Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: Stock Farmer who wrote (28876)	2/18/2003 1:17:43 PM
From: Don Lloyd	Read Replies (1) of 74559

John, However, stock options in and of themselves are a cost of adding bucks to the pile. And thus belong in the "What It Costs To Add A Buck To The Pile" report. Not unlike salary, bonus and other forms of remuneration. Whether we part with the actual cash before actually getting it back from the company or afterwards does not change the existence of the cost or who pays the freight. It's still our money going to employees. Us being shareholders.... You are simply mistaken. Stock options cannot possibly be an expense to the company unless stock itself is an expense, and, as I explained earlier, contrary to current accounting treatment, stock is not an expense except as directly to shareholders through dilution. In fact, option grants provide substantial and real multiple positive cash flows, and reported earnings to the company. It is the repurchase of stock, of zero value to the company itself, that should be expensed dollar for dollar immediately and thus reduce reported earnings. This would help accomplish the desired goal of eliminating unlimited free lunch option grants to executives. Regards, Don

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