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To: Don Lloyd who wrote (173039)6/16/2002 2:08:53 AM
From: mishedlo  Read Replies (1) of 436258
 
Don, Let me try again.
Comments from all are welcome.
=======================================================
Lets assume (tax differences aside)
One company pays it employees in options another in cash.

Shouldn't the effect on earnings be the same.
If that company has income of $1M (with 100% profit, no cost at all for that income, a perfect fabless company with no expenses other than salaries and 100% bottom line profit margins on all income) and pays out $1M in salaries, it has $0 in earnings, correct?

Now that company pays out $1M in options and reports to the press, $1M in "earnings" even though shareholder equity HAS to drop by $1M (cause they had to give up $1M in stock to pay that employee). Assuming options are immediately redeamable isn't this correct?

Yet in the options scenario, the "earnings" that the company reports are $1M, even though the company has $1M less in stock that it had before and thus $1M less in assets, $1M less in shareholder equity, and thus really had ZERO earnings.

Isn't this correct?
If this is correct, then how the Hell can companies overstate earnings by the current value of those stock options every frigging quarter?

I believe every company should fully pay employess in immediately redeamable options (always such that employees geat a fixed amt of income, based on current share price).

Then companies can not only take tax benefits, but have greater "earnings" as well. What a scam.

M
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