PSFT - Fiscal 1998 - Discussion for the next year Message Board

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Technology Stocks : PSFT - Fiscal 1998 - Discussion for the next year

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Oct 29 5:00 PM EST

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To: RetiredNow who wrote (2104)	9/3/1998 6:27:00 PM
From: Chuzzlewit	Read Replies (1) of 4509

Re: The catch is that they as well as their peers have to perform I think you are being very naive. If the goal were to motivate employees, then the options would be for restricted stock (preventing the sale on the open market for a certain number of years). The fact that options are exercised and the stock immediately sold mitigates against long-term incentives. The fact that so many companies reprice options argues against this as an incentive tool. Rather, it is a clever device to avoid explicitly stating the costs associated with labor and a method whereby top management continues to reward itself regardless of performance. In fact, some years ago there was a proposal for an accounting change that would have explicitly stated the cost of options associated with employee incentive programs. There were howls of protest from industry spokesmen. There is currently a watered down version of the same proposal, but this one only will apply to repriced options where the stock subsequently rebounds. The simple fact is that not only do these devices not work as incentives, the costs cannot be calculated from the income statement (because stock trading in one's own stock is not considered an income or loss generating activity) and can only be guessed at. And you are wrong, established companies can afford the salaries. The problem is that the financial results would not look nearly as good if the true costs were explicitly stated. Furthermore, the number of options granted to the people who actually produce the products -- programmers and engineers -- is rather small in comparison to the options that top brass grant themselves. TTFN, CTC

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