Dave,
One question, why does it benefit Cisco that Cisco's employees are cashing in their stock options, other than one obvious reason I can think of, that Cisco doesn't have to pay them as much?
The "obvious" reason you cite benefits them on the "front end", so to speak; i.e., they have less cash outflows to their employees, so their profits are higher. On the "back end", when employees exercise their options, they pay cash to Cisco in the amount of the exercise price. In my understanding, the profits employees make on these options exercises are recognized as compensation by the IRS, so employees must pay taxes to the IRS. Meanwhile, the IRS gives a tax credit to the company for this compensation, so Cisco effectively gets benefits from the government and its employees. |
