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Technology Stocks : Qualcomm Incorporated (QCOM)
QCOM 176.67+1.6%Nov 12 3:59 PM EST
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To: Stock Farmer who wrote (114189)2/24/2002 5:20:01 PM
From: rkral  Read Replies (1) of 152472
 
John, your excellent argument has me 99.9% convinced.

Your following sentences are actually sufficient:
To summarize: employees get value. This value doesn't come from the company, and it doesn't come from shareholders.

Where, pray tell, do you think it does come from? There is no such thing as a free lunch.

For my own understanding, I have paraphrased your story from an options perspective:
Premise:
1. Joe Sixpack grants a call option to his only employee.
Conclusions:
A. Joe is a call option writer (seller).
B. His employee is a call option buyer.

Premises:
2. Excluding transaction costs, the option market is a zero-sum game.
3. The employee exercises his in-the-money call option for a monetary gain.
Conclusion:
C. Excluding transaction costs, Joe Sixpack suffers a monetary loss equal to the employee's gain.

Note that Joe Sixpack gave the call option to his employee. No monetary compensation was involved ... hopefully, Joe received increased performance instead. Additionally, I am still wrestling with the notion that the gain should be considered employee compensation.

Caveat: The option perspective may not be useful for considering the tax consequences.
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