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: Tom_ who wrote (3658)	11/20/1998 6:22:00 PM
From: Chuzzlewit	Read Replies (3) of 4509

Tom, Perhaps you are unaware of it, but the costs of employee stock options are not considered an expense under GAAP accounting, and are not included on the P&L. Why not pay them with cash??? That makes the entire system transparent.Then we know the cost of employees explicitly, and avoid the need for constant dilution and this ugly spectacle of repricing. There are two situations where employee stock options make sense: (1) when a company is strapped for cash; and (2)the company is truly interested in making its employees sensitive to the shareholders and the bottom line. Neither of these conditions is met by PeopleSoft. First, the company generates huge amounts of cash, and indeed there was criticism of the fact that the company hoarded its cash without putting it to productive use. Second, making employees sensitive to the stock price only works if employees are forced to hold stock for an extended period of time. But this stock is not restricted, and for tax reasons (avoidance of alternative minimum taxes) options are exercised and the stock immediately sold. Sensitivity to the bottom line could be better accomplished by profit sharing based on profits reported to the IRS (not GAAP accounting). In any event, repricing options demolishes the sensitivity argument. In fact, this is simply a device for top management to continually rape shareholders without their knowledge. Look at how outrageous Cendant was on this issue. The stock gets killed because of accounting "irregularities" that resulted in massive overstatement of earnings (which of course benefited option holders prior to these "irregularities coming to light), and then Silverman has the nerve to reprice options. This is a system of legalized theft, and it remains in the shadows. Why are so few shareholders outraged at these activities? CTC

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