OT, Amy J, RE: Hi GV, what does Enron's fraudulent behavior of hiding debt (that you listed in your post) have to do with employee stock options that Greenspan wants to attack?
They have nothing to do with each other.
Very simply so: If Greenspan negatively impacts stock options, he negatively impacts motivation. Stock options = motivation. Motivation is an intangible, something that's difficult for Economists to measure, so they dismiss it because they can't measure it. Never mind it's the most important ingredient for business success, innovation, and enhancing this country's GDP.
Sorry, I don't buy that at all. A cash bonus create motivation, too, you know. Why do more firms use options than cash bonuses? Two reasons: first is that particularly for smaller firms, options do not involve cash, whereas cash bonuses do involve cash. Second, and more important reason: stock options create a tax break for corporations, whereas cash bonuses create a tax liability for corporations. There is really no logic why the second reason should exist. For smaller firms, the tax break doesn't matter. While they're growing, they don't pay any tax anyway. Thus,. preventing the stock option loophole doesn't affect the small startup at all. For a larger firm like Cisco or Intel, the motivation factor isn't too significant anyway. One employee doesn't make enough difference to impact the stock price. A cash bonus serves the motivation factor much better, in fact. It is easier to create a direct impact. The tax loophole is huge, though. There was no reason why Cisco should have paid no tax during the boom of a couple of years ago, but they did, mainly because of the tax loophole. Greenspan rightly wants to eliminate that advantage. It has absolutely nothing to do with economists not understanding motivation. |
