Food for thought30 Jul 2014 09:58
I found this comment on another board and post it here for interest and discussion. I have substantial (for me) holding and no deramp is intended..........
"There are a host of reasons why what’s going on here is imo unacceptable the principal ones being:
1) the interests of shareholders (who have committed their money and bought their shares) are certainly not aligned with those of the directors. The whole idea of options (which, if they are to act as an incentive for the directors to perform should be at least some way 'out of the money' when awarded) is to reward continuing performance beyond the norm. In this case it doesn't really matter what the strike price is to the directors (although I don’t suppose they’d moan if they made money on a price rise too) because rewards are paid to them immediately on award of the options, not when they’re exercised. Look out for millions more being showered on them year after year, now they think they’ve prepared the ground with the curious statement in the last accounts: “The Group has only 3.2 million share options granted to directors and officers (5.2%) although its permitted allocation is 16.8% (10.2 million)”. What they got in notional dividends immediately was startlingly high last year (and they won’t do too badly this year either, whatever the results are), because the absolute number of options issued was high – and a load more have recently been issued.
2) The dividend policy hatched by the directors to keep shareholders sweet and compliant by paying 75% of net profits out as dividend looks to me to be about as subtle as a bull in a china shop and the potential damage it could cause is about the same. What of a situation, for instance, where a potential candidate for takeover came onto their radar but such an acquisition was likely to require cash to be retained instead of paying the 75% dividend? Could an impartial judgment be seen to be made if the opportunity was turned down? Could the non-execs impartially be seen to have decided what was best? In a very few years' time these characters possibly won't care because by then they'll have trousered so much they'll probably be able to fly off in their private jets and retire to one or other of their favoured homes in the sun, bought with your money paid to them by way of what seems to me to be excessive reward for the nature of the company, the risks that are endemic in companies following the strategy GVC does, the market it trades on and the difficulty in assessing objectively if they have performed well enough to justify any bonus at all.
3) What of a situation where the commercial and other risks of continuing to provide internet facilities in a country that bans gambling made it unwise to continue to chase revenue and profit deriving from business ‘written’ there? Would commercial prudence prevail over greed? Who would be the judge? You, biguglybear, with all
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