First -- note that mattersight.com contains this "Investor FAQ" page. Here is the pertinent part:. . .11. I saw on a third-party website that a Mattersight executive officer engaged in a non-open market disposition of his shares – what does this mean?
Links and downloads of all of our SEC filings are available on the Mattersight website’s Investor Relations page under “SEC Filings.” We encourage you to review these filings. In some cases, third-party financial websites may report information regarding our SEC filings that incompletely describes the contents of such filings. For example, when an executive officer files a Form 4 to report the shares of our common stock withheld by the company to satisfy mandatory tax withholding requirements upon vesting of a restricted stock award, certain websites simply summarize the content of the Form 4 filing and report this as a “Disposition (Non Open Market) at $X per share.” In this case, referring to the actual Form 4 report will allow you to see that such disposition was made solely to satisfy the executive’s tax withholding obligation in accordance with the terms of the stock award. . . .
What is the implication of the bolded portions? To my eye, it implies that the executive is paying these taxes in the only way he or she is legally allowed to do so.
That is simply not true. Mr. Conway or Mr. Noon or Ms. Carsen could (perhaps should, given the vast, and growing accumulated stockholders' deficits) pay these tax obligations with their own cash. That would be no cash drain on the company, since the company has run 13 years straight of GAAP losses per share, from its continuing operations.
No the way that Mattersight does it, the company is effectively drained of cash (in a truly Transylvanian fashion!), in order to pay the tax obligaitons of its top executives. Yes, the transaction is off market -- but this form of compensation is also dilutive to common shareholders, under GAAP accounting -- and drains precious cash from the company, when it pays the tax and cancels the shares -- all without ever being paid cash for the shares in the first place.
This method of paying taxes for executives is in no manner required by any law or regulaiton. Here endeth the lesson.
Be careful out there.
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