The pay of senior management of company's is an oft discussed subject. The buying and selling of stock by company executives also grabs peoples attention. A couple of days ago Sirius XM Radio CEO Mel Karmazin bought 2,000,000 shares on the open market. Some felt is was a strong sign of commitment, other have termed his buy as "pocket change" for a man of his wealth.

To truly understand the magnitude of Mel Karmazin's personal stock purchases, we should look at the size of his investments vs. the cash pay that he has taken home since he started as CEO at Sirius. This is not taking into account options or warrants that Karmazin has in his contract, but rather the cash he has taken home each year.

Total cash earnings: $18,347,436

Total purchases: 5,500,000 shares for $21,461,250; cost basis is $3.902

Mel Karmazin has personally bought 5,500,000 shares of stock. He has invested over $21.5 million from his own personal bank account into this company. His gross pay since he began his work at Sirius has been $18.3 million, and we have not even gotten into taxes! Mel's average price paid is $3.90. The biggest item to note is that Karmazin has invested every penny he has made, and then some, back into the company, and $21,000,000 is nothing to shake a stick at. This is a lot of money even to someone that has wealth. This type of money is not simply thrown around as if it were pocket change. At the $1.42 price the stock is trading at, his personal investment into satellite radio is worth $7.8 million. Mr. Karmazin has a stake in the company. No one can take that away from him.

Now, the next logical question is other stock interests in the company that Mel has. He did receive 3,000,000 shares when he came to Sirius. This puts his account at 8,500,000 shares. With these shares added to the mix, his average is cost is at $2.50, still above where the stock is trading at today. What about options you ask? When entering into an employment agreement with Sirius, Karmazin received the right to buy 30,000,000 of SIRI stock at an exercise price of $4.72 per share. While much has been written that, Karmazin made $32,000,000 in 2007, the fact of the matter is that a very substantial part of that calculation was taking into account options to buy shares. Mel has not exercised that right, nor at the current stock price would he be likely to.

Does Mel Karmazin make a lot of money? Yes. Has he invested a lot of money into satellite radio? Yes. Is having options to buy 30,000,000 shares a good thing for Karmazin? Is an exercise price of $4.72 on those options good for him? Not right now.

Karmazin has a serious investment in Sirius XM Radio. It is that plain, and that simple. The documents bear this out.

Thanks Homer for outlining this in the Sirius Buzz Forums.

Position - Long SIRI