HI Don, guess I missed that first time around, sorry - I don't get to all the posts. I'm not going to take you on in either economic or accounting theory, because they're not my main areas - only in the basics, as I've said.
I can speak mainly from my first hand observations though, and that has shown me hordes of 22 year old, inexperienced graduates with green hair and goatees striking it rich after a year or two of work because of the granting of extensive options (along with easy credit/venture capital financing), followed by a collapse of the sector (including supposedly larger, profitable companies), and great dislocations. In lockstep, housing prices in the entire Bay Area flew beyond all reason, and will probably crash at some point, with foreclosures galore. There is ample evidence to show that a portion of these home price increases was supported by cashing in of generous stock options. Had there been no enormous options carrots held out, the dotcom/tech boom and movement of thousands of latter day "gold miners" to try for a piece of the pie would not have happened to the extent it did, I have to believe. To me, this is not a rational way to run things.
What amount of influence did this have over the entire effect - I don't know, and am not inclined to spend my time looking up the studies. I don't necessarily object to options per se, but I do think they had gotten all out of proportion and had deleterious effects in a number of ways, except for the lucky few beneficiaries. Then, removing the perceived risk by repricing them when they drop to retain employees does little to comfort the shareholder who has no such alternative. |
