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Technology Stocks : Intel Corporation (INTC)
INTC 35.81+0.2%Nov 25 3:59 PM EST
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To: Amy J who wrote (174237)4/25/2003 1:34:58 PM
From: The Duke of URL©  Read Replies (1) of 186894
 
"But how can the information be better disclosed and how can compensation be better controlled - it does tend to creep up and up. I think it's because of the "survey method."

First, the internet, rather than any court or any SEC action has done more to expose excesses in the option granting business than I would have thought.

It would have been better to allow a couple of knowlegeable stockholders to sue 5 or ten years ago, and every corporate attorney would have advised their client not to play fast and loose with options.

But legislation and political pull made this very difficult.

Buffett's concern is that the options are not granted to reward achievement over what the executive can control. Options should not be geared merely to the price of the stock.

This is true for two main reasons.

1- Human nature will attempt to pump up the price of the stock rather than the intrinsic value of the company. Which in the long run is problematic.

2- Granting a freebee conditioned on something the executive does not have control over, does not stimulate good performance, in fact it may have an opposite effect.

What should be disclosed is the criterian for awarding the option. The term, the exercise price, the vesting schedule and other SIGNIFICANT issues.

Sunshine kills a multitude of bacteria.
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