PMFJO, I realize this is 50% an accounting discussion and 50% something entirely different (and nearly as interesting), but I do have some minor opinions here, having been VP Finance of a start-up high tech company which indeed did use (and needed) stock options -- it's all very fine, Chuzzlewit, to talk about paying everybody in cash, but in the early days we didn't have any cash, and made up our lost salaries (we paid ourselves $2,000 a month, which was trivial even in 1980, and took at least half of that in stock options). Which turned out to be a good deal for us when we finally sold the company to a major NASDAQ company (a good deal better result for us than trying an IPO would have been). Small potatoes, of course, compared to MSFT, but the principal owners are comfortably retired, and I don't have to borrow to put three kids through college.
The question I have for you, Chuzz (if I may be informal, and since you have exposed yourself the way you have on this thread informality is the least of your problems) is WHY do you feel a need to include options in the face of the financial statements IF they are fully disclosed elsewhere, as they must be to get an auditor's okay? Anybody who can't (or won't) read a financial statement and still invests in high tech anyhow deserves to lose their shirts. The information is there for all to read.
But, Edwarda, I think you may over-estimate the value to an established company like MSFT of options, and their benefit to the owners. As to golden handcuffs, they are IMO often equally likely to prove golden hammocks -- living in the Pac NW I know a number of people who did their 8 years at MSFT, cashed in their options, and got out of that 70-hour a week rat-race as fast as they could. In addition, there is the problem that you tend to reward the useless as well as the valuable -- indeed, the valuable may at some point take their knowledge and use their options money start up a new company, perhaps a competitor, while the useless who don't have the skill or intensity to start their own company hang on grabbing more and more of the shareholder value.
Now I will go back to lurking at your substantive discussion, and blushing at your other discussion. |
