Cisco Systems, Inc. (CSCO) Message Board

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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 77.75

-0.4%

2:52 PM EST

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To: PMS Witch who wrote (47641)	1/31/2001 6:57:09 PM
From: Stock Farmer	Read Replies (4) of 77400

PW: Re CSCO options & who gains vs who loses. Bingo: someone benefits and someone else gets shafted. Let's review the candidate list. As a well optioned employee, I gotta tell you this option thing has been the greatest mechanism of filling my pockets I've ever encountered. Keep them coming. No way I'm getting shafted. Worst thing happens I don't pay a cent. Gotta love it. As an executive, I also gotta tell you this option thing is the greatest way of paying employees without having to go the equity market and raise cash. Add to this that unvested in-the-money options (lots of them) are the greatest monkey trap ever invented. Monkey can't get out of the jar with their hand around the apple! Gotta love it. EDIT: I also get a double benefit. I get a tax credit, so I can buy more growth per dollar earnings than my competitors and look like I'm better than they are. If I do this with pooling I can even evaporate the purchase costs too. Gotta love it. I'm not affiliated with the IRS. But they exist to attract more taxes so I've got to think they've got to love options. If I read your post right you think they get less in taxes. Nope, other way around. They get more taxes so they love stock options too. Just to be clear. IRS nets the difference in tax rates between employee ordinary income tax rate and corporate taxe rate, times the imputed gain on the sale of the option. Both numbers are greater than zero (corporate tax is lower than employee tax, and employees smart enough to get hired don't exercise underwater stock options), so the IRS nets a positive number. That leaves only one potential shaftee: the only player who parts with their money in order to make the option-go-round work. The shareholder. So if someone loses from stock options, it's the shareholder. If nobody loses and everyone benefits, then we have found the proverbial free lunch. John.

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