Here's how CEOs cash in on hundred-million dollar corporate stock buybacks
http://www.businessinsider.com/r-special-report-buybacks-enrich-the-bosses-even-when-business-sags-2015-12
NEW YORK(Reuters) - When health insurer Humana Inc reported worse-than-expected quarterly earnings in late 2014 – including a 21 percent drop in net income – it softened the blow by immediately telling investors it would make a $500 million share repurchase.
In addition to soothing shareholders, the surprise buyback benefited the company’s senior executives. It added around two cents to the company’s annual earnings per share, allowing Humana to surpass its $7.50 EPS target by a single cent and unlocking higher pay for top managers under terms of the company’s compensation agreement.
Thanks to Humana hitting that target, Chief Executive Officer Bruce Broussard earned a $1.68 million bonus for 2014.
Most publicly traded U.S. companies reward top managers for hitting performance targets, meant to tie the interests of managers and shareholders together. At many big companies, those interests are deemed to be best aligned by linking executive performance to earnings per share, along with measures derived from the company’s stock price.
But these metrics may not be solely a reflection of a company’s operating performance. They can be, and often are, influenced through stock repurchases. In addition to cutting the number of a company’s shares outstanding, and thus lifting EPS, buybacks also increase demand for the shares, usually providing a lift to the share price, which affects other performance markers.
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