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To: stockman_scott who wrote (131605)	6/8/1999 1:12:00 PM
From: Chuzzlewit	Respond to of 176387

Thanks, Scott. That was an interesting piece discussing the issue of incentives and repricing. It should be clear to anybody reading the article that companies do not expect their executives to suffer the financial pain of stock price declines along with shareholders. In other words, the gain on options is really an entitlement, not an incentive. Unfortunately, the article missed what I believe is the major problem with options. Under current accounting rules, using employee stock options as a form of compensation avoids including their cost on the income statement. Consequently, companies that use ESOs have overstated their true earnings. What has occurred, in effect, is that stockholders are expected to pay for the cost of the options rather than the companies. If you think about the differential tax rates (the difference between the statutory corporate rate and long-term capital gains rate) it makes little economic sense to operate this way. I am convinced that the motivation is to hide the true cost of compensation from shareholders. Thanks again, CTC