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Technology Stocks : Qualcomm Incorporated (QCOM)
QCOM 174.01-0.3%Nov 14 9:30 AM EST
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To: Stock Farmer who wrote (114206)2/24/2002 8:32:41 PM
From: kech  Read Replies (1) of 152472
 
The company relinquishes it's rights to the ownership of the shares represented by the option when the grant is made
Yes, absolutely.

Any appreciation after the grant doesn't belong to the company

Yes, this is the value that the recipient receives.

consequently not realizing that appreciation is not a cost to the company

Is that so? Well then perhaps we have a deal. How about you give me a call option on a third of your shares of Qualcomm (or any other equity for that matter) at the current market price, exercisable over the next ten years. And we'll do this transaction at the cost that you suggest companies book for it: zero.

I hope that in return for this option you will also remit a portion of your salary to me in return and that you also promise to align your interests with the company for the duration of your ownership of your options. <g> Of course this is the logic the company uses to grant these options. These are real effects and are not included in your characterization of stockholder "ripoff". More seriously, are you suggesting that the problem is that the company is giving the stock option to the employees but not "hedging" the risk that the options appreciate a lot in value? If so, it makes sense that they should reduce their exposure by buying the shares at the same time they give the options to the employees. But then if the shares went down a lot, they would eat that loss.
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