Paul,
I appreciate your input and you're certainly not "butting in".
I broached the topic because Parish raises the question of how, while legal under GAAP, the extent to which MSFT makes use of options in lieu of wages, and use of tax deduction not charged against earnings, may have a potentially significant impact on the entire market and retirement system, and hence, the global markets.
Yes, he admits that what MSFT is doing is completely "legal". The question I think he poses is whether the extent that MSFT is participating in the behavior violates "moral and ethical" standards. After all, MSFT holds a market capitalization of close to 1/2 TRILLION dollars, which accounts for a significant portion of S&P Index fund retirement account funds. So the question is really whether there should be a limit to how companies can exploit GAAP accounting rules. Can GAAP truly be considered credible when a company is able to show increaing profitability when only 35% of its actual earnings are derived from sales of product and services?
I certainly find it disturbing that MSFT employees seem to possess an excersiable pricing on their options of $17, while the stock price is trading at $85 and change. That's a $60 difference which seems to be indicative of hiding wage costs through stock options.
Call me archaic and conservative, but I kinda believe that options should be priced close to the yearly average stock price or there abouts, if not at the current market price reflected at the time the employee comes on board. Options should not be underpriced, but rather reflect the belief that "should you work hard and make this company something, your efforts will be reflected with a higher stock price that makes your options worth something".
Anyway,.. again, I just bring up the subject since I think there is a compelling case to be made that having a company sucking an ever greater amount of capital away from the broader market creates a serious moral hazard and macroeconomic danger for the global capital markets. While it's true that all companies offer stock options as incentives and that should be irrationally curtailed, when the issue grows to the magnitude of where MSFT currently is, then I think it should be discussed rationally.
Btw, I'm typing using Win98SE, through Internet Explorer 5.0, so it's not like I'm a virulently anti-MSFT.
I appreciate other opinions and thoughts.
Regards,
Ron |
