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Technology Stocks : Intel Corporation (INTC)
INTC 48.05-1.1%12:39 PM EST
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To: Amy J who wrote (166752)6/21/2002 11:37:20 AM
From: Jacques Newey  Read Replies (1) of 186894
 
Amy J - More on Options from Charlie Munger, Co Chairman of Berkshire Hathaway and one of Warren Buffet's best friends.

bluechipinvestorfund.com

The Great Financial Scandal of 2003

“By a strange irony of fate, the accounting convention for stock options that had so displeased Quant Tech’s founder now made the new officers’ job very easy and would ultimately ruin Quant Tech’s reputation. There was now an accounting convention in the United States that, provided employees were first given options, required that when easily marketable stock was issued to employees at a below-market price, the bargain element for the employees, although roughly equivalent to cash, could not count as compensation expense in determining a company’s reported profits. This amazingly peculiar accounting convention had been selected by the accounting profession, over the objection of some of its wisest and most ethical members, because corporate managers, by and large, preferred that their gains from exercising options covering their employers’ stock not be counted as expense in determining their employers’ earnings.”

These guys do understand options and the peril they pose to the financial books of corporate America.
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