Still searching for that first billion? Try an Internet search engine. At the very least, you'll find Yahoo!'s founders, David Filo and Jerry Yang, both of whom made Forbes' most recent list of the world's billionaires. So did Google's founders, Sergey Brin and Larry Page.
J.K. Rowling, creator of Harry Potter, also debuted on the list. Curiously, Al Gore, inventor of the Internet, didn't. Nor did Dr. Seuss. Who said it pays to have vision?
In today's Motley Fool Take:
- IBM's Options Upgrade
- Shameless Plug: Motley Fool Income Investor
- Disney Braces for Battle
- Quote of Note
- Microsoft: Return the Money!
- Discussion Board of the Day: Armchair Economists
- More on Fool.com Today
M's Options Upgrade
By Seth Jayson
A friend of my father's, a bio-medical researcher and industry executive, once told him that "Big corporations are run for the benefit of management, period." A brief glimpse at abuses in stock option compensation might bring most of us into agreement on that point.
Options-based compensation for executives is rife with opportunities to fatten management wallets at the expense of shareholders. Some techniques are blatant, like the retroactive options repricing committed by Juniper Networks
So let's give IBM
The change may not seem like much on the surface, but take a closer look. Imagine you're an executive at another company, sitting in a fat leather chair glancing through your pile of vested options, and you notice that the exercise price is close to the current market price. Wouldn't you be tempted, just a little bit, to make that stock jump? Maybe lean on the folks down in accounting to make sure the firm beats estimates next quarter? Just move a few things from one column to another, and -- voila! -- the market reacts! With the stock a couple of points above your options, you can cash in, risk-free.
Now, if you're working at IBM, you know there's a 10% spread before those options are worth anything. You should probably take a longer view and work to enhance the company's value so that it will be recognized and reflected in the stock price. This is exactly what stock options should do: encourage a longer-term ownership culture among executives. As of today, there are only a handful of U.S. companies with similar policies. Let's hope more of them follow IBM's lead.
Fool contributor Seth Jayson thinks executives should receive restricted stock at a 15% premium. He owns no stake in any companies mentioned here.
Sh ameless Plug: Motley Fool Income Investor
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Disney Braces for Battle
By Rick Aristotle Munarriz (TMF Edible)
Heading into next week's annual meeting, Disney
The grassroots campaign has been impressive, riling up the individual investor with a passion for animated cel art and defunct park attractions. Still, you rarely accomplish much holding an odd lot of shares. Granted, that's an exaggeration, but Roy and Stan clearly need the institutional investors to put an end to the Eisner era.
It just might happen. Last night, the California Public Employees' Retirement System (calPERS) announced that it would withhold its vote for Eisner next week. As the nation's largest pension with $165 billion in managed assets, CalPERS has been known to throw its weight around when needed. Back in December it even went after the NYSE.
While CalPERS controls just 0.5% of Disney's outstanding shares, it's got a voice that gets heard. And it's singing. "We have lost complete confidence in Mr. Eisner's strategic vision and leadership in creating shareholder value in the company," the pension said in a biting press release.
This does not mean that Eisner's run will end at next week's meeting in Philadelphia. However, while he's in town, he might take a moment to follow Rocky Balboa's tracks up the steps of Philly's Museum of Art. He's got a real fight on his hands, and the dissidents are gaining strength.
And rightly so. Having so recently been ditched by Pixar
Can you hear it? Dumbo, Peter Pan, and Tinkerbell are belting out "Gonna Fly Now." Can Eisner make it a quartet in Philadelphia?
Longtime Fool contributor Rick Munarriz owns shares in Pixar and Disney. He was psyched to see Pixar singled out as a recommended stock in Motley Fool Stock Advisor and looks forward to the day when Disney will be worthy.
Qu ote of Note
"It's not the size of the dog in the fight, it's the size of the fight in the dog." -- Mark Twain
Microsoft: Return the Money!
By Bill Mann (TMF Otter)
A friend of mine who works for a software firm noted the other day: "People have not given enough thought to this amazing fact: Bill Gates completely missed the rise of the Internet -- the biggest computing trend of the 1990s. But once Microsoft saw which way the wind was blowing, it simply spent enough money to catch up." He's right. Most companies do not survive such blunders. That Microsoft succeeded is a testament to a great many things, but most of all it's a testament to cash. Gobs of it.
The trouble is, companies have traditionally been penalized for hoarding cash. Investors wanted them to keep what they thought they could profitably deploy, and return the rest. That's where measures such as Return on Assets came from: People wanted to know that companies were deploying their assets profitably. If they weren't, then good corporate governance demanded that they return excess capital to shareholders. Microsoft broke that mold, and other companies, most notably Cisco
The argument they make is not without merit -- these are not the capital-intensive businesses of yore, and having the cash means the ability to be flexible. As long as these companies grew like weeds, investors bought into this logic. But as Austin Powers once said, "That train had sailed." Microsoft responded this past year by instituting the first dividend in company history, which now sits at $0.16 per share. That returned $1.7 billion to shareholders. But that's not even a drop compared to what sits in the vaults in Redmond -- it doesn't even cover the 4%-6% growth management expects to achieve on its existing investments.
Speaking at a Goldman Sachs
This makes sense to a degree, but that degree sits substantially below the $50 billion threshold. Does management honestly think that either of these cases, at their most negative outcome for the company, would come anywhere close to that level of penalty? Microsoft could, with the stroke of a pen, offer a $2 per share dividend and still have well over $30 billion in the bank. That's 34 times the business' 2003 capital expenditures. It could offer a $4 per share dividend and still have plenty of operating capital.
The lawsuits are out there, and Microsoft may lose them. But shareholders don't require a $50 billion bond just in case.
I'm very happy to see that Microsoft management is addressing this.
Bill Mann does not own any companies mentioned in this article.
Di scussion Board of the Day: Armchair Economists
How does your list of the most admired domestic companies vary from Fortune magazine's recently released ranking? Which international companies do you think would make the cut? How will these companies stand out in good times and bad? All this and more -- in the Armchair Economists discussion board. Only on Fool.com.Mo
re on Fool.com Today
Who doesn't have a couple of head-scratchers when it comes to money and investing? Selena Maranjian takes a crack at a couple in Investors With Questions.... It's not always what you know, though. Take it from Warren Buffett: It's what you don't know.... Whew. All those conundrums sound like reason enough for a getaway. Make it priceless (on a pretty penny), with the Fool's personal finance guru, Dayana Yochim.... And don't miss out on the fourth interview in a five-part series with 7-Eleven's CEO, Jim Keyes. Find out why $1.4 billion in debt doesn't have this man skipping town for a deserted island.
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For a list of all our stories from today, see our Today's Headlines page.