Forum Archive Index - May 2003

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

I decided that if it was good enough for Mark Weldon to introduce 
some new sharemarket indicies then it was good enough for me to do 
so as well.

'Statkey' got me thinking that there is no widely publicised measure on 
how much of the future profitability of companies is potentially able to 
being stolen by management.  So I have introduced a measure that 
goes some way to showing us this.

The 'MGI' or 'Management Greed Index'  may be calculated annually 
by:


1/ taking the number of management options on issue and 
2/dividing this number by the total number of shares on issue added to 
the number of management options.    

The result gives the percentage of the company that will fall into 
management hands should all the options on issue be exercised and 
kept.   I've run the numbers on four income shares that I follow closely 
and hold, and here are the results:


MGI= (Outstanding Options)/(Total Shares+Outstanding Options).


For RBD

3.3m/(94.8m+3.3m)
= 3.3%


For SKC

(1.451m+0.085m)/(207.6m+1.451m+0.085m)
= 0.7%


For WRI

(6.2m+1.5m+0.2m+0.1m)/(134.2m+6.2m+1.5m+0.2m+0.1m)
= 5.6%

For CEN

27.3m/(576.6m+27.3m)
=4.5%

Contact energy do not appear to list any options in the last annual 
report.  But ominously have retained the shares they have bought back 
as 'treasury stock'.  I presume this treasury stock can be reissued by 
management at any time, so this where the figure of 27.3m shares 
comes from.

It would be interesting to get some more figures on this index.  So if 
you are reading this and think it is a good idea don't just say so.   Dive 
into the annual report of your favourite company and post the result of 
the calculation back here!      This way with 'all of us working on it' we 
should be able to build up a good database to give as a realistic 
picture.

In the meantime, with only four results in, it does superficially appear 
that WRI management is indeed a bit greedy.

SNOOPY




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