RE: MW responses14 Aug 2019 13:26
poss scenario ?
"The article describes an officer that had pledged a large proportion of his shares of his company’s stock – about a quarter of the company’s outstanding shares – as collateral for margin loans or in sale/loan-like transactions (variable prepaid forwards). According to the article, the officer apparently leveraged his stake in the company to help fund other business pursuits. When the stock price slumped, the officer faced demands for more loan collateral, which led him to exceed, at various times, the limits imposed by company policy on the extent of his pledging. (Notably, his prepaid forwards were not covered by company policy.) The officer’s situation was salvaged to a limited extent when the share price rose after the board approved a stock buyback plan. But the price dropped again, and the officer again had to increase the number of shares pledged, finally leading the independent directors to sanction him (loss of salary and annual bonus) as a result of the policy violation. The directors delayed imposition of an even lower limit on pledged shares to allow the officer time to reduce his position to get into compliance in an orderly fashion. The officer then called for another much larger buyback. Of course, there are a number of good reasons to engage in stock buybacks when a company’s stock price drops, and the company flatly denied that the buyback had anything to do with the officer’s stock pledges; "from LEX (Cooley LLP)
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