Free lunch

May 6, 2005

A star (definitely not a gold star) this week goes to Fieldstone Investment Corporation (FICC) and United Online (UNTD) for finding a new way to enrich insiders at the expense of shareholders. FICC has instituted option grants that vest over four years and come with “dividend equivalent rights”. Those rights allow the option holder to earn dividends on the stock and receive the cash as the option vests. Just think about that for a minute: the Company paid more than $1 in dividends in 2004, the executives take no risk, may never actually own the stock, but get to collect a gravy train for up to 10 years (the tenor of the options was conveniently not disclosed).

UNTD announced the same type of deal for its non-employee board members – each was awarded 7500 shares that vest in February of next year. But even before the stock vests, in appears that they will get paid any regular dividend declared by the Company.

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