Here’s a surefire way to infuriate your shareholders.
In 2011, two companies linked to South African billionaire Christo Wiese offered top managers an option to buy shares in the businesses they were running. Plenty of companies do that, but not necessarily with this additional sweetener: The executives in question received bank loans to buy the stock — loans that were guaranteed by the company in the event they couldn’t be repaid.
“I doubt whether many institutional investors knew about these transactions, because they didn’t look closely,” said Asief Mohamed, chief investment officer at Cape Town-based Aeon Investment Management. “At the very least, it appears that these investors have not applied their minds and looked at the implications when these schemes were concocted.”