Originally Posted by
pegasus6234
What is the deal with the UPS board declaring a dividend while asking for $40m from the pilots? Was this a mandatory dividend or something? I have no idea how all that works. I'm sure they see it as just business, but it doesn't sound like a good way to foster good will with your employees.
UPS Board Declares Dividend - Yahoo! Finance
Simple answer. It isn't.
UPS management, especially senior management, get a great deal of their income from the dividends on the stock that they have accumulated over the years. Additionally they get stock as part of the compensation plan that they have.
They routinely hypothicate ( similiar to using a margin account at a brokerage house) to purchase additional stock. Management counts on the flow of cash from the dividend to pay the interest on the money they have barrowed to buy the stock. If UPS ever failed to pay a dividend the stock price would plummet, margin calls would be made, causing the stock price to plummet as the highly leverged management had to dump the stock to cover the positions. The pay cuts to management are a way to reflow the money so this run on the stock won't occur.
When the stock was in the forties many, most, where at risk of a margin call which would have driven the stock even lower.
This is one of the reasons that the pay cuts are so important to management to get and one of the reasons that they may put people on the street.
Its always about money going to the top.