SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Pastimes : Austrian Economics, a lens on everyday reality
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: Don Lloyd who wrote (25)12/6/2001 9:56:11 PM
From: Don Lloyd   of 445
 
An alternate way of looking at exactly what happens when stock is used as compensation is the following -

Salary Compensation by Stock Split

Subject to shareholder approval, the board of directors declares a 50:49 stock split and distributes 1 newly created share for each 49 shares that existing shareholders own.

It is common knowledge that a stock split has no real economic consequences to anyone.

In eternal gratitude for their performance, all of the shareholders now redistribute these new shares to the executive management as a bonus.

The result of this is exactly the same as if the company had distributed the new shares directly to the executives.

Since the result is the same, there can be no excuse for a different accounting method. In this case it is perfectly clear that it is the existing shareholders that bear the cost of the bonus, ending up with a smaller proportion of the company, just as happened when the executives were compensated with stock directly.

Regards, Don
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News