the money they reap from selling their options is offset by the company buying the shares -- effectively taking money from the company coffers and putting them into executive pockets, without affecting the (official) bottom line...or reported executive salaries.

Apparently, Dell's buying pattern is exactly this -- they bought lots of stock during the boom years, at the same time that lots of options were exercised--spending more than the company was making. But now that their stock price is lower (and thus cheaper, and thus fewer stock options are exercised), they're considering cancelling their buyback program.

Funny, that.