Witchhollow, thoughts from a greedy management whiner
I disagree with the ‘love it or leave it’ attitude some have regarding IDCC's management. As investors we should make our concerns heard. The areas of operations or legal issues should be left to management’s expertise, as outsiders with far less experience and knowledge cannot dream of making better decisions then the people paid to do those jobs. It is in their best interests for IDCC to be as successful as possible. On the other hand, compensation of officers and communications with shareholders are legitimate areas for shareholders to address. Management has a conflict of interest – they are better off with high salaries and little communication (they have knowledge and others don’t) while shareholders are better off with the opposite conditions. If we don’t raise these issues, who will? No one else has a vested interest in these issues.
I believe the officers should be paid fairly. However, if they are the ones deciding what’s fair, even an honest and ethical person is going to be prejudiced. They know all the hard work they do, the hardships they’ve endured, how much their family deserves and management tends to look at investors as parasites profiting off their hard work. Therefore management deserves great compensation packages and the investors should be grateful for what they get. Because every dollar makes a difference to the officers involved, while the affect on total earnings and therefore the share price is relatively tiny to any single investor, compensation over the last couple of decades has spiraled up. As long as stock prices are rising, it is tough to get people concerned because they are happy. There needs to be some level of reality injected back into this process.
I believe IDCC is going to be selling at multiples of current levels. For the sake of argument, let’s say that management as a whole is overpaid by $1,200,000 per year, plus dilution due to options is 2% (very conservative IMO) higher than it should be, at 60,000,000 shares outstanding. Lets says that the earning per share in 2003 is $2.00 per share ($120,000,000 / $60,000,000) and we are getting a multiple of 20. Our share price is $40. However, if the compensation and dilution were not excessive, earnings would be (($120,000,000 + 1,200,000) / 58,800,000) = $2.06 per share x 20 = $41.20 share price, 3% more. Multiply that by 50 million shares and that is $60 million dollars taken from the non option shareholder base. Now many people would say so what, I made out great, so why worry about it. I am not one of them. I want full value for my shares. So telling someone like me to sell my shares is stupid. I’d rather sell my stock at $40 than $15. However, I’d rather sell it at $41.20 than $40.00. How would you feel if your broker decided that if you sold stock at more than a 100% gain, he would get an extra 5% commission on the excess gain? However to switch brokers you had to abandon your IDCC investment. I think you might want to get some justification and if he just said take it or leave it, you would take it but grumble. That is my view of the compensation. People don’t get upset about 3-4% change in value, especially when it is not obvious. And it builds from year to year. I would like to see options granted with prices out of the money, like $20 through 2004, $30 though 2005 and $40 though 2006. That way if we get great price appreciation, they are well compensated. But if we have a average investment, they get there paycheck but no big bonus from their options.
I feel this is an area for shareholders to make their voices heard to management. I want them to be paid fairly and I want them to share generously in the benefits if IDCC’s price soars. That does not translate into passive acceptance of their compensation just because my investment did well. In order to avoid aggravating my high blood pressure, I did not calculate what the officers and directors would “earn” on their existing and continuing options if IDCC’s price were to appreciate at 10% per year over the next five years. While that is a good return in today’s climate, based on what IDCC has I would not consider it exceptional. However if you compute what they would get over and above their generous salary, I would guess anyone receiving it would be set for their lifetime and their kids as well. If IDCC’s price gets to 100, they will each have tens of millions of dollars for their effort (which will come from the rest of the shareholders via dilution), while if it goes bankrupt they will have to settle for mere millions. They are in a win big/win lotteries position while we who buy the stock are in a lose/win position based on our taking a risk. I’m just looking for some reasonable and rational compensation arrangement and a compensation committee that is independent in fact and appearance.
If the above makes me a greedy whiner windbag, so be it. I'd rather be a whiner than someone who figures if the price goes up (kind of like buying someone dinner), then they have the right to **** 'em. :o)
