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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 72.99

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12:12 PM EST

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To: Chuzzlewit who wrote (24345)	4/12/1999 5:03:00 PM
From: jbn3	Read Replies (2) of 77397

re Employee Options Chuz, 3. The use of stock options is often claimed to act as an incentive for employees. They will work harder, so the theory goes, if they are on the same side of as the shareholder because they are sensitive to the price of the stock. But the fact of the matter is that in company after company options are exercised and immediately sold. There is no long-term incentive that extends beyond the vesting period. About a year ago, someone (Rudedog?) explained that there are very cogent tax-related reasons for immediately exercising and selling reasons. (If memory serves correctly, it has to do with the Alternative Minimum Tax.) At any rate, until the specific tax laws change, the options holder will end up paying a much higher tax rate if the option is exercised and the stock is then held. So the final sale incentive is not corporate, but federal. I'll see if I can find the related postings. best, jbn3

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