Forgiven

Insider loans have been around for decades and are not inherently bad. The problem, critics of the practice say is that when the stocks crashed, companies in scores of cases quietly let executives off the hook by forgiving the loans, even as other shareholders were battered. All told, loans to insid...

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Bibliographic Details
Published in:Business 2.0 (2001) 2002-11, Vol.3 (11), p.82
Main Author: King, Ralph
Format: Magazinearticle
Language:English
Subjects:
Debt cancellation
Effects
Executive compensation
Loans
Scandals
Stock options
Online Access:Get full text
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Summary:Insider loans have been around for decades and are not inherently bad. The problem, critics of the practice say is that when the stocks crashed, companies in scores of cases quietly let executives off the hook by forgiving the loans, even as other shareholders were battered. All told, loans to insiders in recent years may have reached more than $5 billion. Hundreds of millions of dollars in loans, perhaps as much as $1 billion have been or will be forgiven based on SEC records and estimates by corporate compensation experts. This suggests that companies will be eating losses from insider loans for years to come. But the more damaging legacy may be that the practice will contribute to the perception that management has all too often lined its own pockets at investors' expense, and to the pubic's distrust of how America's companies are run.
ISSN:1538-1730