Employee Stock Options - NQSOs & ISOs Message Board

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Strategies & Market Trends : Employee Stock Options - NQSOs & ISOs

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To: rkral who wrote (5)	6/11/2002 12:12:16 AM
From: Clarksterh	Read Replies (1) of 786

I think viewing the intrinsic value (market price minus exercise price) of the option as compensation to the employee, from the viewpoint of the employee, is correct. But from the corporate viewpoint, it is not employee compensation expense. It is a phantom expense. There is no cash flow, as evidenced by its conspicuous absence from cash flow statements. Yea verily!!! Note that everything else included in the earnings is something that, sooner or later, will show up in the cash flow and vice versa. But this is not true of stock options, which aside from the corporate welfare gift by the IRS, never shows up in the cash flow and never will. It is setting an entirely new precedent to put something in the earnings statement which never shows up in the cash flow. I think that the only reason for people wanting the stock options put into the earnings statement is because there are a lot of people who are angry about the amount of money being paid to CEOs etc. IMO this definitely needs fixing, but there are better ways than perverting the earnings statement. Clark

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