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Technology Stocks : Dell Technologies Inc.
DELL 133.35+0.1%Nov 28 9:30 AM EST
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To: Geoff Nunn who wrote (52275)7/19/1998 3:31:00 PM
From: Chuzzlewit  Read Replies (2) of 176387
 
Geoff, thanks for your thoughtful comments on this issue. I was going to suggest something like the Black-Shoales calculation, but didn't want to get sidetracked from the major issue as I see them:

1. Stock options as a form of employee compensation have a cost;
2. That cost is not accounted for by GAAP accounting;
3. The cost is hidden and borne by the shareholders;
4. The practice does not encourage employe loyalty because the stock is not restricted. Indeed, tax considerations encourage immediate sale of stock obtained through exercised options;
5. Diluted share calculations fail to estimate the impact of options;
6. The total remuneration of many top executives is out of all proportion to their economic worth to the firm, and is the result of their being able to successfull hide their total remuneration packages through a lack of proper accounting.

Item 6 above deserves a bit more explanation. When Eisner departed Disney there was an uproar from unhappy shareholders. The problem is that many of these same shareholders voted for his compensation package without any understanding of the costs. That lack of understanding exists because GAAP accounting was designed to disclose shareholder transactions as financing activities not compensation expenses.

TTFN,
CTC
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